This page is part of the Highest Good energy component of One Community and an open source guide sharing our research into West Coast renewable energy net-metering and energy buyback rates. While it is called “Solar Incentive Rates and Net Metering Research”, the research here applies to all sustainable/off-grid energy options (solar, wind power, hydro, etc.) that may end up being connected to the grid (click here for our grid-tie tutorial) for net metering/energy credits.
We discuss this with the following sections:
NOTE: THIS PAGE IS NOT CONSIDERED BY US TO BE A COMPLETE AND USABLE TUTORIAL UNTIL
WE FINISH OUR OWN DEMO CONSTRUCTION AND ADD ALL THE VIDEOS AND EXPERIENCE FROM
THAT BUILD TO THIS PAGE – IN THE MEANTIME, WE WELCOME YOUR INPUT AND FEEDBACK
Net metering (also known as net energy metering or NEM) is an incentive that allows you to store energy in the electric grid. It is usually used with solar but can be used with wind power, hydro, or other sustainable energy options too. When your solar panels (or other energy source) produce more electricity than you need, that energy is sent to the grid in exchange for credits. Then, at night or other times when your solar panels are under-producing, you pull energy from the grid and use these credits to offset the costs of that energy.
In the case of solar, most homes will produce excess electricity in the summer months and will use more electricity from the grid in the winter. Because these variations in production are fairly predictable, your utility won’t send you a monthly check when you produce more than you need. Instead, you will build up extra credits during the summer months so that you can draw from them at night and during the winter months when you need them.
Net metering is how companies credit sustainable energy providers for the energy they provide back to the grid. These credits are what allow someone with solar panels to avoid the costs of purchasing and maintaining the batteries that would be needed to be entirely independent of the grid. Without a grid-tied system, batteries are necessary for low-sunlight times like winter when (in colder climates) long cloudy periods coupled with higher energy needs for heating can require more energy than the solar infrastructure can immediately provide. With a grid-tie system though, excess energy is provided to the grid in the summer for credits that can then be used in times like the winter. This can be used to maintain a net-zero power/cost situation for your energy needs.
The challenge with net metering is that the rate at which the utility company credits a user for energy can be different from the rate they charge for using their energy. For example, in the summer, company A may generate and deliver 100 kWh of energy to their utility provider B. B credits A at $0.5 per kWh of energy they receive. However, in the winter, company A uses an excess of 100kWh of energy from B, but B charges $1 per kWh for this energy that is used. Now, company A needs to pay B $50, even though they are using the same amount of energy that they produced.
If the goal is to maintain net-zero cost, company A in this scenario would need to install more solar panels to generate sufficient credits to cover their winter use. Even though the energy they are providing and using is an equal amount in both seasons, they would need to produce twice the energy that they use in summer to equal what they need credits for in winter. Because of this imbalance, understanding what your local solar energy credits will be is a very important factor in the initial solar farm planning.
This understanding is especially important because some states don’t even offer net metering. Check out this article “Net Metering for Home Solar Panels” to learn more and see a list of states that do and do not offer net metering.
This is a great tool that lists all the solar incentive policies in each state: “Database of State Incentives for Renewables & Efficiency®”.
We all know that renewable energy is the future, but why is it not the present? One of the main reasons is that the cost of the energy harvesting equipment is still high. In addition, instead of paying monthly payments, the investment needs to be made up front, at the beginning of the installation. As a result, investing in solar, wind, etc. equipment is like investing in an annuity, where a lump sum of money is paid up front, and then a series of payments are paid back to you as returns. In the case of solar energy harvesting equipment, after the initial equipment and installation bill, the monthly electric bills are greatly reduced or even eliminated in return. The good news is that solar panels are usually good for at least 25 years or more, and the investments are most likely to be repaid within 10 years. This means investing in solar equipment is almost guaranteed to be a win.
Furthermore, more and more people are realizing the importances of renewable energy and the industry is progressing to reduce the cost of equipment, especially for solar. Governments are also passing regulations to make solar energy more affordable and accessible.
To better understand where the industry stands and how the current solar environment will impact developments like One Community, we researched West Coast power companies and regulations. For the states of Utah, California, Arizona, Washington, Oregon, and Idaho, most utility companies offer solar incentives in combination with net metering programs in order to reduce or eliminate monthly electric bills. However, the rates and programs are a little different across states and even within states (see below).
The goal for this research is to provide a general idea to the solar energy investors about their monthly cost after the initial investments. This research selects the major power providers in all six of these states (Utah, California, Arizona, Washington, Oregon, and Idaho), and lists and compares their net metering programs and incentive rates.
We started with the projected project location, Kanab, Utah. The power provider for the location is Garkane Power Association Inc. Their energy charge and credits are:
In this case, Garkane’s energy charges are 2.88 times their energy rate, which means the solar farm needs to be 2.88 times larger in order to achieve a net-zero bill. Thus, the cost of the project would also be 2.88 times that of a project with a 1-to-1 payback ratio. This is very costly, undesirable, and came as quite a surprise.
The reason that Garkane credits energy generation so low is because they do not generate power, rather, they purchase power from another generation facility. Therefore, they are crediting their customers’ generation at the same rate as they purchase power from the generation facility. In this way, they do not pay more to purchase power from general customers than from their power manufacturer. In addition, they are required by law to charge all of their customers at the same rate. As a result, negotiation of better rates becomes less likely.
Their proposed solution is a generation interconnection program. Through this program, One Community would sign an agreement to produce and provide a certain amount of power directly to the provider within a certain timeframe. In exchange, the power provider would give us a lower energy rate when power is needed from the grid.
However, after seeing the existing interconnection offers that Garkane provided, the generation interconnection program turns out to still be very costly. Because of this, One Community will be reconsidering fully off-grid power or other locations in the West Coast states that would offer better deals like a 1-to-1 credit rate. The current property may still be a viable option though if something changes with our options for Garkane between now and when we’re ready to purchase it.
The table below shares our research on all the net metering rate data we found for all the major power utility companies in the states of Utah, California, Arizona, Washington, Oregon, and Idaho. You can also visit the Google Doc related to this research.
Understanding the differences is important, especially considering the poor cost vs. compensation numbers above for Garkane. Note above that many of the other power producers in the state of Utah offered less than a 1:1 credit-to-charge ratio too. Here’s a table and chart comparing just those Utah power companies, a comparison that (as of the 12/2021 date of this research) showed only ONE company offering a near 1:1 ratio:
It is essential to explore what the net metering options are for your location if you plan to sell power back to the grid. The best way to find out what your situation will be is to first find out which company is the power provider for your location/property. Then, try searching for your power utility company’s net metering information. If their net metering policy does not state that they are crediting customer generation at the energy retail price, and they do not state what rate they are crediting customer generation at, it may be best to contact them directly.
General research into West Coast power companies showed that most offer net metering service, and companies that offer net metering service usually offer 1:1 net metering. We then researched within an 8-hour driving range from Los Angeles, looking into more than 40 utility companies. Of those, 11 companies wrote phrases like “customer generation is credited at the retail rate” or something similar in their net metering document. The rest either didn’t have easily accessible information about what they offered, did not offer net metering service, or did not offer a 1:1 credit rate.
For those that had easily accessible information, 1:1 net metering was the gold standard. This is because 1:1 means the rate of selling energy to the utility company is the same as what is charged for using their energy. Users sell excess solar energy generation to the grid in exchange for credit, and this credit is later used to purchase power from the grid when direct solar energy isn’t available or is too little. In this way, solar energy users can size their solar farms for exactly what they need and avoid costly battery backup systems.
The table above shows the specifics of all this research, but rates may change and you should also confirm all details with your specific company before making any decisions.
Even if the utility company offers low customer generation credit, there is a possibility for getting a higher credit rate if the solar energy user contacts the utility company and applies for a rate change. This is an option for the current project location power provider, Garkane Energy, so it is possible that other companies offer something similar.
For One Community’s original proposed location, Garkane Power Association has the cost of energy at $0.07500/kWh and the energy being credited is only $0.02600/kWh. In other words, for the same amount of energy, the customer pays 2.88 times more than they are credited. Other utilities in the state of Utah though, like Rocky Mountain Power, offer 1:1 (or very close to 1:1) net metering, but they don’t supply power to our proposed location.
The reason that Garkane credits energy generation lower than their retail rate is because they need to purchase power from another generation facility, and they would credit the same rate to their customer generation as the rate they purchase power from the generation facility. Furthermore, they are required by law to charge everyone in their grid at the same rate. Therefore, negotiation for a rate change becomes less likely. As a result, it would be extremely costly to be under their net metering program because they only credit our generation 35% of their retail price. This means we need to increase our solar array size to compensate for the buy-sell difference.
This case of Garkane shows that companies without their own power generating facilities are less likely to offer 1:1 credit because they would be paying their power supplier for the customer usage. Therefore, solar energy investors are advised to work with large power providers that have their own power plant. In this way, the company would have more room to offer better rates for their customers.
However, Garkane possesses an alternative: a generation interconnection program. Under this program, One Community would be working with Garkane and their power provider in a wholesale agreement to sell a certain amount of power directly to the provider within a certain timeframe. With this agreement, the provider would work with Garkane to give us a better rate when power is needed from the grid. The primary benefit of this program is that the credit rate and purchasing rate can be negotiated.
In order to know the exact rates though, ownership of the land or a lease agreement is needed prior to filing the generation interconnection program application. Garkane would then work with their power provider to give us an offer and negotiate for a final price. Although the exact rates cannot be obtained before the application, Garkane agrees to provide some existing offer agreements for One Community to get a general idea of the expected rates. Even with this “better offer,” the on-grid option with Garkane is still very expensive. Because of this, One Community is now considering the off-grid option, with batteries and diesel generators, over the on-grid option.
For cases where the utility company does not want to change the rate, the good news is that, since the federal government is pushing into the clean energy route, the credit rates for these areas are expected to improve. Every utility company not already doing so can be expected to eventually give better solar incentives, and these will most likely be in the form of raising their credit rate.
It is essential to explore what the net metering options are for your location if you plan to sell power back to the grid. This is important because some states don’t even offer net metering and some companies in states that do don’t offer a 1:1 credit-to-charge ratio. In the case of our 7 sustainable village housing project, choosing a property (like our original choice in Utah) could cost millions of additional dollars.
Q: What are your specific plans for your energy infrastructure?
Q: Since Garkane energy and most Utah power providers don’t offer a 1:1 credit-to-charge ratio, what is your plan for your property?
We are currently researching our completely off-grid options and will revisit the situation with Garkane before making any purchasing decisions. We are also considering properties in other West Coast states.
Q: What if I have a question that isn’t listed here?
Use this page (click here) if you have a FAQ you’d like to suggest be added here.