to: Mayor and Town Council
from: Jim Ward, Mayor Pro Tem and Sustainability, Energy and Environment (SEE) Committee Chair
Council Member Bill Strom
Council Member Laurin Easthom
Council Member Ed Harrison
subject: Mayor’s Letter to the North Carolina Utilities Commission Supporting Improvements to the State Net Metering Program
date: October 15, 2008
The purpose of this report is to provide information about the Mayor’s letter to the North Carolina Utilities Commission (NCUC) supporting improvements to North Carolina’s net metering program.
Over the last few months, the Sustainability, Energy and Environment (SEE) Council Committee has been working with the staff to explore options for minimizing the costs associated with renewable energy projects like the 4.68 kilowatt photovoltaic (PV) solar array at the Town’s Fire Station #1. Because there is often times a narrow margin of benefits associated with projects like these, any opportunity to reduce costs can increase the financial success of this and similar renewable energy investments by the Town and its citizens.
Net metering is a billing arrangement in which customer-generators realize one-to-one kilowatt-hour savings from their renewable energy systems (e.g., solar, wind, biomass, hydro). For example, the Town of Chapel Hill (a customer-generator) would receive one kilowatt-hour of savings for every kilowatt-hour generated from one of its solar collection systems. These savings would be realized at times when excess renewable energy is sent directly to the utility grid.
Through its search for ways to minimize the utility costs associated with renewable energy investments, the staff learned about the North Carolina Sustainable Energy Association’s (NCSEA) efforts to help expand the state rules pertaining to net metering. Specifically, the NCSEA and a broad coalition of supporters are asking the NCUC to consider allowing renewable energy customer-generators to choose the rate schedule that is most beneficial to them.
Very few people throughout the state have engaged in net metering arrangements because it is considered financially unfavorable. This is largely due to the fact that customer-generators who have net metering arrangements with utilities are required to participate in time-of-use (TOU) rates. Time-of-use rates generally fluctuate based on utility demand, whereby energy billing rates are highest during times of peak demand. Flat rates, on the other hand, do not fluctuate based on demand. Studies show that TOU rates lengthen the payback period for net metered solar collection systems, which do not meet all of the annual energy demand for a given building. Further, TOU rates have been shown to increase utility costs to customer-generators relative to typical residential or commercial customers without solar collection systems.
Efforts to eliminate the time-of-use requirement for net metering arrangements are viewed by many renewable energy advocates and experts as a step in the right direction for expanding net metering in ways that would make it easier and more attractive to those considering such investments.
At its September 19, 2008 meeting, the SEE Committee received an update from the staff outlining the information above. The Committee was supportive of the effort to improve net metering opportunities for Chapel Hill and those throughout the state. In an effort to voice this support, the Committee worked with the Mayor’s office to draft the attached letter informing the NCUC of the Town’s position on net metering, and specifically, its interest in allowing customer-generators to choose the rate schedule that is most beneficial to them. The attached letter was sent on September 25, 2008.
The Town of Chapel Hill is strongly committed to working toward climate protection and has pledged to reduce carbon dioxide emissions by 60% as of the year 2050 for Town operations. In its efforts to meet and exceed this reduction target, the Town supports renewable energy investments because we are dedicated to the resiliency and sustainability of our community. In order to achieve greater success in renewable energy projects for the Town, its citizens and other communities throughout the state, we believe it will be important for the Commission to remove certain barriers to these types of investments.
The Commission has already made tremendous progress through its efforts to ease interconnection requirements, and this Committee believes that the state’s net metering program is the next step. To that end, if the Town and its residents are permitted to select a rate schedule that is most beneficial to their needs, then net metering could serve as one of the best options for reducing the payback period associated with projects like these, while also encouraging investment in similar projects.
That the Council receive this report from the SEE Committee.
1. Mayor’s Letter to the NCUC (p. 3).