1 Review of Net Metering Practices Presented to: Electricity Control Board of Namibia Author: Patrick Curran and Gerrit W. Clarke Date: 18 December 2012. Reference no. P003734. Version: V1. Document type: Report Client: Electricity Control Board of Namibia Client contact: Mr. Pinehas Mutota Contact details: Manager: Economic Regulation, Electricity Control Board P O Box 2923, 8 Bismarck Street, Windhoek, Namibia Tel: +264 61 374 320, Fax: +264 61 374 305. Cell: +264 81 124 0566, Email: Draft: 18 December 2012. Authors: Patrick Curran and Gerrit W. Clarke QA Jonathan Curren Authors contact details: Email: Tel/Fax: +264 (0)61-210284. Cell: +264 (0)81-127 2304. Email: Telephone: +27 (0)11-253 3400. Disclaimer: This report has been prepared for the above named client for the purpose agreed in Camco Clean Energy's terms of engagement. Whilst every effort has been made to ensure the accuracy and suitability of the information contained in this report, the results and recommendations presented should not be used as the basis of design, management or implementation of decisions unless the client has first discussed with Camco Clean Energy their suitability for these purposes and Camco Clean Energy has confirmed their suitability in writing to the client.
2 Camco Clean Energy does not warrant, in any way whatsoever, the use of information contained in this report by parties other than the above named client. Camco Clean Energy 2012. All rights reserved. Contents 1 1. Project Background .. 1. 2 Overview of Net Metering .. 2. Distributed Generation .. 2. Definition of Net Metering .. 2. Development of Net Metering Policies and Rules .. 4. 3 Net Metering Practices .. 5. Key Considerations .. 5. Policy .. 5. 14. Commercial .. 26. 4 Case Studies .. 28. USA .. 28. Denmark .. 28. Thailand .. 29. Brazil .. 29. California .. 30. Mexico .. 31. Morocco .. 31. Kenya .. 31. South Africa .. 32. 5 Conclusions .. 33. Bibliography .. 35. Appendix A: IREC's Net Metering Model Rules, 2009 .. 36. Appendix B: Eskom Small-scale Renewable Energy Standards and 42. Review of Net Metering Practices 2. 1 Introduction Project Background Recent studies have indicated that Namibia has a substantial renewable energy resource base, which has a strong potential and a role to play in the country's power supply.
3 The White Paper on Energy Policy of 1998 recognizes the benefits of renewable technologies with regard to sustainability and security of supply. Studies have also revealed different regulatory provisions that may be applied to govern the supply of electricity derived from renewable energy resources. Of late, many homes, farms and business owners are considering the installation of alternative forms of electricity generation facilities and connecting them to their utility's electrical network. These facilities are intended to reduce the amount of energy purchased from the utility as well as providing some environmental benefits. The purpose of net Metering rules is to allow electricity users with roof top based PV and wind energy systems to offset part of their conventional electricity requirements. Further, net Metering is intended to encourage private investment in renewable energy resources, stimulate economic growth in the country, contribute to energy security, and enhance diversification of Namibia's energy resources, in line with the objective of the White Paper on Energy Policy of 1998.
4 The Electricity Control Board (ECB) has therefore appointed Camco Clean Energy from South Africa as the consultant to assess the application of net Metering and to develop net Metering rules for roof top and inverter based solar photovoltaics (PV) and micro wind energy converters. Camco Clean Energy has appointed Blueprint Consult from Namibia to manage the project including stakeholder consultation and for the technical aspects of the project. The assignment is funded by the Renewable Energy and Energy Efficiency Partnership (REEEP) through the Renewable Energy and Energy Efficiency Institute (REEEI) at the Polytechnic of Namibia together with the ECB. The project has two main objectives and these are: Assessing the technical application of net Metering within Namibia; and Developing the rules for net Metering and interconnection of roof top, inverter based solar PV and micro wind energy converters used for partial load displacement.
5 This report provides an overview of net Metering Practices and key issues in the following areas: Policy;. Technical; and Commercial aspects. This study also provides case studies to illustrate international best practice with regards to net Metering . Review of Net Metering Practices 1. 2 Overview of Net Metering Distributed Generation Distributed generation (also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or distributed energy) generates electricity from many small energy sources. Most countries generate electricity in large centralized facilities, such as fossil fuel (coal, gas powered), nuclear, large solar power plants or hydropower plants. These plants have excellent economies of scale, but usually transmit electricity over long distances and the fossil fuel types can negatively affect the environment, both locally and globally.
6 Distributed generation may give lower environmental impacts and improved security of supply, but at a higher generation cost. Distributed generation systems are predominantly installed, owned and operated by entities other than traditional centralised electric utilities. In particular they are often privately owned by homeowners, small-businesses and farmers. Most distributed generation technologies are of the renewable energy type (solar, wind, biomass, hydro, etc.). There are 3 generic methods of compensation for distributed, private generators: Net Metering - compensation is always at the retail rate, and allows producers to use electricity at a different time than when it was generated. Excess generation (periodically) is treated separately, and the compensation rates range from lost, to avoided cost, to retail rate. This is commonly used for relatively small generation sizes (lower kW range).
7 Feed-in tariff (FIT) - compensation is usually above retail rate, and as the percentage of adopters increases, the FIT is reduced to the retail rate. Compensation is initially set at the average or levelised cost of generation for a particular technology including an adequate profit. This is commonly applied for relatively medium sized generation stations (hundreds of kWs to tens of MW). Power Purchase Agreement compensation is agreed on between the buyer and seller, and is normally below the retail rate; although in the case of renewable energy can be higher. Compensation is normally very close to the cost of generation including an adequate profit. This is commonly applied for relatively large power stations (tens to hundreds of MWs). It should be noted that all distribution generation types contribute towards technical concerns about distribution network (or grid) stability and reliability (grid stability and reliability are affected when power quality parameters move out of acceptable ranges).
8 Technical concerns due to net Metering should therefore not be analysed in isolation. Definition of Net Metering The Interstate Renewable Energy Council (IREC) of the United States of America (USA). defines net Metering as a methodology under which electricity is generated by, or on behalf, of a customer-generator and delivered to an electricity provider's local distribution facilities and Review of Net Metering Practices 2. may be used to offset electric energy provided by the electricity provider to the customer generator during an applicable billing IREC's Model Net Metering Rules of 2009 will be referred to frequently in this report as a comprehensive reference source and have therefore been included in Appendix A. Net- Metering , in essence, allows small scale renewable energy power producers to bank or store their electricity in times of over-production in the national grid ( for solar energy during peak production in the day), and to balance out their grid consumption with this banked or stored electricity during other times ( for stored solar energy during night, morning and evening hours).
9 This is illustrated in Figure 1 for a typical domestic solar photovoltaic (PV). Figure 1: Net Metering Illustration with Solar PV. Net Metering has become a policy option to support the use of renewable energy technologies and distributed generation. Net Metering is generally a renewable energy incentive that is consumer based and as such the size of systems installed is usually small. Net Metering is designed to encourage distributed generation of electricity through encouraging electricity consumers to install and interconnect their renewable energy generators to the electricity grid. It has been proposed as a low-cost, easily administered policy option to promote direct customer investment in renewable energy. Net Metering is associated with the following advantages: 1. IREC Model Net Metering Rules; Interstate Renewable Energy council (IREC); 2009. 2. Grid Connection of Solar PV - Technical and Economical Assessment of Net- Metering in Kenya; Georg Hille et al.
10 Michael Franz (ed.), December 2011. Review of Net Metering Practices 3. Generation of additional power in the national grid, reducing the need for investment by the utilities or conventional Independent Power Producers (IPPs), Promotion of small scale investments, value addition and market development, No direct payment by the grid operator, Making use of existing electrical infrastructure, and Consumer savings on power bills. However, being a relatively new development, there are also a number of issues still under investigation, including: Technical feasibility of grid connection and impact on grid stability, Revenue loss for the grid operator and potential compensation mechanisms, and Other direct and indirect benefits and costs for the grid operator additional administrative costs. Development of Net Metering Policies and Rules The concept of net Metering originated in 1983 in the United States of America, where consumers connected small scale wind turbines and solar PV to the grid and wanted to use the electricity generated at different time or date then when it was first generated.