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Why Massachusetts Net Metering is the Current Gold Standard

Why Massachusetts Net Metering is the Current Gold Standard

At the state level, energy policy has been formulated to incentivize homeowners to install rooftop solar. Many states have implemented some version of “net metering”, which refers to the system owner’s ability to “sell back” excess production to the grid, in exchange for credits which can be used to offset future electric bills.

Massachusetts currently has perhaps the best version of net metering currently available.   This means western Massachusetts homeowners going solar can count on hefty credits for any excess solar electricity they produce. Yet solar net metering is under pressure. Find out why Massachusetts net metering is the gold standard, and how what’s happening across the country may challenge this important policy.

The solar industry is growing nationwide. The Solar Energy Industry Association’s latest quarterly report found “the US solar industry installed 5.6 gigawatts-direct current (GWdc) of capacity in the second quarter of 2023, a 20 percent increase from Q2 2022 and an 8 percent decrease from Q1 2023.” The association said, “2023 volumes are set to grow year-over-year, reversing the contraction the industry experienced in 2022.”

Some of that expansion could be credited to government support. As part of the Inflation Reduction Act, the federal government offered a 30 percent tax credit for residential homeowners installing solar from January 1, 2022 through the end of 2032, with no maximum credit. Individual states or localities may offer property tax exemptions, installation discounts and rebates to facilitate solar’s expansion.

Solar net metering is another crucial policy helping to encourage adoption. Yet it’s being scaled back in several states.

What is net metering?

Solar energy systems supply as much energy as the sun will provide, meaning energy production is divorced from energy consumption in the home.   In a more northern location like Massachusetts, systems typically supply 2-3x as much potential solar energy in the summer as is available in the winter.  If, for example, a solar energy system was sized to provide exactly as much energy as a home would consume over the course of a year, you would see a bubble of production in the summer months as opposed to the winter months.  This is where net metering comes in.  In Massachusetts, homeowners are able to “bank” their excess solar production as bill credits that will roll over until they are used up.

So, in our example the homeowner would generate surplus solar energy credits roughly from March-September, and then starting in October, they would start to eat through those credits.  If things are sized exactly right, at some time in March their credit balance would reach about zero and they would begin to refill their solar piggy bank as the greater energy production part of the year begins.  Mind you, under this scenario, they would receive a zero-dollar bill the entire time because credits not only wipe out delivery and supply, but all fees and taxes as well.

Here are the three main components of an electric bill, all of which can be offset by net metering credits in Massachusetts:

  1. Supply (this is cost of energy paid by the utilities to energy generators)
  2. Delivery (cost to maintain grid infrastructure and transmit the electricity to end users)
  3. Taxes and Fees

Understanding Massachusetts net metering

In Massachusetts, the state pays approximately 90 percent of retail value for net metered energy. This is considered “retail net metering” because homeowners receive near-retail value for what they produce vs what they pay for the same energy. In addition, our state’s system has no credit expiration for net metering credits, no non-bypassable charges, and no fixed or minimum bill charges. That means homeowners:

  • Can roll-over credits indefinitely until they use them up (no credit expiration).
  • Can apply credits to all electricity bill charges no non-bypassable charges).
  • Don’t have fixed or minimum monthly utility rate that can’t be offset by excess solar net metering credits (no fixed non-offsetable bill charges).

Massachusetts also allows “virtual net metering” where a homeowner can assign credits to a third party who is a customer of the same utility in the same region of the state.  So if you own two properties, for example, you could put solar on one of them and offset the electric bills on both of them (provided both are served by the same utility).

Advantages of net energy metering

Net metering encourages solar installation, which is a good thing for the environment.  A typical home solar system prevents 8.5 metric tons of CO2 emissions/year. That sustainable energy can help Massachusetts meet its goal of a carbon-free grid by 2050.

Solar generation also helps utilities to better manage peak electricity loads. They have another source of generation, near the point of consumption, which reduces strain on the distribution system.

The program is highly beneficial to those who can own solar. Homeowners gain greater control over their electricity bills. Plus, net metering also builds untaxed wealth for solar owners (as savings are not taxed). And, participation in the program is guaranteed in Massachusetts for 25 years by law from when a system is placed into service.

Net metering in transition

Despite the environmental benefits of installing solar to meet critical climate goals, and the gains for individual homeowners, net metering faces opposition.

“In general across the country, net metering policy is in a bit of a transitional period,” Autumn Proudlove, associate director of policy and markets at the NC Clean Energy Technology Center at North Carolina State University, told EnergyWire. “Many states have been reexamining their rules and considering changes, particularly reducing the compensation for energy exported to the grid.”

In Arizona, one of the states reevaluating its metering approach, Republican utility regulators argue that while all utility customers are required to pay for net metering, it only benefits a select few customers who had the opportunity and foresight to invest in solar.

Opponents also suggest that metering plays a role in rising electricity prices. In the first three months of 2023, the average U.S. residential monthly electricity bill was $133, or 5 percent higher than for the same time last year, according to the U.S. Energy Information Adminstration (EIA).

Still, the EIA credits the increase in residential retail electricity prices to higher fuel costs for power plants. The EIA noted, “The cost of fossil fuels—natural gas, coal, and petroleum—delivered to U.S. power plants increased 34%, from $3.82 per million British thermal units (MMBtu) in 2021 to $5.13/MMBtu in 2022.”

Meanwhile, it’s entirely possible that eliminating net metering could increase rather than decrease electric rates. If solar investment goes down, utilities will need additional types of power plants to keep up with fast-growing electrification.

Time is now for net metering

There’s no way of knowing when, or if, the retail solar net metering program could end or be devalued in Massachusetts. Just consider what is happening elsewhere.

California, Hawaii, and Massachusetts have all achieved high solar growth using retail net metering as the main driver of solar investment. Yet California and Hawaii have both joined over a dozen states that have ended metering, according to a report from the National Academy of Sciences. Just last month (December 29, 2023), Idaho voted to end its program, effective January 1, 2024.

Other states—including Colorado and Wisconsin—are weighing their own changes, while legislation introduced in states like Florida and Arkansas could cut their states’ programs.

If Massachusetts follows suit and switches from retail to wholesale net metering like California did, a typical Western Massachusetts solar homeowner could generate $50,000 to $100,000 less in untaxed solar savings over the system’s life.  This would surely deter investment in solar.

Net metering and Valley Solar

Ultimately, if you’re considering going solar, you’ll benefit greatly by doing so while retail net metering is still in place.

The current rules guarantee this approach for 25 years from the time when a system is placed into service (220 CMR 18.04). This grandfathers systems “placed in service” before any future changes to the current law.

It would be great if the laws regarding Massachusetts net metering never change. But, in California, the changeover happened in just four months. The change was announced December 15, 2022, and any system placed in service after April 15, 2023, only receives 25 percent of the original benefit.

Considering the timeline involved with installing new solar projects, a four-month runway is too short. If you are considering solar for your home and want to take advantage of the “gold standard” program we have currently in Massachusetts, contact our team to learn more.