August 8, 2024
How Utilities Must Adapt Net Metering Programs as Homeowners Shift to Battery Storage
7 Min. Read
The residential solar panels market has seen significant growth over the past decade as consumers continue to prioritize sustainability and decrease their dependence on the grid, especially with the increasing trend of inclement weather resulting in power outages across the United States.
Utilities have also been instrumental in supporting the shift to renewable energy by expanding solar energy incentives through programs such as net metering, which allow customers to trade excess electricity produced by their solar panels for energy credits.
However, as we enter a new era of the energy revolution, utilities are increasingly rolling back their historic net metering programs and replacing them with less attractive incentives. Due to this shift and the increasing desire for energy independence from consumers, residential battery systems are becoming increasingly popular among homeowners looking to maximize their benefits and reduce their reliance on utilities as a whole
In this article, we’ll explore what this changing dynamic means for the electric revolution and how utilities can adapt by making changes in net metering programs and other incentives as the trend toward microgrids and nanogrids continues with the rise of whole home electrification.
Understanding Changing Energy Dynamics
Residential battery installations increased by 13% in 2023, and experts predict an increase of 12% in 2024. Adoption is accelerating, and the strong residential solar market is contributing to high rates of home battery installations, valuing the U.S. microgrid market at more than $26.6 billion by the end of 2030.
Battery technology is more affordable and efficient than ever before, driving significant growth in the industry. Additionally, it’s increasingly easy to combine battery energy storage systems (BESS) with smart energy management solutions that can automatically switch between different power sources based on usage and efficiency.
The prevalence of power outages and the feeling that the energy grid is increasingly less reliable contribute to the growing interest in home storage solutions, especially for electric vehicle (EV) owners who charge daily.
Regulations are also evolving. For instance, California recently overhauled its net metering programs, creating a climate of uncertainty regarding the future of utility solar power programs for many consumers.
Changes in Net Metering Programs
The rapid expansion of the home battery storage market is creating a new environment for utilities offering net metering programs and changes in net metering programs are a result of the widespread adoption of solar panels and other electrification technologies. Simply put, an increase in supply is driving down the demand in areas where solar adoption is popular.
Pros and Cons of Net Metering
Net metering programs have played a crucial role in making residential solar financially appealing over the past decade and have directly contributed to the growth of the solar market.
Utilities offering net metering programs have seen several advantages, including a smoother demand curb, more energy generated near the point of consumption, and solar customers who actively monitor and maximize their energy production.
The downside of net metering is that incentives don’t always align with savings for utilities. One reason California rolled back its net metering programs is that non-solar consumers were paying too much to support them. Savings and benefits largely depend on participation, making net metering potentially costly for utilities.
Changes in Net Metering Participation
Net metering programs track the amount of energy solar customers generate and upload to the grid. For every kWh generated, homeowners receive a fixed energy credit based on the retail rate toward their electricity bill and if the energy credits exceed the electricity used, most utilities roll the excess over.
The current trend is for utilities to replace net metering with net billing programs, lessening the value of the energy produced. The payout structure is similar, but the per kWh price is based on retail or wholesale electricity rates, which are much lower especially if time-of-use (TOU) rates were applied in the past.
In California, installers expect a 23% drop in residential solar sales in 2024 as net billing replaces net metering.
Switching to net billing also supports battery adoption in combination with solar since prioritizing energy storage is more financially advantageous for customers than selling the energy produced to a utility at a wholesale rate.
The Impact on Utilities
The good news is that the rise of home battery storage is lessening the demand on the grid during peak hours since solar and battery consumers have an alternative source of power. Easing the strain on the grid can prevent rolling blackouts and help avoid price hikes for other consumers.
However, high levels of BESS adoption directly affect participation in net metering or net billing and decrease the ROI of these programs. Overall revenues can also drop as more consumers become independent from the grid.
While the changing value of energy credits directly impacts participation, it’s also important to acknowledge that some homeowners are opting for battery storage to become more independent from a grid they perceive as unreliable, regardless of financial incentives.
Strategies for Adapting Net Metering Programs
A strong BESS market represents a key advantage for utility providers since home batteries are a source of stored energy that can supplement the grid during surges in demand. In order to tap into this benefit, utilities need to adopt a time-of-use (TCO) pricing model for net metering programs with higher rewards for uploading energy during on-peak hours or during emergencies when power is in high demand.
With the rise of bidirectional charging technology in EVs, more consumers will soon have access to an energy storage solution that can interface with the grid, making TOU net metering programs even more valuable.
Instead of offering a per-kWh pricing model, power companies should explore utility battery storage programs with a tier-based structure. For instance, participating consumers could earn a higher energy credit once they upload power past a certain threshold to encourage higher levels of participation.
Utilities can also make net metering more appealing to solar and storage consumers by leveraging smart grid technologies to automatically manage battery charging and help consumers get a full charge when rates are low.
Other possible perks include unlocking additional incentives toward purchasing or installing home solar or battery storage equipment for enrolling into a net metering program.
Offering incentives to homeowners who install these devices with the caveat that some power can be pulled from their BESS in times of emergencies can further help aid utilities when supply is low and demand is critical, however, these types of programs must be carefully designed to ensure that these customers are not left without power as a result and that they are fully aware that this program is set in place and when their power will be utilized.
Ultimately, there are various strategies that utilities can employ to ensure their customers remain a part of their network even with changes in net metering programs and the installation of energy transition technologies that add greater grid independence. Determining what will work best for your customers will depend on what programs you have deployed in the past, the rate of adoption in your area, and the receptiveness of your customers toward these changes.
Develop Modern Utility Electrification Programs With Qmerit’s Help
The rise of home storage is transforming the energy market by giving consumers more independence and increased flexibility. As traditional net metering programs become less appealing, utilities should adapt their approach and develop new incentives that meet changing needs and expectations.
Offering modern net metering programs could be the key to tapping into home storage as a valuable energy source that can supplement and stabilize the grid when demand peaks.
As the leading provider of electrification services for EV charging and other energy transition technologies such as battery storage and solar panel integrations in North America, Qmerit can be a valuable partner as you navigate this transition, and is recommended by automakers, EV charger manufacturers, utilities, businesses, and homeowners alike.
Our network of certified electricians has installed more EV chargers and other electrification technologies in the last decade than anyone else in the industry—more than 450,000 EV charging station installations, 37,000 battery storage installations, 81,000 solar panel system integrations, and 86,000 electric panel upgrades in homes and businesses across the U.S. and Canada!
We have the knowledge and experience to help utilities support their electrification goals and customer needs, and with our electrification program for utilities, energy companies can accelerate the energy transition, unlock more funding, and deliver an optimal customer experience.
For more information on partnering with Qmerit to see how we can support your changing net metering programs and customer electrification, contact us today.
