Policy Brief on Net Metering of Renewable Electricity in Nova Scotia Feb-2016

February, 2016

In this policy brief, we offer our views on recent amendments to Nova Scotia’s net metering program for the interconnection of distributed renewable electricity generators. We do this at a time when 195 countries, including Canada, recently negotiated the Paris Agreement on Climate Change. The Paris Agreement marks a turning point in global cooperation on climate change, and it requires nothing less than maximum efforts from developed countries to become green- house gas (GHG) emission neutral as quickly as possible. Solar electricity may not be needed to meet Nova Scotia’s current renewable energy targets, but it will be one of many essential technologies to help us reach GHG neutrality. We cannot afford to impede this important part of the solution to climate change at this critical time.

Solar Nova Scotia has previously provided input and feedback on energy policy to the Nova Scotia Department of Energy. Solar Nova Scotia participated in the development and drafting of the Electricity System Review by making two submissions (“Solar Energy: Part of a Sustainable Energy Future in Nova Scotia”, December 2, 2014 and “Response to Electricity System Review Draft Report”, March 18, 2015) regarding the contribution that solar energy can make to a sustainable energy future for Nova Scotia.

Following the release of the Electricity System Review report, draft legislation was introduced by the provincial government in December of 2015. Even though we have been actively involved throughout, and were clearly a key stakeholder, we received no notice of this, and were not invited to comment. The Bill, called the Electricity Plan Implementation Act, included a 50 fold reduction to the maximum size of renewable energy generators that can connect to the grid within the net metering program, from 1,000 kW to 20 kW. It also included a proposed new tariff structure for the net metering program to be developed by Nova Scotia Power that would be based on the ‘net value of the electricity’ rather than the customer’s current cost of electricity.

Following presentations from citizen’s groups and industry at the Law Amendments Committee (including by Solar NS), the maximum size of the renewable energy generators was changed to 100 kW, still a 10 fold reduction in size. The section in the Bill for a proposed new tariff was left unchanged. The Bill was passed by the provincial legislature and became law in late December 2015.

Solar Nova Scotia has now had an opportunity to re-examine the consequences of this legislation. We have concluded that the size restriction and the requirement to develop a new tariff structure has the potential to have a significant negative impact on the sustainable growth of the solar energy industry in Nova Scotia. The size limit on individual projects could prevent commercial, industrial, and institutional property owners from implementing appropriately sized solar generators. Most significantly, if the future new tariff is lower than the current retail cost of electricity, it would reduce the financial viability of all net metered solar electricity projects.
The biggest challenge for future tariff discussions is that the URB currently has no mandate to consider the GHG emission, air pollution and economic development benefits of solar
energy in determining the appropriate tariff.

The combination of these changes could limit the ability of homeowners and businesses to reduce their carbon footprint through generating renewable energy and to support the sustainable growth of an important local industry. By failing to support the environmental, social and economic benefits of solar at a time when most jurisdictions have recognized its value, Nova Scotia risks losing out on an important source of sustainable energy and economic development.

Prior to the introduction of the legislation, Solar Nova Scotia has not been able to find any evidence of notification of the proposed changes to the net metering program in publicly available documents. Solar Nova Scotia along with other citizens, community groups and the solar industry were not consulted or notified during the preparation of these policy decisions to
obtain their input on the effect these proposed changes would have on the ability of homeowners, businesses, municipalities, universities and non-profit groups to adopt renewable energy for their facilities.

Under Section 23 (4)(b) of the Act, it is proposed that the maximum size of renewable energy generator be reduced to 100kW. The net metering program was previously designed to allow power customers to generate electricity up to their annual energy consumption, hence already incorporating a built-in size limit. The original maximum limit of 1,000 kW allowed larger entities such as businesses, municipalities, community groups and First Nations to properly size their projects for their energy needs. However, the artificially low limit introduced in this legislation significantly reduces customers’ ability to design their generation project to meet their energy needs. Solar Nova Scotia is aware of a number of municipalities that were planning to construct net zero community centres and other facilities. Many of these projects are no longer possible under the current legislation, because to meet a net zero energy target for many of these facilities would require more than 100 kW of installed capacity of solar photovoltaic arrays.

In the Electricity System Review report, the need to stabilise energy costs has been stated as the current mandate of the government. Solar Nova Scotia believes that meeting this mandate is possible without stifling the development of renewable energy businesses that create jobs
and support the mandate of the Green Economy Strategy. It is our view that our province needs to accelerate development of the clean technology sector and the greening of companies, product and services.

The province should also take a longer-term view with respect to the stabilization of the cost of energy. Key, in the long term, will be to have access to a range of sources of renewable energy to reduce and eventually eliminate the dependence on fossil fuels, and their price volatility. Furthermore, price stability cannot be the only consideration of energy policy. Fossil fuels are largely imported, whereas a significant portion of the cost of solar energy stays in Nova Scotia, creating local jobs and spin-off economic opportunities.

The net metering program has historically enabled small renewable energy businesses to engage with customers and develop a small but growing market. This is in contrast with the Community Feed-In Tariff (COMFIT) program, in which medium-to-larger business entities were more involved. Currently, under the net metering program there are 1.4 MW of renewable energy generators, which is about 0.06% of the total generation capacity in Nova Scotia.

The total capacity of net metered renewable generators is too small at this time to cause any significant influence on the power rates of Nova Scotia Power customers. This market needs to grow at this time, not to be restricted. For the industry to be able to grow sustainably, the market needs to be stable and predictable. Sudden and arbitrary changes create uncertainties that can stall this important industry. Solar Nova Scotia believes that it is premature to target the net metering program and stifle the development of businesses that create jobs and promote the reduction of our carbon footprint.

Under Section 23 (8)-(11) of the Act, it is proposed that a new tariff structure be created for the net metering Program. The current rate structure allows the user to be compensated for the energy generated by their renewable energy system equal to the rate that they are paying on their power bill and use the grid as temporary energy storage to store the excess energy, resulting in an annual net zero excess energy production. For example, currently any excess solar electricity energy production during the summer will be credited at the same rate as the energy is purchased. This credit is then used during winter, resulting in an annual net-zero excess energy to the grid.

The new tariff structure proposes to apply a different rate for any excess energy put back on the grid at any point in time, which could dramatically affect economic viability of these projects, without recognizing the economic and environmental value of solar energy. This Act proposes that the new tariff would be based on ‘net value of the electricity’, effectively putting the small renewable energy generator in competition with the economies of scale of Nova Scotia Power’s energy generation (much of this capacity has been subsidized, and continues to be subsidized in the form of free allocation of air pollution and GHG emissions). We consider these changes to be inconsistent with the election promise to support independent power producers to generate their own energy. Current energy costs do not reflect the full socio-economic and environmental cost associated with carbon based fuels, and hence do not provide a fair consideration of the value of renewable energy generated through the net metering program.

The solar industry in Nova Scotia has seen gradual and sustained growth for the past number of years with the declining cost of solar modules. This growth in the industry represents the willingness of Nova Scotians to invest in their energy future and reduce their carbon footprint while supporting their local businesses involved in design, installation and maintenance
of these systems.

The argument sometimes made against net metering is that producers who have access to net metering do not pay their fair share of maintaining the grid infrastructure that they use to transmit the power they produce, and that the cost is born by other ratepayers, many of which cannot afford the capital investment needed to take advantage of net metering programs.
Such arguments ignore a number of factors.

We are still far from net metering offering financial gains to small producers of solar energy. The benefits such efforts offer to the broader community in the form of reduction in pollution, GHG emissions, and resource depletion far outweigh any cost to the electricity grid.
Before solar energy producers can be asked to pay for the cost of using the grid, fossil fuel based electricity should be required to fully internalize the cost of the air pollution
and GHG emissions it produces.

With respect to the equity argument about low income rate-payers, we agree that this
issue needs to be addressed. However, there are better ways to protect low income rate payers than by artificially keeping power rates below the full cost of producing electricity for everyone, or by inadequately supporting sustainable energy sources. Why should everyone be encouraged to waste energy through artificially low power rates to protect low income rate-payers?

Programs that help low income rate payers to become more energy efficient, differential power rates, and universal service programs are all initiatives that can help to ensure
low income rate payers have access to affordable energy without harming efforts to transition to renewable, GHG emission neutral sources of energy.

The changes to the net metering program were included in a Bill designed to provide rate stability. Penalizing a relatively small renewable energy program that promotes the gradual and sustainable growth of small businesses and the ability of ratepayers to generate their own clean energy and reduce their energy footprint, is short sighted.

It is important to consider carefully the detrimental consequences of this policy decision. This legislation does not support the mandate of the Green Economy Strategy to develop the clean technology sector and accelerate the greening of companies, product and services. It is in fact surprising to see this type of legislation being implemented in light of COP 21 in Paris, where new global emission reduction goals were agreed to, making it clear that we need
all the tools available to enable us to reduce our carbon footprint and to reach
GHG emission neutral electricity generation by 2050.