Net metering, unlike a feed-in tariff, requires only one meter, but it must be bi-directional.
In net metering the price of the electricity produced is the same as the price supplied to the consumer, and the consumer is billed on the difference between production and consumption. Net metering can usually be done with no changes to standard electricity meters, which accurately measure power in both directions and automatically report the difference, and because it allows homeowners and businesses to generate electricity at a different time from consumption, effectively using the grid as a giant storage battery. With net metering, deficits are billed each month while surpluses are rolled over to the following month. Best practices call for perpetual roll over of kWh credits. Excess credits upon termination of service are either lost, or paid for at a rate ranging from wholesale to retail rate or above, as can be excess annual credits. In New Jersey, annual excess credits are paid at the wholesale rate, as are left over credits when a customer terminates service.
Feed-in Tariffs (FIT)
With feed-in tariffs, the financial burden falls upon the consumer. They reward the number of kilowatt-hours produced over a long period of time, but because the rate is set by the authorities, it may result in perceived overpayment. The price paid per kilowatt-hour under a feed-in tariff exceeds the price of grid electricity. Net metering refers to the case where the price paid by the utility is the same as the price charged.
The complexity of approvals in California, Spain and Italy has prevented comparable growth to Germany even though the return on investment is better. In some countries, additional incentives are offered for BIPV compared to stand alone PV.
- France + EUR 0.16 /kWh (compared to semi-integrated) or + EUR 0.27/kWh (compared to stand alone)
- Italy + EUR 0.04-0.09 kWh
- Germany + EUR 0.05/kWh (facades only)
Solar Renewable Energy Credits (SRECs)
Alternatively, SRECs allow for a market mechanism to set the price of the solar generated electricity subsity. In this mechanism, a renewable energy production or consumption target is set, and the utility (more technically the Load Serving Entity) is obliged to purchase renewable energy or face a fine (Alternative Compliance Payment or ACP). The producer is credited for an SREC for every 1,000 kWh of electricity produced. If the utility buys this SREC and retires it, they avoid paying the ACP. In principle this system delivers the cheapest renewable energy, since the all solar facilities are eligible and can be installed in the most economic locations. Uncertainties about the future value of SRECs have led to long-term SREC contract markets to give clarity to their prices and allow solar developers to pre-sell and hedge their credits.
Financial incentives for photovoltaics differ across countries, including Australia, China, Germany, Israel, Japan, and the United States and even across states within the US.
The Japanese government through its Ministry of International Trade and Industry ran a successful programme of subsidies from 1994 to 2003. By the end of 2004, Japan led the world in installed PV capacity with over 1.1 GW.
In 2004, the German government introduced the first large-scale feed-in tariff system, under the German Renewable Energy Act, which resulted in explosive growth of PV installations in Germany. At the outset the FIT was over 3x the retail price or 8x the industrial price. The principle behind the German system is a 20-year flat rate contract. The value of new contracts is programmed to decrease each year, in order to encourage the industry to pass on lower costs to the end users. The programme has been more successful than expected with over 1GW installed in 2006, and political pressure is mounting to decrease the tariff to lessen the future burden on consumers.
Subsequently, Spain, Italy, Greece—that enjoyed an early success with domestic solar-thermal installations for hot water needs—and France introduced feed-in tariffs. None have replicated the programmed decrease of FIT in new contracts though, making the German incentive relatively less and less attractive compared to other countries. The French and Greek FIT offer a high premium (EUR 0.55/kWh) for building integrated systems. California, Greece, France and Italy have 30-50% more insolation than Germany making them financially more attractive. The Greek domestic “solar roof” programme (adopted in June 2009 for installations up to 10 kW) has internal rates of return of 10-15% at current commercial installation costs, which, furthermore, is tax free.
In 2006 California approved the ‘California Solar Initiative’, offering a choice of investment subsidies or FIT for small and medium systems and a FIT for large systems. The small-system FIT of $0.39 per kWh (far less than EU countries) expires in just 5 years, and the alternate “EPBB” residential investment incentive is modest, averaging perhaps 20% of cost. All California incentives are scheduled to decrease in the future depending as a function of the amount of PV capacity installed.
At the end of 2006, the Ontario Power Authority (OPA, Canada) began its Standard Offer Program, a precursor to the Green Energy Act, and the first in North America for distributed renewable projects of less than 10 MW. The feed-in tariff guaranteed a fixed price of $0.42 CDN per kWh over a period of twenty years. Unlike net metering, all the electricity produced was sold to the OPA at the given rate.