LeAnne Graves: Net metering is shaky ground to build business on
Dubai envisions solar spanning over large distances and sitting atop every roof with ample room for growth. Until there isn’t.
When a big-chain supermarket arrives to a neighbourhood, small businesses start to panic – and the same can be said with the big guys of solar.
Those heavy hitters come in the form of companies that can build more than 100 megawatts of solar power as opposed to firms that target residential and commercial spaces.
Work is under way on the emirate’s Mohammed bin Rashid Al Maktoum Solar Park, which plans to produce 5,000MW by 2030, and then there’s the Shams Initiative, launched last year, under which solar panels will decorate rooftops across the emirate.
To launch this, the Dubai Electricity and Water Authority (Dewa) set up a net metering system allowing private owners and businesses to install solar energy based on the amount of electricity consumed on average by the individual or company.
Any excess power produced from solar energy can be fed back into the grid, with customers receiving a credit on their next electricity bill.
This has caught the eye of firms that instal systems that are much smaller than the big guys – usually around 10MW or less.
However, as this segment grows and utility scale projects are completed, a conflict could potentially arise.
“With some pretty big projects being installed at the utility-scale level in Dubai, companies must carefully watch the demand being met by these large projects, because once enough demand is met, net metering is curtailed and residential rooftop solar does not remain viable,” said Omer Ghani, the chief executive of the power company Kilowatt Labs.
Mr Ghani said that if utilities suddenly stop net metering, an installer focused on these types of projects runs the risk of losing all future business. “And unless it has capability to pivot to other activities, it goes bust,” he said.
He pointed to the net metering debate taking place in the United States, with one of the largest solar states, Nevada, revamping its legislation on the programme at the end of last year.
The state decided, having reached its target for solar energy of 235MW – or 3 per cent of the total peak capacity – to triple fixed charges paid over the next four years. In addition, the legislation reduced the credit received for net excess generation by 75 per cent.
A showdown erupted between the entrepreneur and inventor Elon Musk and the business magnate Warren Buffett. Tesla’s Mr Musk is also the chairman and creator of SolarCity, which installed more than 60 per cent of the rooftop systems in Nevada, while Mr Buffett backs NV Energy after his investment firm, Berkshire Hathaway, purchased the state’s largest utility three years ago.
SolarCity claims that the change does not offer incentive for a homeowner to install solar systems, which cuts into his business. Utilities such as NV Energy work harder to take the individually generated power as well as delivering electricity at night, all for less profit, under net metering.
The debate has pushed electricity generation from solar into mainstream conversations, and the question of whether to keep the December policy changes has been put on Nevada’s November general election ballot.
The NV Energy spokeswoman Jennifer Schuricht told The National that while the utility supported the removal of the cap on solar capacity, customers had to “pay their fair share for their specific use of the grid”.
“We believe that customers without rooftop solar should not have to pay unlimited subsidies for those who can afford it,” she said.
The new rates have negatively impacted SolarCity. The company has lost nearly half of its value since the beginning of the year, and it closed shop in Nevada.
In Dubai, Dewa will get electricity from utility-scale suppliers at between 3 and 5 US cents per kilowatt-hour. Yet Dewa compensates at the higher slab rate for any electricity produced by customers from solar that is fed back into the grid.
When “peak solar” – or the maximum amount of solar that the grid can handle – is eventually reached, there will be a nervous period during which there will be little incentive for Dewa to pay the higher rate at the current price difference.
However, this point may be further away than we think.
A decade ago, utilities thought solar could generate up to 20 per cent of their capacity without adverse affects on the grid, but it has since been proven that more than 50 per cent of electricity from solar can be supplied without negative impact, said Lee Bremer, the chief operating officer of Yellow Door Energy in Dubai.
Follow The National’s Business section on Twitter