Solar Magazine – Net metering scheme costs people without solar panels €1.35bn per year

At least, that’s the result of a rough calculation by the Netherlands Authority for Consumers and Markets (ACM). From an internal email exchange and regulator documents, it became clear last week that ACM was initially in favor of introducing a subsidy on domestic battery if the net metering scheme is phased out.

open government law
ACM has made its internal correspondence public because it received a request to do so through the Open Government Act (Woo, ed., the successor to the Government Information (Public Access) Act; Wob). The person who submitted Woo’s application had asked the regulator to release internal documents on the preparation of ACM’s memorandum on the net metering scheme.

The applicant also wanted an explanation with proof and quantification of the statement that there are costs associated with the net metering agreement and how these are processed and charged to the energy supply and return tariffs.

redistribution effects
ACM writes that ‘redistribution effects’ are the result of the effect of net metering regulation. ‘Electricity prices in wholesale markets fluctuate considerably. In general, prices are significantly lower in sunny seasons than in dark seasons. On sunny summer days, prices are sometimes even negative. By offsetting, consumers can offset the electricity they supply at sunny times with the electricity they buy at dark times. You can see the economic value of electricity at a given time in the wholesale price of electricity at that time. At times when consumers replenish, the wholesale price, and therefore the economic value, of electricity is low. The economic value is generally significantly higher at times when they are not feeding back energy, but actually buying energy. Therefore, energy providers have to “buy” electricity at a price well above market value, or in other words: “sell” it at a price well below market value.’

profit motive
According to ACM, energy providers will need to take this into account in their business operations. Because power companies are private for-profit parties, according to the regulator, they will have to “recoup something” for the cost of compensation.

‘Since energy tariffs are the only source of income for energy providers, the costs of energy providers will end up in this. The result is a redistribution of costs from people with solar panels to people without solar panels.’

cautious assumptions
To give an indication of the effects of redistribution through the net metering system, ACM states that it has deliberately opted for “a simple calculation.”

An official from the Ministry of Economic Affairs and Climate Policy has also asked the ACM about the grounds for this calculation. The ACM employee says in an email to the official that the costs of “a few tens a month” are based on his own calculation. “Although I do have to comment that it is crude and pricing assumptions are hard to make.”

assumptions
The ACM calculation is structured as follows.

Assumptions:

  • Total number of households in the Netherlands: 8.1 million units.
  • Total number of homes with solar panels: 1.5 million units.
  • Average electricity consumption per household: 2,500 kilowatt hours (ed. The ACM employee points out that this consumption is already lower due to the generation of electricity with solar panels).
  • Price ceiling for electricity: 0.40 euros per kilowatt hour.
  • Assumption: the net metering scheme covers an average of 90 percent of the self-consumption of solar panel owners.

math:

  • (8.1 minus 1.5 million households) / 1.5 million households = 4.4 households must finance the 1-household net metering scheme;
  • 2,500 kilowatt hours x 90 percent x 0.40 euros = 900 euros are the costs of the net metering scheme on an annual basis generated by each household with solar panels;
  • The net metering scheme costs €900 / 4.4 = €204.55 per year for each household without solar panels; or 17.05 euros per month;

Even higher costs
ACM also emphasizes that some of its assumptions are conservative, particularly the assumption that solar panel owners’ energy consumption equals average electricity consumption. “This is a very conservative assumption, as average consumption is already being depressed by solar panel generation and solar panel owners generally earn more and have larger homes, both of which strongly correlate with higher electricity consumption.” .

Therefore, ACM suggests that the actual costs of the net metering scheme for people without solar panels could be even higher in practice.

2 million homes
The conclusion that the costs of the net metering scheme for households without solar panels amount to €1.35 billion (ed. €900 per household x 1.5 million households = €1.35 billion) is out of date anyway.

Last December, in the presence of the Minister for Climate and Energy, Rob Jetten, the 2 millionth house in the Netherlands was fitted with solar panels. As a result, the ‘new’ calculation, using the ACM assumptions, would be as follows:

  • (8.1 minus 2.0 million households) / 2.0 million households = 3.05 households must finance the 1-household net metering scheme;
  • The net metering scheme costs €900 / 3.05 = €295.08 per year for each household without solar panels; or 24.59 euros per month.