How owners are compensated for grid-tied power

A financial return may or may not be the primary objective for those investing in a net-metered solar system. Either way, it is important to understand the potential financial risks and benefits of solar power.

As stated in Gunnison County Electric Association’s (GCEA) previous article, solar members reap the most direct benefit if they immediately consume the electricity their panels produce, when the sun is shining. However, a member’s solar system production may sometimes exceed their ability to consume the energy being produced. When this occurs, the excess generation is provided to the grid for others.

Solar systems are generally costly, and electric utilities set physical capacity and financial compensation boundaries on how much energy a member may inject onto the grid. It is crucial for members to review their current and historic electric usage and to become knowledgeable about how they use energy on a daily and seasonal basis.

Individual solar production, excess generation and grid injection may be financially viable as a result of net-metering. Net-metering is the billing mechanism created by the Colorado legislature to provide a financial incentive to consumers. Homes and businesses with grid-attached solar systems earn kilowatt-hour credits for energy supplied to the local grid.

Under net metering, solar members receive a bill credit good for one kilowatt-hour (kWh) for each kWh delivered to the grid. This credit can be used anytime within a predefined one-year period to receive a kWh of energy. The retail value is currently $0.13821 per kWh for most residential members. At the end of each one-year period, any annual excess may be cashed in, or a member may choose the perpetual rollover option and bank all kWhs for future use.

The current retail rate for a kWh exceeds the market value of the energy supplied by the utility and exceeds the price that an individual solar member could theoretically sell this energy for. GCEA currently pays $0.03434 per kWh for the wholesale energy it purchases from its power supplier, Tri-State Generation and Transmission Association. The remainder of GCEA’s energy rates recover the cost of operating and maintaining the grid and related business functions.

Net-metering and the grid together create a virtual super battery, allowing solar members to move production from day to night, from sunny days to cloudy days and from summer to winter — providing a far more versatile and cost-effective means of storing energy.

For some solar members, knowing their daytime electric consumption comes from renewable energy generated by the sun satisfies their desire to do good for the environment. Others may value knowing they can rely on their utility’s virtual super battery (the grid) to see a return on their investment as they dip into their bank of kWhs when using electricity after dark.

Either way, it is important to further consider the potential impact of likely future rate changes and potential net-metering law changes on any solar investment. This topic will be addressed in the final article of the three-part series next week.

For more information about solar, visit gcea.coop and go to GCEA’s “Solar Opportunities” page.

(Matt Feier is the strategy execution specialist at GCEA, a member-owned, not-for-profit electric cooperative, that delivers electricity to homes and businesses throughout Gunnison County, Hinsdale County and parts of Saguache County.)