Mississippi Moves Forward with Net Metering Based on Independent Economic Study

Recently, the Mississippi iStock_000007078510_MediumPublic Service Commission (PSC) unanimously voted to move forward in developing a net metering policy. This decision comes (somewhat) on the heels of an independent study commissioned by the state’s PSC concluding that distributed solar would provide levelized net benefits to the state over a period of twenty-five years. Adding to a growing body of work finding untapped value in distributed solar, the study is particularly noteworthy because Mississippi is one of only a few remaining states without a net metering regime. The PSC’s vote therefore serves as indication that solar is gaining traction even in jurisdictions that have been slower to embrace the technology.

Mississippi’s study, completed last October by Synapse Energy Economics, Inc., was similar to that released by Maine’s Public Utilities Commission (PUC) earlier this year in that it compared the per-MWh costs of distributed solar generation to its benefits, which were expressed as avoided costs. However, unlike Maine, Mississippi did not incorporate into its analysis the externality costs associated with displaced air emissions. By excluding potential environmental and public health benefits, Mississippi honed in on the money utilities—and, by extension, ratepayers—would save for every MWh of distributed solar adopted.

Source:  Public Service Commission of Mississippi, Net Metering in Mississippi (Sept. 19, 2014)

Source: Public Service Commission of Mississippi, Net Metering in Mississippi (Sept. 19, 2014)

Regarding cost inputs, Synapse considered distribution companies’ potential revenue losses as well as the costs of administering a net metering program. Solar integration costs were not incorporated into the study, as they were found to be negligible at an assumed penetration rate of 0.05 percent of the state’s historical peak demand.

Regarding benefit inputs, Synapse considered avoided energy costs—the variable operating and fuel costs of marginal resources; capacity value benefits—the benefits associated with increased capacity availability; avoided transmission and distribution capital costs—the money saved as the need to install or upgrade transmission and distribution lines is deferred; avoided system losses–the energy that would otherwise have been lost in transmission from a centralized generation source; avoided environmental compliance costs—the costs utilities would otherwise incur in complying with mandated emissions reductions; and avoided risk—the benefit of shifting risk away from utilities and ratepayers and towards private solar developers. The study did not consider employment-related benefits.

Source:  Public Service Commission of Mississippi, Net Metering in Mississippi (Sept. 19, 2014)

Source: Public Service Commission of Mississippi, Net Metering in Mississippi (Sept. 19, 2014)

Net metering was found to provide net benefits in almost every scenario and sensitivity analyzed—save for when each input was adjusted to yield the lowest possible benefits. Importantly, the study determined that, due to avoided costs, “[d]istributed solar has the potential to result in a downward pressure on rates.” In fact, the study went as far as concluding that “[i]f all avoided costs are accurately and appropriately accounted for and the consumers are paid an avoided cost rate, then there is no cost shifting because the costs to non-participants (those customers without distributed generation) are equal to the benefits to non-participants.”

Notably, the study cites Massachusetts as having one of the country’s “most developed net metering programs” and one of the “most aggressive goals for distributed solar.” But as states such as Mississippi begin to embrace the economic benefits of solar, Massachusetts—which recently experienced some of the highest electricity rates in the nation—stalls as it mulls what to do with its own net metering regime. It seems that the Commonwealth urgently needs its own value of solar study to keep from falling behind Mississippi.

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