Net Metering Policies
Act 278 passed by the 94th General Assembly in 2023 has overhauled the net metering policy in Arkansas. To take advantage of the current net metering with 1:1 rate structure and the grandfathering term, any renewable energy projects that are under development will have to follow the extended deadline of Sept 30, 2004. Grandfathering says the net metering rate when the project is developed is not going to change half way through the contract duration, which is 20 years in this case.
Under the upcoming compensation policy called net energy billing, or instantaneous netting, banking of site-generated electricity, i.e. kilowatt-hours (kWh), within a billing cycle to offset future consumption will not be allowed any more. A system owner can consume electricity generated by their PV systems in real time and export any generation in excess of on-site consumption to the utility grid and be compensated (credited) by the dollar values based on the avoided costs, which are much lower than the typical retail prices charged to electric ratepayers. For details of the new policy and related terms and conditions of the deadline extension, please refer to ACT 278.
What is net metering?
Net metering is a metering and billing arrangement designed to ensure fair credit for the owner/customer of a distributed generation systems for electricity exported to the grid. Net metering policies promote the development of distributed renewable energy systems (solar, wind, geothermal, etc.).
In general, electricity produced by grid-connected solar PV system may be used by the business load or flow to the utility’s distributed system to other loads. With net- metering, the kWh produced by the customer and supplied to the grid offsets the kWh supplied to the customer in that month (net kilowatt-hours). If the customer sends more kWh to the grid than used, the kWh charge is zero that month (the account charge remains). The kWh generated by the customer in excess of the kWh used is accumulated and credited to the account associated with the meter physically attached to the net metering facility in the next applicable billing period. The new net-metering rules allow existing agreements between net-metering customers and utilities to remain in place, or grandfathered, for 20 years (until 2040).
Why do net metering policies vary by state?
Net metering policies vary by different states, and by different utilities in some states. The differences include the capacity limits for residential and non-residential sectors, the true-up period, and how the net excess generation is compensated. The Arkansas Public Service Commission (APSC) announced the State’s new net-metering rules regarding solar development on June 1, 2020.
The new net-metering rules allow existing agreements between net-metering customers and utilities to remain in place, or grandfathered, for 20 years. The variation of the net metering policies and an explanation of what AR policy stands are below.
1) How long excess generation credits can be carried forward and applied to future
Some utilities specify annual credit expiration. The billing year may end on a specific date or be based on when the system was installed. During the one year billing period, a customer’s excess generation credits can be applied to future months. At the end of a customer’s annual period, any excess credits are lost. Customers may receive a small compensation based on the wholesale rate of electricity for their excess generation. Arkansas’ net metering allows credit to be carried forward, until the customer elect to be paid after 24 months, or other circumstances for example, when changing ownership of a business or home.
2) Value of electricity sold to the grid from a solar installation compared to the
value of electricity bought from the grid
The Arkansas Public Service Commission (APSC) reinstated the existing rate (1:1) of what utilities pay for electricity from solar systems that is fed back onto the electric grid by residential and commercial consumers. The new net-metering rules allow existing agreements between net-metering customers and utilities to remain in place, or grandfathered, until 2040. Starting in 2023, a utility can request an alternate net-metering rate structure “that is in the public interest and will not result in an unreasonable allocation of, or increase in, costs to other utility customers,” according to the new rule. In comparison, some states or utilities specify a reduced value for electricity sold to the grid, devaluing the energy production from the PV system. This is usually specified as a percentage reduction – the utility might credit the customer only 85% of the value of an equivalent amount of kWh bought from the grid.
3) Capacity limit
The capacity limit of Arkansas net-metering is 25 kilowatts (kW) of peak power to residential customers. As a reference, the nation-wide average installation of residential customers is 6.5 kWDC. The capacity limit of Arkansas net-metering for commercial customers is 300 kW of generating capacity.
The law allows third-party financing for those looking to use but not own solar energy (such as city government, schools, etc.) and increased the allowed generating capacity for commercial solar systems from 1000 kilowatts to 1 megawatt. Another aspect in the net-metering rules regards commercial systems with a generating capacity of between more than 1 megawatt and 20 megawatts. For customers with these systems, they will receive a 1:1 retail credit for net electricity generation but will face a utility grid charge. The charge will initially be set at zero, but utilities may request to change the charge.
Meter aggregation expands options for customers who have multiple electric meters which is common in farming. In farming, the electric consumption on any given meter can vary substantially from month-to-month and year-to-year. The combination of Arkansas net metering and meter aggregation policies is critical for the agricultural community. Specifically, meter aggregation allows for a single generating system to be used to offset electricity use on multiple meters, without necessarily requiring a physical connection between the system and those meters. While meter aggregation has the potential to benefit many different types of customers (commercial real estate, franchised businesses, and urban businesses without nearby land), it can be particularly beneficial for farms with multiple meters and/or electric accounts that are geographically dispersed. This potentially removes at least some of the obstacles associated with site limitations, allows customers to benefit from economies of scale in system sizing, and allows the use of underutilized land in system siting.
Customer sites that are well-suited for PV installations are not suitable to be net-metered, or vice versa. For instance, a local government may want to offset load in an older building that cannot support the weight of a PV system, or on a building with a roof that will need to be replaced before the life of the PV system has expired. A building with significant electricity load might have too much shading or might not have enough roof space to site a large enough system to significantly offset the on-site electricity consumption. Alternatively, the best site for a PV system might be located on a capped landfill, a brownfield, or on undeveloped land where there is currently little or no electricity demand. Because a system cannot be sized to exceed demand at the site, these sites are not appropriate for traditional net metering.
For more information about the Arkansas net metering policy, read the