News Story

Analysis: Renewable Electricity 'Net Metering' Capacity: 1/28,000 of Michigan’s Total Needs

The Michigan Public Service Commission has just issued a report on "net metering" in the state during the last six months of 2009. The press release that accompanied the report chirped that the number of net metering electricity customers increased by 85 percent during that period, from 135 to 254. With a few exceptions, most of these small generators make electricity with wind turbines and solar collectors.

"Net metering" is a clever practice in which an electricity customer who also generates some juice can sell it back to the utility by essentially "reversing" the flow. The customer is then charged only for the "net" of electricity purchased from the utility minus electricity sold to the utility.

It's more complicated in practice, and potentially adds to the challenges power companies face in planning how much they need to generate. For this reason, net metering is heavily regulated by statute and Michigan Public Service Commission rules that impose limits and price controls.

For example, DTE is required to offer net metering connections under terms that generally favor the customer, but is not required to acquire any more than 1 percent of its total capacity from them. Therefore, even if dispersed renewable power generation became much more cost-effective than currently, net metering would never replace more than a fraction of the total electricity required to keep Michigan's homes, shops and factories humming.

This reality is reinforced by the details of the new MPSC report, which reveals the potential amount of power those 254 net metering customers can provide - at least during the hours the sun shines, the wind blows, etc. - is just 884 kilowatts. Therefore, if the wind blew steadily and the sun shone non-stop for 12 hours a day - they won't, but it's useful to set the outside boundary - these net meterers might produce 3,871,920 kilowatt hours of juice annually.

According to the U.S. Department of Energy, Michigan's total electricity consumption is 110,445,000,000 kilowatt hours each year (110.4 billion). This is 28,524 times more than the maximum potential output of all the state's current net-metering providers. Under current law, net metering could legally provide around five times more electricity, which would potentially bring it up to 1/5000 of Michigan's needs, even under the most optimistic assumptions.


Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.