The argument is being made that smart grid supporters should support “net-metering” since it will spur renewables, which will in turn require smart grids to integrate them efficiently. What the argument ignores is the fact that net-metering requires those who can least afford it, to subsidize the very rich. Moreover, there already are alternative ways of spurring renewables in more cost effective ways. Support of smart grid deployments should be based upon the value that it will provide to consumers and their utilities, not on its ability to create subsidies from those who can least afford it.

Net-metering requires utilities to overpay for renewable generation by paying for the energy delivered to the utility using a bundled retail rate that includes not only the generation charge (which would be more appropriate), but also all distribution, transmission and other utility costs. The end result is that those consumers/suppliers fail to pay their fair share of the utility’s fixed costs and consequently the revenue shortfalls are ultimately added to the bills of all other consumers. Additional financial problems are created for utilities and ultimately their consumers when energy supplied to the utility at night, which generally has a very low value, is netted out against energy taken from the utility during the peak of the day, which is the most expensive power to purchase or generate. Alternatively, “net-billing” prices energy sold to consumers at the normal state set retail rate, but prices energy delivered to the utility at prices that reflect the real market value to the utility of the energy. While this might mean payments at rates that exceed non-renewable energy prices, the payments reflect least cost renewable alternatives.

Importantly, renewables are already being spurred by state renewable portfolio requirements which generally require utilities to get 15-20% of their energy from qualified renewable sources. There is also the possibility of a federal requirement. Such requirements not only mandate renewables but also provide utilities with the ability to build or purchase from renewable resources that can capture the economies of scale and scope from grid sized facilities or utilize a million solar roofs where the value of smaller distributed resources can be considered.

Smart grid deployment already has proven value in reducing meter reading costs, helping utility avoid major investment in generation, transmission and distribution, and the ability to mitigate volatile wholesale markets. Moreover, providing consumers with the information and tools to manage their own requirements in relationship to utility price and reliability signals already has been shown in numerous pilots to justify smart grid deployments. Supporting net metering as a justification for smart grid deployments makes as much sense as burning down homes so that we can justify buying new fire trucks.