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How Virtual Net Metering Opens New Markets of Solar Customers

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Residential solar has grown dramatically over the last decade, making the benefits of lower electric bills and cleaner energy significantly more accessible. In fact, the annual growth in residential solar installations has averaged 68% over the last 10 years according to the Interstate Renewable Energy Council (IREC). In addition to the falling cost of solar components, this growth has to a large extent been driven by the development of policies and financing approaches that enable cost-effective projects.

To date, however, policies for residential solar, like net metering, have predominantly focused on supporting solar for homeowners, leaving renters and other potential solar customers limited options for accessing the benefits of solar energy. And for solar contractors, this means a large portion of the potential market has been closed.

Virtual net metering, which extends net metering to customers who do not share the same meter as a solar installation, has great potential to make cost-effective solar energy accessible to other portions of the residential market.

illustration of a multi-family apartment building with a solar array (virtual net metering enables shared solar)

Virtual net metering can allow residents of multifamily buildings to share the solar energy from a communal array.

What is Virtual Net Metering?

Virtual net metering (also called virtual net energy metering, or VNEM) uses the same compensation structure as net energy metering (NEM): utilities pay customers the retail rate for the energy that their solar system feeds back to the electric grid, so that they pay only for the net amount of energy they consume. However, unlike traditional net metering, virtual net metering allows the credits from an array to be distributed among multiple customers who do not share a meter with the system. For instance, energy credits from a solar array on a multifamily apartment building could be divvied up and applied to the accounts of different households in the building and to common area electricity usage. Virtual net metering policies are what enable shared renewable energy projects like community solar gardens, although some community solar projects are structured in other ways.

What is the Current Status of VNEM and How Big is the Potential Market?

In many states, and especially in cities, large proportions of the population live in apartment buildings, condos, or other buildings with multiple tenants. Since regular net metering policies require bill savings from a solar installation to be applied to a particular customer’s meter— rather than distributed across multiple accounts—it has been more difficult for these customers to access the benefits of solar. But with VNEM policies, this huge base of new solar customers is opening up.

How Does Virtual Net Metering Differ From Community SolarFor instance, nearly 17% of California residents live in apartments, but in major cities like San Francisco and Los Angeles that number is significantly higher (40 and 43% respectively) according to the Virtual Net Metering Policy Background and Tariff Summary Report  published in 2015 by the Center for Sustainable Energy, IREC, and CalSEIA. In Seattle, nearly 50% of the population are renters, and 40% of occupied housing is comprised of apartments (according to another IREC report ).

Around the country, there are already many states that have virtual net metering policies in place, though—for the most part—the number of projects developed under these policies has been limited. In California, for instance, one of the earliest adopters, virtual net metering was authorized for the general multi-tenant market in 2011 by the CPUC, following a pilot program for residents of affordable housing complexes. However, while there are several hundred thousand multifamily properties in the state that are eligible to develop shared solar projects under the state’s VNEM policies, as of 2016 only about a hundred such projects have been developed according to the Center for Sustainable Energy .

Virtual Net Metering Policies by State

Fourteen U.S. states have mandatory virtual net metering policies (typically applying to the state’s investor-owned utilities, or IOUs), according to IREC’s State Shared Renewables Program Catalog (updated September 2016). While this list focuses only on mandatory programs, “many utilities across the country, including IOUs, municipal utilities (MUNIs) and cooperative utilities (coops), also voluntarily offer shared solar or VNEM programs,” according to the Virtual Net Metering Policy Background and Tariff Summary Report.

The states (and districts) with mandatory virtual net metering policies include California, Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Vermont, as well as Washington, D.C.

VNEM_mapchart.jpgAt the time of publication, 14 states have virtual net metering (VNEM) policies. 

The structure of virtual net metering policies (and the terms used to refer to these programs) varies by state, with diverse restrictions on customer type, technology type, capacity limits, and the allowable distance between the shared array and the meters of participating customers. California’s policy is somewhat unique in that it limits virtual net metering to “customers of multi-tenant buildings that share a common service delivery point (SDP)”1 meaning that only onsite projects are supported. In contrast, most other VNEM policies include solar systems located on properties that are offsite from participating customers.

How Can You Tap Into This Emerging Solar Market?

As you can see, VNEM policies in many states have made possible a whole new class of solar projects. But, while the policy mechanisms are in place, the limited use of these policies to date means that there is significant room for growth.

Curious about how to serve this market? While adding new services to your business is always something that should be weighed carefully, if your company is interested in understanding the business opportunities of virtual net metering processes here are some tips to get you started navigating this area.

First, you’ll need to understand whether there are state-level VNEM policies the areas where you work. (If not, it may be worth also contacting your local utility to understand whether the utility offers a voluntary VNEM program.)

If your state offers VNEM, the Virtual Net Metering Policy Background and Tariff Summary Report  is a good starting point, providing summaries of how each state implements VNEM (pages 31-48) and links to the relevant policies and rules. Another helpful resource is IREC’s State Shared Renewables Program Catalog , which provides a comparative chart of states’ shared renewables programs, like VNEM, for solar and other renewable energy technologies.

If you’re a solar contractor in California, you’re in luck, because the Center for Sustainable Energy, with support from the SunShot Solar Market Pathways Program, has put together some VNEM toolkits for contractors. These include interactive maps of multifamily buildings to enable more targeted marketing efforts, and guidelines and forms for navigating the interconnection process. Additionally, they’ve put together guides for owners of apartments and condominiums, which may be helpful references to share with prospective customers to help educate them on the value of virtual net metering systems and how the process works.

As we work towards a future in which renewable clean energy is accessible to all, the development and implementation of approaches to bring solar to new markets will be key. Virtual net metering presents a great opportunity to include many more people in the solar market—from renters, to residents who live in multifamily buildings, to those whose property is too shaded. For contractors who get familiar VNEM projects, a vast market of new customers awaits.