Net metering: Enticing self-generating companies back to the grid

(Part 2 of a series on the renewable energy bill. See "Renewing calls for the renewable energy bill passage: Part 1", May 29, 2008)

By J R Ruaya

Apparently trying to deflect some of the criticisms hurled against it, the Manila Electric Company (Meralco) is now urging self-generating companies to directly connect to the grid to help in efforts to reduce power rates in the country.

Meralco president Jesus Francisco pointed out that system losses in the country are higher compared to those in other countries because the share of the industrial sector to overall electricity consumption is much lower.

He pointed out that the share of Meralco’s industrial customers in electricity consumption is only 28.2 percent. In contrast, industrial users in Korea, account for 52.9 percent; Taiwan, 50.9 percent; Malaysia, 45.4 percent and Thailand, 48.8 percent.

He further pointed out that in the 1970s, industrial users stood at 38%, but has now dropped to about 29 %.

“Some companies said that they are wiling to stop self generating and go back to the grid,” he said. Many of these companies opted out of the grid due to inefficiency of power supply as exemplified by the debilitating brownouts in the early 1990s.

It will take more than gentle persuasion to lure back these large industrial power users.

For those self-generating industries using crude oil, the escalating price of the fuel which now stands at above $140 a barrel, may be a rude awakening enough for them to go back to the fold.

For those using other sources or fuel such as biomass, they may be enticed to sell their excess capacity to the grid. For example, a 14-MW biomass generation plant uses only 9 MW for its own purpose, such as running a sugar mill. It would be more profitable to the owner if he could sell the extra 5 MW to the grid.

Such a mechanism is actually embodied in the renewable energy bill which the House of Representatives recently ratified; however, the Senate version still languishes at the committee level.

The mechanism is called net metering. Simply put, if you are a generation grid user and at the same time producing some power, you could have a two-way connection to the grid. You only pay for the net use from the grid. And at times when you have excess power, you could sell back some of the excess.

The system will only work if one has a distributed system in place. Provided that the appropriate infrastructure is in place, theoretically, a home owner using solar power, a farm using a small-scale wind turbine, or a small industry with a (say 5 MW) binary plant using low-enthalpy geothermal fluid, could sell the excess power to the grid. Alternatively, if the local generating plant needs maintenance work, the owner could source the needed power from the grid.

Aside from the interconnection to the grid, other parts of the needed infrastructure include proper power accounting, the measurement of actual power coming from and going into the grid, and of course, the issue of pricing.

Such a mechanism, combined with the other incentives offered in the renewable energy bill and the opening of a real competitive electricity market as envisioned by EPIRA or the electric power industry reform act, could at least encourage small to medium industries, and even homeowners, to generate their own power.

But we are still very far from that situation. Our legislators seem to be taking their sweet time just passing the renewable energy bill.