Interconnecting to the grid in New Mexico

Introduction

"Net-Metering" refers to interconnecting a renewable energy system with the power grid, such that excess on-site generated power is fed back into the grid, and such that grid power supplements the on-site demand when the on-site generation is either absent or insufficient. In this way, one can effectively use the grid as a battery and hence eliminate the need for batteries, which can decrease the cost of one's system substantially (often by 20-30%: batteries are often roughly 1/3 of the life-cycle cost of a solar electric system). This also eliminates the need for battery maintenance. 

Net-metering increases the fraction of the on-site generated power which is actually used, because excess power is never wasted, unlike the power wasted when an isolated system's batteries become fully charged but the system is still generating power, and the power is used more efficiently as well. 

To see more information about net-metered systems in New Mexico, see our Solar Tour Sites Listing.

Rules Governing Interconnection

There are two PRC (Public Regulatory Commission) rules governing interconnection to the grid in New Mexico, both of which are available from this website:

These rules apply wherever electricity service is regulated by the PRC. This includes the areas serviced by New Mexico's four investor owned utilities (IOUs) (which encompasses Santa Fe and Albuquerque for example), and the areas services by electric coops. It does not include municipal utilities (such as Los Alamos and Farmington), which are self regulated. 

Rule 570, which became effective on 6/30/88, implements the Public Utility Regulatory Policies Act (PURPA) of 1978, a ruling by the Federal Energy Regulatory Commission (FERC) which establishes the right of qualifying facilities (independent power producers) to sell power to utilities at "avoided cost". Unlike Rule 570, PURPA does in fact apply to all electric utilities in New Mexico (and in the US). Utilities not under PRC regulation must offer their own equivalent of Rule 570.

Avoided cost means the cost at which the utility would either generate the power itself or purchase from another source, which is generally less than the wholesale cost of power. Rule 570 involves a lengthy application, certification from a licensed professional electrical engineer, and possibly expensive interconnection equipment and evaluations.

To streamline the process set forth in Rule 570 and create enhanced incentives for small renewable energy systems, Rule 571 establishes the right of small renewable or alternative energy production facilities to a) Effectively use the grid as a battery, b) Sell power to the utility at avoided cost rate (the word "selling" is probably too strong - the details of the ruling basically negate using Rule 571 to establish a company to make profit selling power). The basic provisions are:

  1. Net-metering is limited to non-fossil generation (i.e. solar and wind, and possibly biomass/biodiesal types of generation).
  2. Certification from a professional electrical engineer is not required.
  3. Net-metering is limited to 10 kilowatts or under.
  4. Single phase photovoltaic systems may interconnect without an isolation transformer.
  5. If the net-metered facility uses more power than it produces over a billing period, the utility may bill the customer for the net power used according to the rate structure that would apply to the customer if they had not connected as a net-metering facility.
  6. If the net-metered facility produces more power than it uses over a billing period, the utility may either:
    1. Reimburse the facility for the net kilowatt-hours produced during that billing period at the utilities avoided cost rate. This is not a very desirable option, and not the option that PNM's policy chooses at present, for example. 
    2. Apply the net kilowatt-hours as a credit (at full retail rate) to the succeeding billing period. In this case, the utility must only reimburse the customer for the net power produced when the facility officially disconnects from the grid, and can do so at the utilities avoided cost rate.

Note that, unlike the agreements that would typically be set up under Rule 570 for larger systems, the only time when a utility is absolutely required under Rule 571 to monetarily reimburse the facility owner is when the owner eventually disconnects their system. On one hand, this makes it difficult to actually generate profit selling power to the grid, because any monetary payment is delayed. On the other hand, assuming that any monetary reimbursement by the utility is limited to avoided cost rates, having the credit roll over indefinitely at full retail value, if option 6.2 above is implemented, is the most advantageous arrangement for those whose net kilowatt-hour production over a full year is negative or only slightly positive (i.e. those who primarily intend to use the grid as a battery). The rule was written this way with the latter in mind, with the idea that delayed payment for excess power produced is of less concern because small renewable energy systems tend to be too expensive to generate a profit at avoided cost rates to begin with. For those truly wanting to sell power under PURPA for profit, interconnecting under Rule 570 instead will generally be more appropriate, because 570 allows generation in excess of 10 kilowatts and regular payment. 

It is worthwhile noting that use of the grid by net-metering systems generally benefits the utility as well as the system owner, by providing increased generating capacity (often during peak demand times), by offsetting both the utility transmission and distribution capacity needs of the utility, voltage support, and possibly VAR support (if the system displaces power with a poor power factor).

Technical Issues

The basic technical requirements that a net-metering system should have are a visible means of disconnection, so that a utility can disconnect the system if they are working on the system, a net-meter, which should not cost more than about $20, and an inverter that disconnects properly if the grid goes down. The latter, which is called the "anti-islanding" requirement, is met by any inverter which is UL Listed (UL List 1741 to be precise). This UL rating will also insure that the inverter also has acceptably low levels of harmonics. Note that many inverters are not UL listed - for example, modified sine wave inverters are not because they generally lack both anti-islanding and have high levels of harmonics.

Note also that Rule 571 also does not require an isolation transformer! This is major simplification and economization.

Political Issues

Of course, in our view it would be desirable to have a net-metering rule that allowed more than 10 kilowatts, and possibly a more timely and generous pay-back rate than avoided cost only at time of disconnection. Some, for example the Southwest Energy Institute, have questioned the right of the utility to set their own safety standards, since many utilities are increasingly involved in provided distributed generation. Aside from these issues, we are quite pleased with Rule 571 and the advantages it provides for renewable energy system owners. 

Net-Metered Systems in New Mexico 

As of this writing (October 2002), PNM (a major utility in New Mexico) has 22 net-metered systems in their service area. PNM's Pat Scharff (phone: 505-241-2548), has recently led an effort to simplify the net-metering application for PNM served areas to two pages.