Fitch Ratings expects strong growth of U.S. net energy metering (NEM) policy as federal and state governments seek to further renewable energy goals. However, the electricity generated under NEM programs as a percentage of total electric retail sales will remain low, according to a new Fitch report.
The majority of consumer-produced NEM electricity – mainly through solar technology – is self-consumed, resulting in lost sales to the utility. According to the market analysis and ratings firm, excess NEM generation sold back to utilities represented just 0.01% of total electric retail sales in 2012.
A key driver of NEM growth is third-party financing of solar PV technology, which represents the largest proportion of net excess generation utilizing NEM programs, the report says.
According to Fitch, U.S. residential PV solar installations have had a compounded annual growth rate of 51% since 2005. In 2012, residential PV installations increased 62% to 488 MW, as compared to 2011, driven by the growth of third-party financing options. Third-party-owned systems now account for more than 50% of all new residential installations in most major residential markets.
A further NEM growth driver is new types of investor financing, Fitch says, noting the first securitization of distributed solar generation occurred in November. The report concludes that the securitization market provides a potential new source of efficient capital to fund the nascent solar generation installations while removing the high-cost barrier of entry for residential consumers.