Page 307 - Fluid Power Engineering

Financial Modeling of W ind Projects 273

energy production is less than demand, that is, energy is used from the
grid. In the United States, several states have legislated net-metering
laws. The laws are state-specific and the most updated information
may be found at DSIRE, http://www.dsireusa.org/. The net-metering
scheme is characterized by the following:

a. Capacity limit of the power plant. In majority of the cases, net-
metering applies to small generators of size 100 kW or less.
For instance, as of 2009, Nebraska has a net-metering limit of
25 kW, Oklahoma is 100 kW (or 25 MWh per year), Illinois is
40 kW, and Massachusetts is 2 MW.
b. Netting period. The meter is netted at the end of the specified
period. For example, if the netting period is 1 month, then, at
the end of each month, the excess energy supplied to the grid
is paid at the excess energy price. In Massachusetts, there is
no netting period, that is, credits can be transferred from one
month to another indefinitely. In Illinois, the netting period is
a year after which the credits expire, meaning that net excess
generation can be transferred month-to-month at full retail
value until the twelfth month; at the end of 12 months, the
credits expire. In Oklahoma, the netting period is 1 month.
c. Payment of excess generation. In some cases, the utility receiv-
ing the energy pays for the excess energy produced by the
renewable source at a discounted rate. In Massachusetts, the
net excess generation is monetized at a rate that is slightly
less than the full retail rate (goes hand-in-hand with no net-
ting period). In Oklahoma, utilities are not required to pay for
net excess generation; however, if a utility wishes to, it can
then pay the avoided cost rate.

In addition to paying for energy usage, which is a charge per kilowatt-
hour, nonresidential utility customers pay a variety of other charges:
Demand charge, reactive power charge, and other charges. Demand
charge is computed based on peak power usage (not energy). Peak is
computed by finding the maximum power usage in each 15-min or
1-h interval for the billing cycle of 1 month; the interval used depends
on the utility. The demand charge is high because it reflects the cost
of infrastructure—generators, transmission, and all the equipment—
required by the utility to deliver peak power to customers, in addition
to the extra cost of turning on the most expensive generation capac-
ity. It is not uncommon to see higher kilowatt demand charges com-
pared to the kilowatt-hour energy charges. Customers are, therefore,
rewarded handsomely to reduce peak demand.
In order to understand the real savings of a wind energy project
under the net-metering scenario, factors like reduction in demand