What is Net Metering and Why is it Important for Mexico?

By Ben-Zion Ptashnik, Dec 16th 2010

In 2008 and 2010 reforms to the Ley del Servicio Público de Energía, made it possible for producers of renewable energy in Mexico to sell electricity back into the power grid after decades of electricity monopoly by the Comission de Electricidad Federal (CFE). This new law mandates that CFE allows for both residences and commercial enterprises, and possibly municipalities, to sell electric power from renewable energy generators such as solar Photovoltaic systems or wind generators back to the electricity grid, and is one of the most important steps in building a national solar energy industry and wind industry in Mexico.

Net metering is hailed as “providing the most significant boost of any policy tool at any level of government…to decentralize and to ‘green’ energy sources.” It makes every customer of electricity a potential producer of clean energy, and makes the solar or wind system significantly more economical to install, because it requires less batteries, and reduces the time that it takes to return the investment to the owner of that system. It also could give the grid a new degree of stability via “distributed generation.” Net metering allows consumers to participate in greening the electric grid and freeing the utilities to invest more in transmission and distribution, rather than new gas or coal power plants.

For example: In the state of New Jersey (USA) early this decade the state electricity infrastructure became unstable due to rapid economic and residential growth, which outstripped the State’s utility infrastructure. After a series of blackouts disrupted industry and created millions of dollars in losses of refrigerated and frozen food in restaurants and supermarkets, a commission was formed to study how to repair the problem. After studying all the alternatives, New Jersey’s solution was to legislate $800 million dollars in state subsidies to homeowners and businesses to incentivize installation of solar systems. New Jersey rebated $5 dollars for every $8 dollars invested in solar photovoltaic energy.

This distributive renewable energy generation stabilized the electric grid of New Jersey, and prevented the need for a two billion dollar investment in new transmission lines. It also prevented the need for New Jersey to buy power contracts from coal plants in Pennsylvania and Ohio- plants that New Jersey was suing because of the acid rain produced by these same plants, and which was destroying New Jersey’s forests. In the process New Jersey also created thousands of green energy jobs, and built a stable, sustainable “green” electricity grid.

Mexico will be in a similar position as New Jersey in the coming years. As population and industry grows, Mexico will have to build new transmission and gas-fired generation plants to meet demand. But Mexico already depends on gas for 74% of electric generation capacity, and PEMEX production of fossil fuels has diminished to such a great extent that Mexico now imports 40% of the gas needed for domestic consumption. This has resulted in drastically higher electricity rates, as every homeowner and business owner in Mexico can attest. That’s why net metering is so important for Mexico, as it begins the process of creating a stable and green energy grid for Mexico that is not dependent on fossil fuels, and which can produce electricity at half the cost of gas. Wind and solar energy resources in Mexico are abundant and limitless. And the day will surely come when most of the electricity produced in Mexico comes from such renewable resources. It makes logical, ecological and economic sense.

Net metering is an advanced electricity policy for consumers, and for society. The method of net metering used in Mexico involves installing a new bi-directional meter which measures both the purchases by the consumers, and also the kilowatt hours of renewable electrical generation that is “sold” back to the CFE utility."Net", in this context, is used in the sense of meaning "what remains to be paid after deductions". One might also “net out” the millions of tons of carbon emissions which renewable energy sources deduct from the Earth’s atmosphere.