This meter shows that the customer has delivered 15,170 kWh to the utility grid since it was installed.

Utility Interconnection Tiers Explained

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The Florida Administrative Code is where we find the Net Metering Rule for Florida. Utility companies are bound by this law, and each has an interconnection agreement form that is approved by the Public Service Commission.

FPL and LCEC are the two utility companies in our service territory. Both have interconnection Tiers 1, 2, and 3. Tier 3 is only for utility-scale projects over 2 megawatts, so we won’t cover that here. Here are the explanations and requirements for Tier 1 and Tier 2:

Tier 1 Utility Interconnections

Tier 1 interconnections are systems up to 11,764 watts. The watt rating is based on the DC rating of the system. For example, if you have 28 solar panels, each 415 watts, that is a 11,620 watt system and it qualifies as Tier 1.

Where did the seemingly random number of 11,764 come from? Well, the utility companies recognize that the AC rating of a solar energy system is usually much less than the DC rating. This is due to design practices that size the solar panels greater than the solar inverter, and also accounts for conversion losses and real world effects. The utility companies use a mostly arbitrary figure of 85% of the DC rating, which calculates to 11,764 x 0.85 = 10,000 watts AC. A 10 kW system is a nice round number that they can use as a cutoff point for tiers.

This is the simplest interconnection type for smaller photovoltaic systems. FPL has no interconnection fee and LCEC has a $35 fee. There are no additional requirements other than filling out the agreement, which we will prepare for you. FPL has an online process with digital signatures and LCEC has a paper process that we scan as a PDF and submit for you via email.

Tier 2 Utility Interconnections

Tier 2 systems start at 11,765 watts and require a $400 one-time interconnection fee and $1 million of personal liability insurance either on your homeowner’s insurance or as an umbrella policy.  Each utility requires a specific type of disconnect switch that is accessible to them, and generally near the utility meter. The interconnection process is the same, with some additional documentation required.

The idea behind the Tier 2 requirements goes back to the days when solar equipment was not as evolved as it is today, and some equipment could potentially backfeed power to the grid, endangering utility workers. The requirements are outdated and unnecessary, but they are part of the Net Metering law’s tier system and part of each utility’s approved interconnection agreements. To change these requirements would be an onerous process, and might result in some negative consequences for consumers, so the solar energy industry accepts the status quo.

Another factor is how much power the utility company can accept on your part of the grid. They need to make sure that their transformers and transmission equipment can handle the amount of backed power produced by you and other net metering customers in the area. So Tier 2 interconnections require a bit more study on the utility’s part, justifying the fee to ensure the stability of the grid for all users.

What Utility Tier Levels Mean To You

If you have modest energy use, or if you do not already have an umbrella insurance policy, you might consider staying within Tier 1. You can offset a portion of your expected electricity use rather than all of it. If your electricity usage is high, the additional costs of complying with Tier 2 requirements might be well worth it. If you already have the required insurance, this would not be factor in your decision making. Each scenario is different, and we can help guide you. Most of the time, if you are considering a system just over the Tier 1 level, we will encourage you to stay within Tier 1. If you plan to install a Tier 2 system, going well over 11,764 watts is advisable.

Another complication is that FPL has a minimum bill that effectively forces you to pay $16.01 (currently) for electricity, even if you have no net usage for the month. So even if you produce excess solar power, you will still need to pay a small amount. Your excess can still be used to apply to future months’ bills, but this rate structure disincentivizes you from going with the largest system they will allow. Still, many people will purchase the largest system anyway out of principle, and to cover future energy needs that will inevitably grow.

Don’t Confuse Interconnection Tiers with Tiered Rates

Adding to the confusion is that each utility has tiered rates for usage. This has no bearing on interconnection tiers.

For FPL, your first 500 kilowatt-hours (kWh) of usage are billed at a lower rate. For LCEC, they have 3 tiers for 500 kWh, 1,000 kWh, and over 1,000 kWh. However, when you do net meteirng with LCEC they give you a single blended rate once you add solar panels. This blended rate is lower than the two highest tiers before you go solar.

Without getting into too much of the complexities, the net effect is that you have a financial incentive to use solar power to knock down your most expensive energy. This often means that producing just under 100% of your annual usage is the best return on investment. That’s not to say that generating 100% of more is a bad investment – it just has lower marginal benefits. Our software takes these before-and-after tiered rates into account when presenting you with the financial outcomes you should expect.

Final Words on Interconnection Tiers

The tier system is an annoying complication, but it really doesn’t mean much unless your needs are right on the cusp of the two tier levels. If you have modest energy use, you will most likely be presented with a Tier 1 system. If your electricity use is very high, a Tier 2 system will almost always be in your best interest, but you can still choose to stay within Tier 1 and offset a portion of your electricity bill.

When choosing a system size, don’t worry too much about how much your bill is currently. Focus on how much you want to reduce it. Give the orientation and geometry of your roof, we will tell you how many panel that will take and whether that falls into Tier 1 or 2. As a general rule of thumb, a maximum-sized Tier 1 system with ideal orientation and no shading should offset around $180 in utility electricity in an average month*. If you want to offset more, you will need to consider a Tier 2 system.

Let us do the hard work of figuring this out for you. It might sound confusing, but we do this every day and will guide you based on what is best for your investment goals.

 

* Based on August 2022 utility rates of $0.12 per kWh.

 

 

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