Consensus Study Report
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COMMITTEE ON THE ROLE OF NET METERING IN THE EVOLVING ELECTRICITY SYSTEM
JANET GAIL BESSER, Independent Expert, Chair
ANURADHA M. ANNASWAMY, Massachusetts Institute of Technology
GALEN BARBOSE, Lawrence Berkeley National Laboratory
SEVERIN BORENSTEIN, University of California, Berkeley1
MARILYN A. BROWN, NAE/NAS, Georgia Institute of Technology
MELICIA V. CHARLES, Mainspring Energy2
MOHIT CHHABRA, Natural Resources Defense Council
ELENA M. KRIEGER, PSE Healthy Energy
JOSHUA M. PEARCE, Western University
AUTUMN F. PROUDLOVE, NC Clean Energy Technology Center
VARUN RAI, The University of Texas at Austin
MOHAMMAD SHAHIDEHPOUR, NAE, Illinois Institute of Technology
NICOLE D. SINTOV, The Ohio State University
THOMAS S. STANTON, National Regulatory Research Institute (Retired)
TERRENCE G. SURLES, Independent Consultant
SUSAN F. TIERNEY, Analysis Group
Staff
K. JOHN HOLMES, Board Director and Scholar, Board on Energy and Environmental Systems (BEES)
BRENT HEARD, Study Director and Program Officer, BEES
DANIEL TALMAGE, Program Officer, Board on Environmental Change and Society
REBECCA DEBOER, Research Associate, BEES
ELI NASS, Research Assistant, DEPS
JASMINE BRYANT, Research Assistant, BEES
KAIA RUSSELL, Program Assistant, BEES
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1 Resigned from the committee August 2022.
2 Resigned from the committee April 2023.
BOARD ON ENERGY AND ENVIRONMENTAL SYSTEMS
JARED COHON, NAE, Carnegie Mellon University, Chair
VICKY BAILEY, Anderson Stratton Enterprises, LLC
CARLA BAILO, Center for Automotive Research
DEEPAKRAJ M. DIVAN, NAE, Georgia Institute of Technology
MARCIUS EXTAVOUR, XPRIZE
T.J. GLAUTHIER, TJG Energy Associates, LLC
PAULA GLOVER, Alliance to Save Energy
NAT GOLDHABER, Claremont Creek Ventures
DENISE GRAY, LG Chem Michigan, Inc.
JENNIFER R. HOLMGREN, NAE, LanzaTech
JOHN KASSAKIAN, NAE, Massachusetts Institute of Technology
MICHAEL LAMACH, Trane Technologies (Retired)
JOSÉ SANTIESTEBAN, NAE, ExxonMobil Research and Engineering Company
ALEXANDER SLOCUM, NAE, Massachusetts Institute of Technology
SUSAN F. TIERNEY, Analysis Group
GORDON VAN WELIE, NAE, ISO New England, Inc.
DAVID G. VICTOR, University of California, San Diego
Staff
K. JOHN HOLMES, Senior Director and Scholar
JAMES ZUCCHETTO, Senior Scientist
ELIZABETH ZEITLER, Associate Director
BRENT HEARD, Program Officer
KASIA KORNECKI, Program Officer
CATHERINE WISE, Program Officer
REBECCA DEBOER, Research Associate
KYRA HOWE, Research Assistant
JASMINE BRYANT, Research Assistant
KAIA RUSSEL, Program Assistant
HEATHER LOZOWSKI, Financial Manager
BOARD ON ENVIRONMENTAL CHANGE AND SOCIETY
KRISTIE L. EBI, University of Washington, Seattle, Chair
BILAL M. AYYUB, University of Maryland
LISA DILLING, University of Colorado Boulder
KENNETH GILLINGHAM, Yale University
KATHARINE L. JACOBS, University of Arizona
STEPHEN H. LINDER, University of Texas
GARY E. MACHLIS, Clemson University
MICHAEL ANTHONY MENDEZ, University of California, Irvine
ASEEM PRAKASH, University of Washington, Seattle
BENJAMIN KENNETH SOVACOOL, Boston University
MICHAEL P. VANDENBERGH, Vanderbilt University Law School
CATHY L. WHITLOCK, NAS, Montana State University
Staff
THOMAS F. THORNTON, Director
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Reviewers
This Consensus Study Report was reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise. The purpose of this independent review is to provide candid and critical comments that will assist the National Academies of Sciences, Engineering, and Medicine in making each published report as sound as possible and to ensure that it meets the institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process.
We thank the following individuals for their review of this report:
Kate Anderson, National Renewable Energy Laboratory
Paul Centolella, Paul Centolella & Associates, LLC
Peter Fox-Penner, Boston University
Matthew Freedman, The Utility Reform Network
Kenneth Gillingham, Yale University
Lynne Kiesling, University of Colorado Denver
Sarah Kurtz, NAE, University of California, Merced
Mark LeBel, Regulatory Assistance Project
Suzanne Leta, SunPower
Amparo Nieto, PA Consulting
Karl Rábago, Rábago Energy LLC
Timothy D. Wilson, NAS, University of Virginia
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations of this report, nor did they see the final draft before its release. The review of this report was overseen by Granger Morgan, NAS, Carnegie Mellon University, and Anjan Bose, NAE, Washington State University. They were responsible for making certain that an independent examination of this report was carried out in accordance with the standards of the National Academies and that all review comments were carefully considered. Responsibility for the final content of the report rests entirely with the authoring committee and the National Academies.
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Contents
Variants for Customers with On-Site Generation
Mechanics of Traditional Ratemaking and Rate Design
Mechanics of Net Metering and Variant Options
Further Considerations Affecting Rate Design
Typical Configuration for a Rooftop Solar System
Relevant Metering Technologies
3 BACKGROUND AND HISTORY, CURRENT STATUS, AND NEAR-TERM FUTURE OF NET METERING
Trends in the Adoption of Net Metering and Related Solar Support Policies
Trends in the Adoption of Net Metering Variants and Alternatives
Trends in Deployment and Costs for Distributed Solar Generation and Storage
Deployment Trends for Customer-Sited Generation and Storage
Trends and Tensions in Net Metering and Associated Supporting Policies
International Experiences with DG-PV Compensation Policies
4 ECONOMIC CONSIDERATIONS RELATED TO NET METERING
The Societal Perspective: Economically Efficient Pricing
Utility and Non-Participant Rate Impacts
Estimating the Electric System and Broader Societal Impacts of DG
Key Considerations in Evaluating Future DG Impacts
Major Electric System and Societal Impacts of DG
Environmental and Other Externalities
5 EQUITY CONSIDERATIONS OF NET METERING
Definition and Dimensions of Equity
Definition and Scope of Equity Concerns
The Demographics of Net Metering Participation
Net Metering, Rate Structures, and Demand Flexibility
Equity Concerns of Net Metering Non-Participation
Net Metering Participation and Equity Impacts on Electricity Bills and Rates
Environment, Health, and Other Societal Equity Effects of Net Metering
Current State of Equity Requirements and Range of Equity Solutions
Opportunities to Enhance Distributional Equity
Addressing Equity in Regulatory Frameworks
Opportunities to Enhance Net Metering Procedural Equity
Opportunities to Address Intergenerational and Structural Equity
6 NET METERING AND DISTRIBUTED ENERGY TECHNOLOGIES
Grid Modernization and the Integration of Renewables
Technology Intersection 1: Power Physics-Based Constraints
Increasing Complexity of Operations, Planning, and Forecasting
Technology Intersection 3: Cybersecurity and Resilience
Cybersecurity and Privacy Considerations
7 REGULATORY, LEGAL, AND MARKET CONSIDERATIONS
The Jurisdictional Split Over Regulation of Wholesale Versus Retail Sales of Electricity
Federal Rate Regulation and Net Metering
State Rate Regulation, Supply Acquisition, and Net Metering
Principles of Regulation of Retail Rates and Net Metering
Principles of Retail Regulation of Utility Payments for Power Supply
Considerations for Control of Net Metering Customers’ DER Assets
Interactions of Net Metering with Local Regulatory Policies and Conditions
Accounting for Clean Energy and Environmental Mandates in Net Metering
Principles for the Design of Policies That Aim to Launch and Invigorate Markets for New Technologies
8 THE FUTURE OF NET METERING IN AN EVOLVING ELECTRICITY SYSTEM
Evolving Net Metering for the Future Electricity System
Pillars of Net Metering Redesign
DG as Part of an Interdependent, Synergistic Evolving Electricity System
System Context and History Should Inform Net Metering Redesign
“Beyond DG” Approach Needed for Net Metering Redesign
A Committee Biographical Information
B Net Metering and Net Metering Reform Status in U.S. Jurisdictions
Preface
In its 2020 appropriations for the Department of Energy (DOE), the U.S. Congress directed the National Academies of Science, Engineering, and Medicine to appoint an ad hoc committee of experts to study the issues associated with net metering, including the medium- to long-term impacts of net metering on the electricity grid and consumers. This report responds to that direction. It is intended to provide useful guidance to policymakers, legislators, regulators, utilities and their governing boards, distributed generation providers, electricity customers, and other stakeholders interested in and affected by how the electricity system can continue to provide safe, affordable, and reliable service as it evolves to become increasingly decarbonized, equitable, and resilient.
I wish to express my appreciation to the members of the committee for their dedicated and thoughtful contributions to the study and to its timely preparation. This committee’s careful and nuanced discussions informed the perspective this report takes towards net metering.
The committee is grateful to DOE as well as the representatives of the various organizations that provided presentations, comments, and active participation throughout the study: Michele Boyd (DOE), Scott Burger (Form Energy), Stephen Campbell (GRID Alternatives), Gabriel Chan (University of Minnesota), Colton Ching (Hawaiian Electric), Sachu Constantine (Vote Solar), Jon Creyts (Rocky Mountain Institute [RMI]), Thad Culley (Sunrun), Gavin Dillingham (Houston Advanced Research Center), Mark Dyson (RMI), Matthew Freedman (The Utility Reform Network), Sean Gallagher (Solar Energy Industries Association), Marissa Gillett (Connecticut’s Public Utilities Regulatory Authority), Rachel Gold (RMI), Allison Hamilton (NRECA), Anne Hoskins (Sunrun), Lon Huber (Duke Energy Solutions), Christopher Irwin (DOE), Mike Judge (Coalition for Community Solar Access), Mark LeBel (Regulatory Assistance Project), Roger Lin (Center for Biological Diversity), Shelby Linton-Keddie (Edison Electric Institute), Kevin Lynn (DOE), Michelle Moore (Groundswell), Lee Peterson (CohnReznick), Karl Rábago (Rábago Energy LLC), Daniel Scripps (Michigan Public Service Commission), Benjamin Sovacool (Boston University), Reuven Sussman (American Council for an Energy-Efficient Economy), and Kim Wolske (The University of Chicago).
The committee would also like to thank the National Academies staff—John Holmes, Brent Heard, Daniel Talmage, Rebecca DeBoer, Jasmine Bryant, Kaia Russell, and Eli
Nass—for their work to support this study. Finally, we thank Cathy Gruber and the executive office reports staff of the Division on Engineering and Physical Sciences, who provided valuable help with editing the report, and Katiria Ortiz, who managed the report review process. We hope this report can provide instructive and actionable guidance to policymakers, regulators, and stakeholders in the electricity system as they navigate the evolution of net metering to support a decarbonizing, equitable, and resilient electricity system.
Janet Gail Besser, Chair
Committee on the Role of Net Metering in the Evolving Electricity System
Glossary
This report uses several key terms, which are defined as follows to facilitate a common understanding and foundation for the committee’s consideration of net metering and the evolving electricity system.
Avoided cost (AC): Cost that an entity (e.g., a utility) would otherwise incur to produce or acquire an additional unit (kWh) of generation or a substitute (e.g., energy efficiency). Several different methodologies exist for calculating avoided costs. In terms of net metering compensation, avoided cost-based rates are typically the lowest because they include only generation costs. These rates often do not include all of the avoided costs, normally comprising only the generation cost.
Behind the meter (BTM): With respect to net metering, BTM refers to energy devices on the customer’s side of the meter which have the potential to export generation and/or discharge storage to the electricity grid. (BTM devices can also include efficiency and demand response technologies that reduce customer usage.)
Clean energy standard (CES): A portfolio standard which mandates that retail sales of electricity to end-use customers contain a given share of electricity sourced from eligible zero- or low-emissions sources.
Distributed energy resources (DER): Energy devices (including generation and storage, as well as energy efficiency and demand response), which are not centrally located or connected into the electricity system, but may be connected at the distribution-level.
Distributed generation (DG): Electricity generated from sources of supply located near the point of use instead of centralized generation sources from power plants. DG facilities are typically interconnected to the distribution system.
Distribution: In the context of this report, this refers to the low-voltage, local electric system.
Economic efficiency: An allocation of resources within a market such that overall value to all participants is maximized while minimizing cost. In order for economic efficiency
calculations to be valid, all costs and values must be fully quantified so that the social marginal cost is optimized.
Energy affordability: The affordability of energy bills for all customers accounting for the value of services delivered (see Electric Power Research Institute’s 2021 list of Sustainability Priorities).
Energy burden (also, energy cost burden): Refers to the share of a household’s income that is spent on energy utilities.
Energy efficiency: A measure or device or process improvement that enables a consumer to achieve his/her needs (e.g., for cooling, space heating, lighting) with less energy. The energy service divided by the energy consumed.
Energy insecurity: The uncertainty that a household might face in being able to make utility payments and the risk of shutoffs due to an inability to pay bills.
Energy poverty: Living in a home that does not have access to enough energy to meet essential needs.
Equity: Equity encompasses:
Distributional equity, encompassing the equal allocation of rights, resources, and/or information.
Procedural equity, focusing on who is represented and engaged in decision-making processes.
Intergenerational equity, considering obligations to future generations.
Structural equity, recognizing the roles and legacies of historical, cultural, and institutional power dynamics and structures.
Fixed charge: An element of an electricity bill that does not vary with the customer’s usage.
Grid defection: In the context of this report, this concept includes (a) an electricity customer’s actions (e.g., installation of a generation and storage system) that enable the customer to fully disconnect and operate independently from the broader electricity system; and (b) an electricity customer’s adoption of on-site generation that serves a major share of that customer’s electricity needs. See also Load defection.
Independent system operator (ISO): An entity independent of the owners of generation, transmission, and distribution assets and other market participants that administers
the system’s reliability and energy-market functions. Similar to a Regional Transmission Organization.
Investor-owned utility (IOU): A utility that is a private company, with shareholders that own the assets. Almost universally, the rates and investments of investor-owned utilities are regulated by state public utility commissions and the Federal Energy Regulatory Commission.
Load defection: Any action that reduces end-user demand (load) (includes self-supply of electricity from generation, energy efficiency, demand response and/or load-shifting, energy conservation, and disconnection from the grid by the customer).
Location based: Rate varies by location on the distribution system or may be a flat rate available to customers in certain zones of the distribution system; typically, an adder or a component of a value-based rate.
Organized markets (or organized wholesale markets): Electricity markets administered by regional transmission organizations or independent system operators.
Public Utilities Commission (PUC): The state agency (sometimes called the Public Service Commission [PSC] or similar) with responsibility to regulate the prices and other terms and conditions under which an electric utility (in particular, an investor-owned utility) may sell electricity to its retail consumers.
Public Utility Regulatory Policies Act (PURPA): A federal statute P.L. 95-617, 92 Stat. 3117, first enacted in 1978 with the purpose of promoting the efficient production of electricity and the use of renewable energy to produce power. PURPA requires utilities to purchase power from Qualifying Facilities at the utility’s avoided cost.
Publicly owned utility: In this context of this report, this includes utilities that are cooperatives, municipal utilities, federal and state public utility authorities, special purpose utility districts, and other utilities not owned by private investors.
Qualifying facility (QF): A generating unit with size, fuel, and other attributes that qualifies it to sell its output at the utility’s avoided cost as set forth in the Public Utility Regulatory Policies Act and in the associated regulations of the Federal Energy Regulatory Commission.1
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1 See https://www.ferc.gov/qf.
Regional transmission organization (RTO): An entity independent of the owners of generation, transmission, and distribution assets and other market participants that administers the reliability, transmission, and energy-market functions of the electricity system. Similar to an independent system operator.
Renewable portfolio standard (RPS): A regulatory mandate requiring that sales of electricity to retail electricity consumers contain a given percentage of electricity production be sourced from eligible renewable generation.
Retail rate: Rates charged for electricity service to the end-use customer. Includes generation, transmission, distribution rates (which may include energy, demand, and/or fixed charges). May include seasonal or other time-of-use variation. The effective retail rate includes all of these costs divided by the amount of energy consumed to be measured in $/kWh.
Storage (electricity storage, energy storage, or stored generation): Energy storage is the capture of energy produced at one time for use at a later time. Electricity storage devices (e.g., batteries, pumped hydroelectric facilities, flywheels, thermal storage equipment) can help to reduce imbalances between energy demand or consumption and energy production.2
Time-varying rates (TVR): Electricity rates that vary based on day of week, and time of day, which are more closely tied to the utility’s actual cost. May also include seasonal variation.
Transmission: In the context of this report, this refers to the delivery of electricity over the high-voltage electricity system.
Value-based rates: Rates based on the value of solar or other distributed generation. Many different methodologies exist for calculating value-based rates. These rates may include societal and/or non-energy benefits or values.
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Variable charge: An element of a customer’s electricity bill based on the amount used for energy (expressed in $/kWh), or for demand (expressed in $/kW of peak demand, or both) over the billing period.
Wholesale rate: Rates charged to customers for electricity purchased in wholesale markets for their own use or for resale to retail customers.
