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Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
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2

Net Metering 101

Chapter 1 describes net metering as a compensation mechanism and lays out key definitions for understanding net metering. This chapter describes the basic technology behind how net metering for behind-the-meter (BTM) distributed generation (DG) works. This discussion begins by presenting a typical configuration for a BTM rooftop solar system, then provides an overview of relevant metering technologies, and concludes by describing how these systems may look when integrated with storage or other distributed energy resources (DER) elements, or both.

TYPICAL CONFIGURATION FOR A ROOFTOP SOLAR SYSTEM

All electricity users or consumers (e.g., residential customers in a single-family home or apartment building, commercial customers in schools or businesses, and industrial customers with factories) that are connected to the grid have a meter to record (i.e., measure) the amount of electricity they use. There are many types of metering technologies and equipment. Historically, residential and small commercial customers’ electricity usage was recorded by a simple meter that measured the amount of electricity drawn or consumed from the grid over the course of a billing period, usually a month (measured in kilowatt/hour [kWh]), without regard to when and how much electricity was used at different times during that month. Larger users (e.g., a large commercial office building or an industrial facility) had meters that recorded not only monthly consumption but also the maximum instantaneous draw from the grid during a month, or the peak use each day (measured in watts or kilowatts), or some other dimension that examined demand levels at different points of time during a period (e.g., watts of demand on a Thursday between 5:00 and 5:05 pm on a hot day). In recent years, metering technology has become much more sophisticated, enabling data recording and communications of the customer’s usage across the hours of a day and across the days of the billing period.

With the proliferation of BTM DG, metering technologies have also become more sophisticated to accommodate and support policies like net metering, which encourages DG adoption. When it comes to the interconnection of DG with the electricity grid, the

Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×

most common type of household DG for much of the world is a solar photovoltaic (PV) net-metered system, as shown in Figure 2-1.1

In this example, a solar PV array on the roof (or a ground mounted system in a yard), produces a direct current (DC) voltage when the sun is out. The DC voltage then runs through an inverter which converts the DC electricity to alternating current (AC) electricity. The utility or the solar provider usually monitors the inverter in some way; often a separate circuit-breaker panel is installed between the solar PV system and the grid. Thus, in most systems, the AC voltage goes straight to the main utility breaker panel, which means it serves on-site loads first, and then if any electricity is available in excess of usage, the excess can flow onto the electric grid.

RELEVANT METERING TECHNOLOGIES

When the solar PV system is producing more electricity than the building is using—for example, perhaps when the occupants are away from home, few appliances are turned on, and the sun is shining—then excess solar-generated electricity (i.e., any amount

Image
FIGURE 2-1 Technical configuration of a behind-the-meter rooftop solar system. The figure illustrates system operation when solar electricity generated exceeds total electricity load.

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1 Figure informed by Grafman, L., and J. Pearce. 2021. To Catch the Sun. Arcata, CA: Humboldt State University Press.

Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×

generated that is greater than the on-site demand at that moment) can be fed back into the grid. From a metering point of view, in older systems and under those circumstances, one could literally see the utility meter spinning backward; at the end of each billing period only the net amount of electricity consumed or produced was recorded by the utility. Under a traditional net metering arrangement, the customer would pay the retail rate for net electricity consumed (i.e., for consumption that exceeds production) or be credited at the same retail rate for the amount of production that exceeds consumption, which was allowed to feed back into the grid.

With a two-meter system, electricity production and consumption are recorded separately. The PV system may not be connected to the house’s breaker panel and might feed all of its electricity onto the grid. Gross production and gross consumption are measured and can be paid or charged at different rates.

It should be noted that from a technical and engineering point of view, a PV system can also be used to power a specific load (or specific loads) in a building. For example, a PV system with a small battery backup may be used to power outdoor lighting and have no connection to the grid and thus is not net metered. In addition, PV systems can be used to power buildings or groups of buildings in off-grid installations that are not necessarily ever interconnected with the wider electricity grid.

Differing levels of sophistication in measuring, recording, and communicating a customer’s electricity usage have had different implications for rate design and billing, which are relevant for net metering and its variants. For traditional net metering, where the meter records the net amount of a customer’s withdrawals or consumption of electricity from the grid at the end of a billing period, after injections (DG production) and withdrawals take place over the course of the month, there was a straightforward alignment between net retail sales and standardized retail prices that did not vary by time of day or day of the week. As metering technology has evolved to enable more precise recording and measurement of withdrawals from the grid and injections to it, rate designs (such as time-of-use rates) can include different pricing of power for net withdrawals or net exports during different time periods, providing a means for managing a dynamic system with a number of distributed resources efficiently and reliably. This is important to keep in mind because the utility’s cost to supply power varies by time of day and by seasons of the year.2Table 2-1 lists different types of metering technologies and their measurement capabilities, that are commonly used in the United States.

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2 For additional information see DOE Office of Electricity. n.d. “Recovery Act: Time Based Rate Programs.” https://www.smartgrid.gov/recovery_act/time_based_rate_programs; Farugui, A., R. Hledik, and S. Sergici. 2019. “A Survey of Residential Time-of-Use (TOU) Rates.” The Brattle Group, Inc. https://www.brattle.com/wp-content/uploads/2021/05/17904a_survey_of_residential_time-of-use_tou_rates.pdf.

Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×

TABLE 2-1 Meter Options for Net Metering

Energy/Usage Meter Measures the total kilowatt-hours of electricity delivered to the customer from the utility.
Production or Generation Meter Measures how much electricity the customer produced (e.g., from a solar PV system).
Dual Meter Consists of both a standard usage meter and a separate production/generation meter.
Bi-directional Meter (also sometimes called a net meter) Measures both electricity delivered to and electricity produced by the customer and sent to the utility. Can be an interval (readings are taken at defined times, like every hour) or cumulative. (Meter must record usage on the first and last day of each billing period to calculate net usage for that period.)
Smart Meter Enables two-way communication between the utility and the meter, as well as digital connectivity allowing the use of Web-based home energy management tools and possibly integrating compatible home devices such as electric vehicles, air conditioning, and BTM DER, including BTM DG.
Variable Rate Meter Variable rate meters allow utilities to charge customers different rates at different times of the day. Customers in some utility service areas are also able to opt-in to a variable rate electricity plan, where rates change by the hour or other time period in a day (rather than being a fixed per-kWh charge) and can fluctuate above or below the rate paid by flat rate customers.
Time-of-Use Meter Measures total kilowatt-hours of electricity delivered to the customer from the utility and also has a time switch and multiple registers to record when the electricity is used, generally in either on- or off-peak hours. The simplest form of variable rate meter.
Demand Meter Measures maximum kilowatts consumed in a set time period (usually 15 minutes). Used for utilities with electricity rate designs that include non-coincident and coincident peak demand charges.* Generally for commercial and industrial customers.

* Customers can be charged based on their individual peak, which may not coincide with system peak (i.e., on a non-coincident peak basis). Alternatively, customers can be charged based on their demand at the time of the system peak (i.e., on a coincident peak basis).

NOTE: BTM = behind the meter; DER = distributed energy resources; DG = distributed generation; kWh = kilowatt-hour.

Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×

It should be noted that not all these different metering technologies are functionally available in all areas of the United States, in part due to differing types of regulation and rate recovery associated with metering technologies. This variation in availability may present challenges for implementing more-complex rate designs and net metering variants or alternatives in particular locations.

BTM DG SYSTEM CONFIGURATIONS

In addition to the basic configurations of BTM DG with net metering described in Table 2-1, electricity storage can be added (see Figure 2-2). For such a solar + storage system, surplus generation can be used to charge the storage system, and then the stored generation can be discharged and fed into the grid at another time, with the exported power compensated according to the net metering or a net metering variant applicable to that customer. Solar + storage can also provide resilience for the electricity consumer in the case of a grid outage. Depending on the configuration of their interconnection, residences and commercial buildings with solar + storage can maintain electricity for themselves for some period of time during system outages, but BTM DG customers without storage would not be able to do so.3

In addition to feeding generation back into the grid, DG can be used by a customer to support demand-response capabilities. These can take a variety of forms, including agreements between the utility and customer for reduced rates if the customer agrees to use their DG to reduce their power demands during peak periods when requested to do so by the utility.4 Energy storage systems charged by excess generation from BTM DG can also be used for demand response for load shaving during peak periods and load shifting5 to off-peak periods or periods with excess generation. As mentioned, BTM DG and stored generation can provide resilience as well when there are system outages. Net metering policies can affect how storage is deployed and utilized, in conjunction with

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3 In some systems, the customer may have the ability to connect their BTM solar system to an internal load if there is a grid outage, enabling some level of more affordable resilience without a battery. Note that this configuration is prohibited in some areas.

4 For more information see McDermott, T.E., K. McKenna, M. Heleno, B.A. Bhatti, M. Emmanuel, and S. Forrester. 2022. Distribution System Research Roadmap. Report No. PNNL-31550. Richland, WA: Pacific Northwest National Laboratory.

5 For more information on load shifting see FERC. 2020a. “2020 Assessment of Demand Response and Advanced Metering.” Staff report. https://cms.ferc.gov/sites/default/files/2020-12/2020%20Assessment%20of%20Demand%20Response%20and%20Advanced%20Metering_December%202020; and Potter, J., E. Stuart, and P. Cappers. 2018. Barriers and Opportunities to Broader Adoption of Integrated Demand Side Management at Electric Utilities: AScoping Study. Berkeley, CA: Ernest Orlando Lawrence Berkeley National Laboratory. https://emp.lbl.gov/publications/barriers-and-opportunities-broader.

Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Image
FIGURE 2-2 Technical configuration of a behind-the-meter rooftop solar system with battery storage.a The figure illustrates system operation at times when the electricity generation exceeds the demand in the building, but current flows in some of the wires reverse when the solar output is small.
a It should be noted that this figure illustrates a DC-coupled PV+storage system. Other examples of BTM PV+storage include AC-coupled PV+storage system. See the following for more information: Clean Energy Group. 2023. “Resilient Power Project.” https://www.cleanegroup.org/publication-project/resilient-power-project; and DOE Office of Energy Efficiency & Renewable Energy. n.d. “Solar and Resilience Basics.” https://www.energy.gov/eere/solar/solar-and-resilience-basics.

BTM DG, by providing compensation for electricity exported to the grid during peak demand periods (and at other times).6

The eventual emergence of newer DG and other DER configurations and the corresponding net metering compensation methods will depend on the development of new telecommunications, monitoring, networks of Internet of Things, power electronics, and other emerging technologies. These advances may also eventually allow for more opportunities for BTM DG, storage, demand response, and their increased adoption. There are many potential outcomes for how these systems can either take advantage of, or be limited by, net metering rules. Chapter 6 addresses these emerging technologies, the opportunities they provide, the challenges that need to be addressed, and the implications for pricing and increased DER adoption.

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6 Net metering policies may require that storage be charged with BTM DG, not grid power, to be included in net metering.

Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Page 26
Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Page 27
Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Page 28
Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Page 29
Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Page 30
Suggested Citation:"2 Net Metering 101." National Academies of Sciences, Engineering, and Medicine. 2023. The Role of Net Metering in the Evolving Electricity System. Washington, DC: The National Academies Press. doi: 10.17226/26704.
×
Page 31
Next: 3 Background and History, Current Status, and Near-Term Future of Net Metering »
The Role of Net Metering in the Evolving Electricity System Get This Book
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Over the last three decades, there have been fundamental shifts in the electricity system, including the growing adoption of clean distributed generation energy technologies such as rooftop solar. Net metering, which compensates customers for excess energy they contribute to the grid, has been instrumental in supporting the integration of these systems into the grid, but these policies may need to change to better address future needs.

The Role of Net Metering in the Evolving Electricity System explores the medium-to-long term impacts of net metering on the electricity grid and customers. This report evaluates how net metering guidelines should evolve to support a decarbonized, equitable, and resilient electricity system.

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