The Role of Net Metering in the Evolving Electricity System (2023) / Chapter Skim
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These drivers are also spurring the evolution of new utility business models, along with the growth in non-utility product and service providers, including DG installers, energy service companies, competitive energy suppliers, microgrid operators, and community choice aggregators, among others, who can be utility partners, complements, or competitors. Succeeding in this increasingly complex environment will require not only new utility business approaches but also new product and service provider approaches, as well as innovation in the regulatory framework within which utilities operate.
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If retail rates cannot be readily adjusted to reflect costs, then the net metering mechanism itself can be changed to compensate BTM DG production based on its value, rather than the retail rate. As policymakers consider changes to net metering policy to align with the evolving electricity system, it is essential to address equity as these changes present an opportunity to improve outcomes for all electricity system customers.
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THE REPORT The committee recognizes that coordinating the evolution of net metering with broader electricity system changes will lead to a vastly superior outcome than addressing net metering without due consideration of its context. Therefore, the committee began its exploration by establishing a common understanding of net metering terms and its relationship to rates, how BTM DG with net metering works, and past and recent policy trends.
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, the committee uses the term net metering "alternatives" that refer to DG support policies outside of ratemaking, such as tax credits. It is also critical, from the outset, to understand how BTM DG works technically.
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An alternative to changing the retail rates that underlie traditional net metering may be implementing changes to the net metering mechanism, such as net billing tariffs or buy-all/sell-all rates, with DG compensation levels set at, or near, the social marginal cost of electricity production and delivery. Where additional incentives to support BTM DG may be needed to achieve specific deployment and policy goals, the committee recommends that they be transparent and designed to achieve a specified outcome, such as encouraging BTM DG adoption by low-income customers or deployment in certain locations on the grid.
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Finally, given the economic and equity challenges associated with using net metering and other incentives and programs where costs are recovered in electricity rates, policymakers should consider net metering alternatives such as tax incentives, building codes, and financing assistance to low-income households. The report concludes by highlighting the success of net metering to enable and support the deployment of BTM DG, advancing policies to reduce climate impacts, meeting customer expectations for better products and services, and encouraging technological innovation (Chapter 8)
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With a more open, transparent, deliberate, and intentional approach that leverages the locational, temporal, and contextual value streams of BTM DG, an evolved net metering policy could enable an electricity system that is more sustainable, equitable, and resilient. The report ends with a full listing of all of the recommendations from the chapters.
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