Study finds states should factor environmental-harm reduction into net-metering policies

Net metering practices should be revised to reflect the value that distributed electricity generation ― for example, electricity generated by rooftop solar panels ― can provide to society by reducing use of fossil fuels, enhancing resilience and improving equity, according to a new report from the National Academies of Sciences, Engineering, and Medicine, sponsored by the U.S. Dept. of Energy.

“Net metering, although just one element among a broad constellation of changes affecting the electricity system, has proved quite successful in increasing consumer installation of solar panels and reducing reliance on fossil fuels,” said committee chair and independent scholar Janet Gail Besser. “As a result of this success, the system has reached an inflection point, technologically and economically, where there’s a real need to revisit and equitably evolve net metering policies to support distributed generation deployment where it adds value moving forward.”

State policymakers and regulators have been exploring variants and alternatives so that net metering may better accomplish objectives for decarbonization, equity and resilience. For example, under alternative approaches known as net billing and “buy all/sell all,” a customer’s electricity consumption is charged at the retail rate, but the electricity they generate and contribute to the grid may be credited at a different rate, such as one based on the electricity’s value to the electric system or society.

Equity considerations need more attention

Unleashing the promise of distributed generation for a more resilient, equitable and decarbonized electricity system will require a more intentional and integrated approach than traditional net-metering policies, the report states. As they update net-metering policies, policymakers should consider historical issues of access to distributed generation programs and technologies for low-income communities and the cost implications for people not participating in net metering.

Rates should be designed in a manner consistent with updated rate-making principles, with particular attention to the equity impacts for customers least able to afford them. To help accomplish this, utilities and policymakers should ensure that information about utility rates is easily available to all customers and that all customers have a voice and can participate in the design of rates.

In addition, policymakers should consider investments, such as grid upgrades in disinvested communities, to reverse historic structural inequities and enable broader and fairer adoption of behind-the-meter distributed generation.

Other aspects of net metering also can be improved

Electricity rate decision-makers should consider both the impacts of the distribution of benefits and costs, as well as total benefits and costs when designing net-metering policies, and ensure that adequate data are collected and made publicly available. These benefits and costs should include and balance public health impacts, job impacts, land use impacts and the future options that will be enabled or precluded, among other things.

In determining compensation for distributed generation, decision-makers should also explicitly account for the environmental harms reduced by distributed generation when it displaces fossil fuels. To fairly compensate for this clean energy attribute, policymakers should consider whether to do so based on the monetary value of the environmental externalities that the DG is likely to abate or the cost to achieve the same reduction in environmental harms through alternative technologies or policies.

News item from the National Academies of Sciences, Engineering and Medicine