NASEM Report: Evolution of Net Metering

Background

Over the last three decades, changing economics, innovations across energy technologies, new policy objectives, and customer expectations have driven fundamental shifts in the electricity system. In March 2022, PSE Healthy Energy’s Dr. Elena Krieger was appointed to the National Academies of Sciences, Engineering, and Medicine (NASEM) Committee on The Role of Net Metering in the Evolving Electricity System. The committee was convened to complete a congressionally-mandated study for the Department of Energy examining the medium-to-long term impacts of net metering on the electricity grid and consumers. The resulting report includes an evaluation of the equity, decarbonization, and resilience implications of different net metering and rate design structures.

Key Findings

The report finds that greater interdependence is needed between customers, utilities, and other energy product and service providers. At the same time, decision makers must examine the economic, equity, technology, and legal and regulatory implications of net metering. Key findings include:

• Economics: The compensation provided to participating customers should reflect the social marginal cost—including externalities such as pollution—of producing and delivering electricity.
• Equity: Net metering can play a role in alleviating—or exacerbating—existing inequities associated with power supply and delivery across the United States. Rate design should strive to achieve procedural equity and incorporate the voices of all affected stakeholders; reflect historical structural inequities, such as grid disinvestment; and incorporate not only total costs and benefits but the distribution of economic and societal costs and benefits across different population groups.
• Technology: Distribution grid modernization, transparent data collection, and technology integration and management systems will be necessary to balance increasing levels of distributed generation on the grid.
• Regulatory and Policy: Net metering tariffs should be updated to reflect traditional ratemaking principles and be consistent with utility rate design, and concerns such as public health externalities should be integrated across all rate mechanisms.