In a recent article in The Electricity Journal, NERA Director Kurt G. Strunk and Senior Consultant Willis Geffert propose new standards for metering, compensating, and (where appropriate) charging customers who own distributed generation (DG) resources. DG includes rooftop solar and other generation located “behind the meter.” The authors encourage compensating a customer’s total DG output based on the total value (and costs) of the DG, considering granular and market-based value as reasonably practicable, and including environmental benefits as appropriate. Total electricity consumption would be metered and charged separately.

The article examines net metering in the context of the traditional utility business model and presents a framework for evaluating the efficiency and equity of net metering. It then presents the approach the authors advocate: decoupling of DG compensation from retail rates for electricity consumption, and providing market-based compensation, where possible, and an appropriate level of non-market compensation, where not. The authors review reforms of the net metering regime that are being implemented or proposed in the US, and evaluate the pros and cons of their proposal and these various approaches. The authors conclude that their proposed framework for DG can form the basis for reforms that deliver efficient economic incentives and fairness to both customers and utilities.