The Future of Distributed Generation: Moving Past Net Metering

• Date: 01 August 2018

8-2018 NEWS & ANALYSIS 48 ELR 10719

ARTICLE

The Future of Distributed

Generation: Moving

Past Net Metering

Richard L. Revesz and Burcin Unel, Ph.D.

Richard L. Revesz is the Lawrence King Professor of Law and Dean Emeritus, New York University School of Law.

Burcin Unel is the Energy Policy Director, Institute for Policy Integrity at the New York University School of Law.

I. Introduction

“Distributed generation” is a term used to describe elec-

tricity that is produced at or near the location where it is

used.1 Distributed generation systems, also known as dis-

tributed energy resources, can rely on a variety of energy

sources, such as solar, wind, fuel cells, and combined heat

and p ower.2 Over 90% of the current distributed genera-

tion capacity in the United States is solar,3 and the num-

ber of installations is increasing rapidly.4 As a result, ma ny

states are in the process of changing their utility structures

and regulatory policies to accommodate more distributed

energy re sources.5

1. Distributed Solar, S E I. A’ (2015), https://perma.cc/

MA74-45JJ.

2. A P P A’, D G: A O-

  R P  M D A 3 (2013), https://

perma.cc/62YC-P85G.

3. See id. at 2–3.

4. I R E C, T S O C

E F: T 2014 IREC P 25 (2014), https://perma.

cc/359X-ZMTW [hereinafter IREC, T S O C E-

 F].

5. DPS—Reforming the Energy Vision, N.Y. D’ P. S., https://perma.

cc/BB5Y-VFPA (announcing broad regulatory changes that promote “wider

deployment of ‘distributed’ energy resources”); D.C. Pub. Serv. Comm’n,

Formal Case 1130, Comment on the Scope of the Proceeding (Aug. 31,

2015), https://perma.cc/EG5M-PK68 (calling for grid modernization with

a “focus on deployment of distributed energy resources”); Mass. Dep’t of

Pub. Utils., Investigation by the Department of Public Utilities on its own

Most distributed generation systems are grid-tied, which

means that they are connected to a utility’s power grid.6

Customers with connected distributed generation systems

can buy power from their electric utility when they are not

producing enough electricity to meet their needs, and sell

power back to the utility company when their systems are

producing more electricity than they are using.7

e question of how these customers should be com-

pensated for that electricity they send to the grid ha s three

signicant policy implications. First, it plays a key role in

determining the economic feasibility of clean electricity

relative to electricity produced by fossil fuels. Second, dis-

tributed generation has benets for the electric grid’s resil-

ience, as it provides a more diversied portfolio of energy

sources than schemes that rely exclusively on centralized

power plants.8 Finally, the details of how distributed gen-

eration is compensated for various benets will aect the

composition of future clean energy projects.

Net metering is the most commonly used approach for

setting distributed energy compensation.9 e trad itional

net metering approach is functionally equivalent to having

a single meter that runs forwa rd when the customer needs

more power than she produces, and backward when she

sends excess power to the grid.10 At the end of the billing

period, the customer is billed at the retail electricity rate

Motion into Modernization of the Electric Grid, D.P.U. Order 12-76-B, 2

(June 12, 2014), https://perma.cc/6FZR-8J5Q (requiring every Massachu-

setts electric provider to submit a 10-year plan outlining how the utility will

“integrate distributed resources.”

6. Andrew Mills et al., Net Metering, S E ( July 2015), https://

perma.cc/6S48-YKKQ.

7. E E I., S T A N M 1–2 (Jan.

2016), https://perma.cc/E5FF-C54F.

8. D G  ., R D   D E: E-

 P   D R F 16 (Rocky Mountain

Inst. Aug. 2014), https://perma.cc/JNK4-52T7.

9. S T, supra note 7 (laying out electric industry arguments against

net metering).

10. Id. at 2.

is Article is adapted from Richard Revesz & Burcin Unel,

Managing the Future of the Electricity Grid: Distributed Generation

and Net Metering, 41 H. E. L. R. 43 (2017), and is

reprinted with permission. Copyright in the Environmental Law

Review is held by the President and Fellows of Harvard College, and

copyright in the Article is held by the authors.

e authors gratefully acknowledge the generous nancial support

of the Filomen D’Agostino and Max E. Greenberg Fund at NYU

Law School. ey wish to thank Paul-Gabriel Morales and Nathan

Taylor for exceptional research assistance, and David P. Brown,

David E.M. Sappington, Tom Stanton, and Katrina Wyman for

helpful comments and observations.

Copyright © 2018 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.