Net metering
European Union Electricity Market Glossary

 


 

 

Net metering is a regulatory framework under which the excess electricity injected into the grid can be used at a later time to offset consumption during times when their onsite renewable generation is absent or not sufficient.

 

In other words, under this scheme, consumers use the grid as a backup system for their excess power production (Commission Staff Working Document "Best practices on Renewable Energy Self-generation", 15 July 2015, COM(2015) 339 final, p. 10).

 

Net metering of self-generation should be avoided as it implies that system storage capacity is available for free (Council of European Energy Regulators, CEER Position Paper on Renewable Energy Self-Generation, September 2016, p. 1).

 

It reduces consumers' time-value sensitivity to volatile energy prices and hence undermines efforts to enhance flexibility and to develop a wider demand-side response with consumers playing a more active market role.

 

Also ACER and CEER in the "European Energy Regulators’ White Paper #1, Renewables in the Wholesale Market Relevant to European Commission’s Clean Energy Proposals" of 11 May 2017 said:

 

"[...] "net metering" should be avoided because it may involve participants not paying for their fair share. With increased active participation in the energy markets from prosumers and distributed generation alike, it is important that the signals of the time value of energy and network capacity are available to all. Net metering reduces consumers’ sensitivity to this system, which undermines efforts to enhance flexibility in the market. It can result in parties not paying their fair share of network or system costs and can dull the rewards of those capable of providing flexible response to the system.

 

Therefore, European Energy Regulators recommend that, in Article 15 of the Electricity Directive, the reference to “cost reflective, transparent and non-discriminatory network charges, accounting separately for the electricity fed into the grid and the electricity consumed from the grid” for prosumers be further developed to exclude the possibility of net metering."

 

 

 

Net metering approach

 

Net metering is a regulatory framework under which the excess electricity injected into the grid can be used at a later time to offset consumption during times when their onsite renewable generation is absent or not sufficient. In other words, under this scheme, consumers use the grid as a backup system for their excess power production.

 

Generally, net metering approaches have limited the system size to which it is applicable, with limits ranging from 20 kW to 2 MW or expressed in proportion to customer's power capacity use.

 

The applicable billing period can extend from one hour over long periods of time (e.g. one billing period) or one year, renewable.

 

Net metering schemes have proved to be effective to jump-start distributed generation markets and are progressively being introduced in a number of Member States.

 

Outside the EU, net metering forms the basis of support for solar PV across most US states (43 of them) and Australian states.

 

From the consumer perspective, net energy metering is attractive and easy to apply and to understand, as it relies on the use of one single meter. From a system perspective, however, net metering raises concerns when large deployment levels are reached.

 

This is because remuneration of the excess production from onsite renewable energy systems is made at a retail price that in most cases exceeds the value of that generation to the electricity system.

 

Under this model, consumers with self-generation are using the grid to artificially store electricity produced at one point of time to consume it at another point of time, without reflecting the value of electricity which may vary substantially between the time periods. An alternative approach is provided by the Italian 'net billing' scheme which calculates the value of the excess electricity fed into the grid (at wholesale price). Such value can be used as a credit for subsequent period or is paid to the consumer.

 

The amount of the net billing grant includes an energy component that varies with the value of energy exchanged and a service component, updated regularly, that depends on the cost of services and the energy exchanged. Net metering is only possible when the owner of the renewable energy system and the self- consumer are the same entity (i.e. it is not possible to have net metering when the plant's owner is a third party).

 

This challenge explains why a number of countries in the EU and states in the USA have put different forms of limits to their net metering programmes.

 

In California, the largest US solar market, a bill is about to implement a new net-metering scheme, introducing time of use rates by 2019, i.e. creating a variable cost for kWh depending on actual wholesale price of electricity. Some important, and very sunny, US states (e.g. Arizona, Colorado, and New Mexico) have not put any limit.

 

For instance, following a surge in net-metering deployment in 2012, Denmark reformed its system to allow netting withdrawals with injections only on an hourly basis – resulting in much less netting to occur.

 

In the Netherlands, yearly-based net-metering is allowed for 'small users'. This applies to systems up to 15kWp with a grid connection limited to 80A in three phases, but compensation is received for only a maximum of 5000 kWh28. In Belgium, all regions have chosen a net- metering scheme for systems up to 10kW (10kVA) but no remuneration is foreseen for the excess electricity generation that is injected into the grid.

 

Commission Staff Working Document "Best practices on Renewable Energy Self-generation", 15 July 2015, COM(2015) 339 final, p. 10, 11

 

 

 


 

 

 

 

Documentation

 

 

European Energy Regulators’ White Paper #1 Renewables in the Wholesale Market Relevant to European Commission’s Clean Energy Proposals, 11 May 2017

 

Council of European Energy Regulators, CEER Position Paper on Renewable Energy Self-Generation, September 2016, p. 1

 

Commission Staff Working Document "Best practices on Renewable Energy Self-generation", 15 July 2015, COM(2015) 339 final, p. 10, 11

 

 

 

 

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Last Updated on Friday, 19 May 2017 22:59
 

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