4 rate setting alternatives for the evolving energy grid

The approach to renewable energy rate setting is changing. 

For years, subsidies like net metering have helped to drive an increase in uptake for residential PV. But now, some US States with high PV presence have switched to alternatives and many more are undergoing policy or rate design changes.

https://pubs.naruc.org/pub/A107102C-92E5-776D-4114-9148841DE66B

So with the old approaches on the way out, what solutions are emerging to encourage, balance and manage residential PV growth? 

Here are five methods that are currently in operation or being explored:

1) Net billing / NEM 2.0

This twist on traditional net metering still compensates for energy delivered to the grid, but does so at a price other than the retail service rate.

Unlike net metering, which offers like-for-like rates for consumption and supply and balances it out in the billing process, this sees prosumers paid a reduced rate for any exported generation. Some utilities and retailers also charge a standby or demand charge to cover the cost of distributing that energy to other customers.

2) Buy-All-Sell-All (BASA) / Gross Metering

This requires the prosumer to feed all the energy produced by their PV system to the grid and to buy any energy they use from the grid.

The energy utility or retailer pays a set predetermined per-watt tariff for what is fed onto the grid and the consumer then pays the retail rate for the energy they use. This approach has proven very unpopular, and has ultimately been removed, in most areas it has been introduced in the US.

3) Customer Grid Supply PLUS and Smart Export

This complex but highly efficient form of solar subsidy uses price incentives to encourage prosumers to manage their PV resource depending on the time of day.

Used in Hawaii since 2018, CGS+ offers better rates for solar export at certain times when rooftop solar is needed to support the grid. Smart Export goes even further, with zero payments for energy exports from 9am-4pm and only avoided costs covered from 4pm-9am. It aims to encourage prosumers with solar-plus-storage to use as much of their own energy as possible and curtail exports when the grid is at saturation point.

4) Local energy markets

This approach connects energy resources and consumers together and uses dynamic consumer driven pricing to replace set subsidized compensation.

Using a bid-based system, prosumers with residential PV panels are paid for excess energy at the market rate at the time it is fed onto the grid and those who also own storage are encouraged to feed energy onto the grid at times of high demand.

Ultimately, the integration of smart devices and EVs will also allow pricing incentives to encourage consumers to alter energy usage patterns and shift demand, improving energy efficiency and providing suitable compensation for all stakeholders.

LO3 has pioneered development in this area, and we have recently launched Pando, an ‘off-the-shelf’ solution that enables utilities and retailers to provide customers with simple, secure and automated local energy markets.

WANT TO LEARN MORE?

To read our detailed blog about net metering and the alternatives…CLICK HERE

And to find out more about Pando…CLICK HERE