Choose DER Metering & Billing Arrangements | Clean Power Hub

Choose DER Metering & Billing Arrangements

Metering and billing arrangements are important for DERs that involve customers exporting electricity back into the grid, as they define how consumption and generation of electricity are measured and billed. The three options for metering and billing are net energy metering, net billing, and buy all, sell all.

The selection of a metering and billing arrangement, in combination with the sell rate of electricity, determines the level of compensation a DER system owner will receive.

What You Need To Know

  • Net energy metering is based on the net energy consumed during a billing cycle, making it a relatively simple and easy to understand scheme that does not require significant regulatory change and can often use existing metering infrastructure. However, compensation of the system owner at retail rates may not reflect the true value of the electricity to the utility, which may also experience revenue loss from decreased sales.
  • Net billing is based on charges for the instantaneous net generation or consumption by a DG system owner, with net generation credited at the sell rate and net consumption billed at the retail rate. Net billing is more complex than net energy metering but can be more precise because it allows the compensation for the electricity injected into the grid to reflect its value to the utility. Net billing requires new metering infrastructure, but careful setting of sell rates can balance value to the DG system owner and to the utility.
  • Buy all, sell all differs from net energy metering (NEM) or net billing by treating electricity generation and consumption completely separately, with electricity generated going directly to the grid instead of being used to offset consumption. Generation is compensated at the sell rate, while consumption is billed at the retail rate. Buy all, sell all provides a simple value proposition to both the DG system owner and the utility, but like net billing, requires new metering infrastructure.

First, Look At This Schematic of Net Energy Metering

Net energy metering (sometimes called NEM or just net metering) allows a DG system owner who generates more electricity than they are consuming to export the excess energy to the grid and thereby offset electricity consumption during the billing cycle. The system owner is billed for net energy consumption during a billing cycle. In many NEM schemes, any excess electricity generated can be saved as a credit and used to offset consumption in future billing cycles. A single bidirectional meter can be used, or two unidirectional meters. There is no difference between the sell rate of the energy produced and the retail rate of the energy consumed.

Now, See This Summary of Net Energy Metering Features, Benefits, and Challenges

NEM is a relatively simple and easy to understand scheme that does not require significant regulatory change and can often use existing metering infrastructure. However, compensation of the system owner at retail rates may not reflect the true value of the electricity to the distribution utility. The utility may experience revenue loss from decreased sales and may compensate for this through rate increases that would affect other customers.

Next, Look at This Schematic of Net Billing

Net billing allows a DG system owner who generates more electricity than they are consuming at any moment to export that excess energy to the grid at a pre-determined sell rate. During the times when the system owner consumes more electricity than they are generating, they are billed at the retail rate. Net billing therefore allows for a difference between retail and sell rates, but requires either two unidirectional meters (one for net electricity exports and one for net consumption) or a single smart meter.

Now, See This Summary of Net Billing Features, Benefits, and Challenges

Net billing is more complex than NEM but is more precise because it allows the compensation for the electricity injected into the grid to reflect its value to the utility. If the sell rate is lower than the retail rate, the consumer is incentivized to use or store all the generated energy. If the sell rate is higher than the retail rate, the consumer is incentivized to produce more electricity. However, net billing requires new metering infrastructure and careful setting of sell rates to balance value to the DG system owner and to the utility.

Next, Look at This Schematic of Buy All, Sell All

Buy all, sell all differs from NEM or net billing by treating electricity generation and consumption completely separately. Electricity generated goes directly to the grid instead of being used to offset consumption, and is compensated at the sell rate, typically fixed in a long-term contract. Electricity consumption from the grid is billed at the retail rate. Like net billing, buy all, sell all requires either two unidirectional meters (one for electricity exports and one for consumption) or a single smart meter.

Now, See This Summary of Buy All, Sell All Features, Benefits, and Challenges

A buy all, sell all mechanism provides a simple value proposition to both the DG system owner (who can estimate the amount and value of electricity that will be sold) and the utility (which doesn't have to adjust to reduced consumption and sales). However, like net billing, buy all, sell all requires new metering infrastructure and careful setting of sell rates to ensure DG system owners are fairly compensated.

Finally, See This Comparison

Use the table to compare the key features of each of the metering & billing arrangements.

Suggested Actions & Next Steps

  • Read the IRENA Innovation Landscape Brief on Net Billing Schemes to learn more about the benefits and enabling factors for net billing, see examples of systems around the world that have adopted it, and understand why this scheme has become more popular.
  • Review the readiness of your power system against the technical and regulatory requirements listed in the IRENA document. What are the main gaps that you need to address?
  • Are there locations that are a priority? Consider planning for and implementing piloting programs there, including stakeholder outreach and information campaigns during the planning stage to ensure buy-in.
Want to ask more questions or share your ideas about DER metering and billing arrangements?Join the Discussion in the Clean Power Hub Community.

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