EME 444
Global Energy Enterprise

Policy Basics

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The technology and economics of wind and solar make it practical to install and use them over a wide range of scales--from single-household residential installations a kW or less in size to multi-MW power plants. In particular, the ability for electricity consumers to generate some or all of their own electricity invites new circumstances, needs, and opportunities for policy.

On- and Off-Grid

Both solar and wind can be used in situations with or without access to electricity from a utility company. When solar or wind is used to generate electricity at a site that is not connected to a local electricity transmission and distribution system, the installation is off-grid (also often referred to as a standalone system). An installation may be off-grid because it is in an area where there is no electricity infrastructure - typically remote areas - or because the wind or solar system is generating enough electricity to support the site, and electricity from the grid is not necessary. More often than not, it is due to the lack of local electricity infrastructure. Because wind and solar are intermittent energy sources - the wind doesn’t always blow and the sun doesn’t always shine - off-grid systems are almost always designed with on-site electricity storage, usually batteries and called "battery backup."  Off-grid systems constitute a very small portion of total installed capacity worldwide (remember that capacity refers to the rated output of an energy-generating system, as opposed to generation, which refers to the energy output). In the U.S. the most frequent use of off-grid systems is for small-scale solar applications such as road signs and weather stations.

Solar and wind systems are most often installed at sites that do have access to electricity from the grid. These sites have a meter and are connected to local power lines from the utility company. These installations are on-grid and often called grid tied. (These systems may also have battery-backup, to provide power during times of grid outages.)

When a grid-tied electricity consumer generates some or all of its own electricity that it uses on site, it is called a behind-the-meter (BTM) installation. If you were to put a photovoltaic system on the roof of your home or small business, for example, and used some of it on-site you would have a BTM installation. And when you both buy electricity from others (through the grid) and generate some of your own electricity, you are sometimes referred to as a customer generator.

When wind or solar is used on the scale of a power plant where the electricity being generated is sold to other electricity consumers, the installation is a commercial generator (a power plant), in the same way that other power plants are, like the coal, nuclear, and gas generators we considered earlier. 

Net Metering

In BTM generation, the site will use electricity it generates (from the wind or solar) and, when more is needed, draw additional electricity from the grid. If the site is generating more electricity than it is using, the excess electricity is sent out to the grid. Customers pay for the electricity they get from the grid and may get credit for the electricity they send to the grid. This credit may then be used to offset future electricity use. For example, a customer generator may generate more electricity than they use in the summer time which gives them “money in the bank” (kWh in the bank, really) with the utility company. In the winter, when the customer generator needs more electricity than it can generate, electricity is pulled from the grid and the credit is used. When the credit is used up, the customer once again buys electricity from the grid. This may also happen on a daily basis if a customer generates excess energy during some daytime hours and needs to purchase energy at other times. When the utility gives the customer credit for all energy the customer sends to the grid, it is called net metering. Net metering exists in most, but not all, states in the USA but the details vary widely.

Net metering gives the customer generator the opportunity to avoid electricity costs beyond what they have without it. The customer only pays for the “net” amount of electricity that is purchased, which means that the utility in effect pays customers for the electricity they generate and feed into the grid. Many states require utilities to pay "retail" rate for this electricity, which means they pay the same rate the customer pays to the utility. See the image below for an indication of which states have net metering policies. (This is the most updated listing of policies as of March 2017.)  This map was taken from the Database of State Incentives for Renewables & Efficiency (DSIRE), which is unequivocally the best source to consult if you want to find which energy incentives are available nationally or in any U.S. state.

US map of net metering policies by state.
Summary map indicating states with net metering policy.
Credit: U.S. Department of Energy, DSIRE Summary Maps

To Read Now

Net metering policies have become quite controversial in the past few years. For a good summary of this and some other issues related to subsidies, read "The Solar Net Metering Controversy: Who Pays for Energy Subsidies?" by Forbes Magazine.