NET ENERGY METERING, ZERO NET ENERGY AND THE DISTRIBUTED ENERGY RESOURCE FUTURE

This report, produced by the Rocky Mountain Institute (RMI) for PG&E, examines the impact of distributed energy resources (DERs) and Zero Net Energy (ZNE) buildings on California's electricity system. It identifies misalignments between current utility business models and the shift toward decentralized generation, proposing a transition toward new pricing structures and regulatory frameworks to ensure grid stability and cost equity.

• California's electricity system is undergoing a fundamental shift as customers gain more control over energy consumption and onsite generation. In PG&E's service territory, it is estimated that one-fourth of all new investments in generating capacity between 2012 and 2020 could be customer-side investments, primarily rooftop solar PV.
• Existing utility rate structures, particularly bundled volumetric rates and retail net energy metering (NEM), are poorly adapted to a high-DER environment. These models can lead to a "cost shift" where the fixed costs of maintaining the grid are borne by non-NEM customers because DG customers may reduce their bills to zero while still relying on the grid for network services.
• The value of distributed generation to the grid is highly dependent on timing, location, and resource characteristics. For instance, solar panels oriented toward the west provide more value by aligning production with midafternoon peak loads, whereas current incentives encourage southern orientation to maximize total annual energy output.
• California has set aggressive energy efficiency and renewable targets, including goals for all new residential construction to be Zero Net Energy (ZNE) by 2020 and all new commercial construction by 2030. These policies, along with the Renewable Portfolio Standard (RPS) mandating 33% renewable sales by 2020, are reshaping the state's supply mix.
• Technological cost reductions are making DERs more competitive independently of subsidies. Solar module costs have historically declined by 50% for every tenfold increase in production, and projected declines in solar and lithium-ion battery costs are expected to offset the sunsetting of federal and state incentives by 2017.
• Third-party ownership and financing, such as leases and power purchase agreements (PPAs), have significantly lowered barriers to solar adoption. In California, third-party-owned projects accounted for 57% of the PV market as of the report's data.
• The report proposes two primary paths for adapting utility business models: an "incentive regulation" approach, where utilities take a more expansive role in managing and investing in DERs to reduce system costs, and a "network utility" approach, where the utility focuses on operating the grid and providing differentiated price signals to direct customer-led investment.
• To resolve current misalignments, the report suggests that utilities must first identify and measure the full range of costs and benefits of DERs, then remedy economic misalignments through innovative pricing (such as time-of-use rates or network use charges), and finally adapt their business models to sustain value in a high-efficiency future.

APA

RMI (2012). NET ENERGY METERING, ZERO NET ENERGY AND THE DISTRIBUTED ENERGY RESOURCE FUTURE. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-02_PGENetZero.pdf

Chicago

RMI. NET ENERGY METERING, ZERO NET ENERGY AND THE DISTRIBUTED ENERGY RESOURCE FUTURE. 2012. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-02_PGENetZero.pdf.

Wikipedia

{{cite report |author=RMI |title=NET ENERGY METERING, ZERO NET ENERGY AND THE DISTRIBUTED ENERGY RESOURCE FUTURE |date=March 2012 |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-02_PGENetZero.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2012net, author = {{RMI}}, title = {{NET ENERGY METERING, ZERO NET ENERGY AND THE DISTRIBUTED ENERGY RESOURCE FUTURE}}, institution = {RMI}, year = {2012}, month = mar, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-02_PGENetZero.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }