Sustainable Zero Net Energy – Identifying the Essentials for Solutions

This research paper by the Rocky Mountain Institute (RMI) and PG&E examines the challenges and opportunities presented by the rise of zero net energy (ZNE) buildings and distributed energy resources (DERs). It argues that traditional utility business models and volumetric rate structures are poorly adapted to a bidirectional power system, potentially leading to economic inefficiencies and equity issues. The authors propose a framework for solutions based on rigorous impact measurement, the use of price signals to align incentives, and the evolution of utility business models toward either incentive-based regulation or a network utility model.

• Zero net energy (ZNE) buildings, while achieving a net-zero energy balance annually, can create significant challenges for the electricity grid because they operate on different time scales than the grid. While ZNE is measured annually, the grid requires millisecond-level matching of supply and demand, meaning ZNE buildings can cause "more and steeper peaks and valleys" in grid load.
• Traditional volumetric rate structures, which bundle fixed utility costs into a single rate per kWh, become unsustainable with high penetration of ZNE and net energy metering (NEM). Because NEM often credits exports at the retail rate, revenue from customer-generators may decline faster than the actual cost to serve them, potentially creating a "cost shift" where non-NEM customers subsidize the fixed costs of the grid.
• The value of distributed energy resources (DERs) is highly variable and non-linear, depending on the timing, magnitude, and location of the resource relative to grid needs. The greatest value is realized when DERs are placed in areas of high system congestion and operate during times of peak demand, potentially deferring expensive transmission or distribution upgrades.
• Current ZNE definitions and metrics are insufficient because most focus on annual energy balances and ignore grid interaction. The authors highlight the need for Load Matching and Grid Interaction Indicators (LMGI) to quantify how buildings interact with the grid on smaller time scales, and note that the International Energy Agency (IEA) is working to harmonize ZNE definitions globally.
• To align utility profits with the deployment of distributed resources, the paper suggests two regulatory paths: an incentive-based model where utilities are rewarded for achieving deployment targets that minimize system costs, or a 'network utility' model where the utility focuses on grid operation and uses differentiated price signals to direct third-party investment.
• Financial innovations, specifically third-party ownership models like leases and power purchase agreements (PPAs), have significantly lowered barriers to solar adoption. In California, these third-party owned projects accounted for 57% of the market as of 2012, and a similar trend was observed in Colorado.

APA

Lacy, V., & Buller, S. M. (n.d.). Sustainable Zero Net Energy – Identifying the Essentials for Solutions. RMI. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-08_ACEEESustainableZeroNetEnergy.pdf

Chicago

Lacy, Virginia, and Susan M. Buller. Sustainable Zero Net Energy – Identifying the Essentials for Solutions. RMI, n.d. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-08_ACEEESustainableZeroNetEnergy.pdf.

Wikipedia

{{cite report |last1=Lacy |first1=Virginia |last2=Buller |first2=Susan M. |title=Sustainable Zero Net Energy – Identifying the Essentials for Solutions |publisher=RMI |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-08_ACEEESustainableZeroNetEnergy.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lacyndsustainable, author = {Lacy, Virginia and Buller, Susan M.}, title = {{Sustainable Zero Net Energy – Identifying the Essentials for Solutions}}, institution = {RMI}, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2012-08_ACEEESustainableZeroNetEnergy.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }