We have already talked about the energy crisis and the need to achieve energy independence through self-generation and the birth of P2P energy networks. At that point we were always talking about communities or households, but the logic applies equally to the distribution and generation of energy in every single country.
The electric companies are involved in the generation of almost all the energy distributed through the national grid. In some countries the end users are allowed to feed-into the grid with energy coming from renewable electrical technologies. In some cases with a fixed price and long-term contracts, in others with short term contracts and variable prices. In some countries the final users are allowed to generate their own energy and to feed-into the grid with their surplus production peaks, as well as to demand from the grid electricity when their generation is below their consumption; this is called net metering.
Both strategies point to the same thing; transforming the actual grid into a distributed generation network, that would not only rely on large power stations, but which would scatter the production among thousands of the utility customers, distributing as well the investment in power generation among those retail investors.
In a feed-in model, the investor-customer structures the investment in photovoltaic or wind power through a bond. The utility companies are committed to the purchase of the generated energy for a number of years at a fixed price, so through their investment, the client is buying an energy bond for the years the contract will last. The electric companies are the main beneficiary as their clients are relinquishing their investments to the company’s own property, giving them their energy production; the clients are ‘lending’ to the companies to invest in a mini renewable-power station. The clients receive a rate of return that can vary according to new rules and legislation that might apply to the feed-in model.
The net metering is radically different, the philosophy to establish a distributed power generation grid is still there, but it is encouraged in a much more comprehensive way. The client-investor is not investing in a bond with a utility company, but investing in its own energy self-production with the advantage of avoiding the expensive investment in battery banks, as the storage of the generated energy will be done through the national grid.
The net metering is a necessary policy to boost the growth of renewable energy, the energy sovereignty and the energy self-production.
A household that evaluates the self-production and energy sovereignty but dismisses it due to the high initial costs in battery banks that always take a large percentage of the investment, might reconsider the self-production if the net metering is in force in their country and it is offered by the utility companies in their area.
How does the net metering work? In a household or an energy self-production node there will always be valleys and peaks of generation. Times when the facility produces less energy than what the node is demanding (troughs) and times when the facility would produce more energy than what the node demands (peaks). In an off-grid (self-sufficient) installation these peaks and troughs are solved thanks to battery banks, where the excess energy generated would be stored during the peaks and then used during the troughs, where due to climatic circumstances, the node is not producing enough energy to meet all the needs.
What if instead of a battery bank we could store on the grid? That is net metering. The surplus of a household facility will be delivered to the grid and that household will demand electricity from the grid when its production is not covering the energy demand within the household.
The advantage is that the grid is able to supply much more electricity than it has been given by the household to store. This gives the flexibility of sizing the household installation below the highest requirements to cover the worst scenario, so that the initial investment in renewable self-production may be less than would be necessary in an off-the-grid design.
How is the feed-in and demand energy balanced against the grid? It depends on the laws and regulations adopted by each country and by each utility company. Typically, delivery and demand intersect at the same price, therefore at the end of the month, the quarter, the semester or the year, the balance is made between the energy that has been given from the household unit to the grid and the energy that has been consumed by the node from the grid. To that effect, on net metering facilities, there is a bidirectional counter between the mini power station and the grid, so that the amount of energy delivered can be measured as well as the amount of energy consumed from the grid. At the end of the billing period if the household has exceeded consumption from the grid against what has been fed-into the grid, the customer would pay the difference, while if feed-in has exceeded the overall energy demand from the grid, the customer would receive the difference from the utility company.
What about taxes? Some countries have not yet adopted the net metering among other reasons because of taxes. Today, with a distribution grid controlled by the utility companies, all the energy we consume gets taxed at a 21% VAT. However self-produced energy cannot be taxed, so in a net metering system, we will only pay VAT over the difference at the end of each period. If customers produce more than they consume, would utility companies agree to pay back the tax on the generated energy to the households? Will the Government be willing to waive on the taxes over the total energy consumed, and only get the taxes over the balanced energy?
Is there net metering where I live? Wikipedia has a pretty well updated list on the rules and regulation of net metering in a large number of countries, which can be viewed here.
In countries where utilities are the powers that be, the net metering is not yet a reality. And far from thinking globally, in these communities the private interests of the utilities have primacy over the benefits that the net metering will bring to the population as a whole, as well as to the country:
The net metering helps distribute the net energy production of a country, getting more generation sources, redundancy, robustness and resilience both individual and national.
The net metering can help achieve energy independence in a country.
The net metering is efficient. Decreases national production requirements, which would reduce energy generation from fossil fuels and nuclear sources.
The net metering will promote the installation of renewable and clean energy.
The net metering provides energy sovereignty to the people at an affordable cost.
The net metering is the way to begin to convert the national grid in a P2P energy network. Let’s hope Spain fulfills its promise and within 2013 passes the law for net metering without restriction or hindrance that favor only the same supply companies that have blocked the passage of this bill for more than a decade.