On the role of net metering and time-of-use pricing in distributed renewable energy adoption: A review and policy insights

Net metering and time-of use pricing play a vital role in widespread adoption of distributed renewable energy (DRE). However, existing mechanisms may be overly weighted toward renewable energy development and fail to accommodate the large-scale adoption of DRE. This paper examines how net metering and time-of-use pricing can adapt to the mass DRE adoption by a literature review. We first provide a conceptual modeling framework for making DRE investment decisions and then report the main findings from reviewing existing literature on the roles of the net metering and time-of-use pricing on DRE adoption. It is found that net metering may lead to overcompensation or an unfair cross-subsidy effect, and multiple rule-based compensations such as avoided costs, value of solar rate, and levelized cost of energy have emerged as alternative approaches for optimizing net metering design. The effects of time-of-use pricing indicate that setting the right timing in time-of-use pricing design can enhance both the economic performance and self-consumption value of the DRE technologies.