Distributional Inequity in Net Metering Policy Design: Compensation Rules, Financing Constraints and the B angladesh Multi‐Utility Case

Net metering is widely treated as a technical connection rule. This article reviews evidence that it operates as a distributive instrument, allocating value between utilities, adopting households and non‐adopting households. Three literatures usually kept apart are synthesized: compensation rule design, financing constraints on participation, and the carbon abatement cost of distributed generation. Evidence from high‐income systems shows that retail‐rate compensation transfers value toward wealthier adopters where network costs are recovered volumetrically, and that a uniform national rule does not produce uniform incidence. Evidence from emerging economies shows that utility cost recovery pressures determine which reforms are feasible. The review then turns to Bangladesh, where one national rule operates through utilities paying different bulk buyback rates, holding policy constant while compensation varies. Simulation of residential systems from 1 to 4 kWp across three zones yields a present‐value gap of BDT 130,300 for an identical 4 kWp system. Financing terms rather than technology cost determine participation, and concessional lending extends access downward by one to two income quintiles. Carbon abatement cost falls below the social cost of carbon at 3 kWp and above and exceeds it at 1 kWp, so climate cost‐effectiveness and affordability diverge across the size range. This study recommends a national floor buyback rate, paired with concessional credit and a tiered capital subsidy.