Rigorous Systems Research Group (RSRG) Seminar

Net energy metering (NEM) is one of the major driving forces behind the phenomenal growth of the behind-the-meter distributed energy resources. By charging net consumptions and crediting net productions at the same retail rate, the original implementation of NEM, a.k.a. NEM 1.0, offers exceptional incentives for distributed solar adoptions. However, the benefits to prosumers raise revenue adequacy concerns for the utility and equity issues of cross-subsidies of prosumers by consumers. Currently, variations of NEM 1.0, broadly referred to as NEM 2.0 and NEM 3.0, have been proposed, implemented, and heatedly debated in the U.S.

This work aims to gain analytical insights into the impacts of NEM policies on prosumer and consumer behavior, social welfare distribution, cross-subsidies of prosumers by consumers, and the market potential of DER adoptions. To this end, we propose NEM X, an inclusive parametric model that captures key characteristics of all NEM tariffs. We then obtain analytical characterizations of the optimal prosumer decisions on consumption and DER resources, including behind-the-meter generation and storage. Under a stochastic Ramsey pricing framework that maximizes the social welfare subject to the revenue adequacy constraint of a regulated utility, the performance of NEM X is analyzed. Our results highlight tradeoffs among achieving economic efficiency, equity between consumer and prosumer groups, and the market potential of DER adoption.

Lang Tong is the Irwin and Joan Jacobs Professor at Cornell University and the Site Director of the Power Systems Engineering Research Center (PSERC). His current research focuses on optimization, machine learning, and market design issues in future energy and power systems.