Energy 84 (2015) 684e694

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Energy
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A comparative assessment of net metering and net billing policies.

Study cases for Spain
pez*, Jose
Rodolfo Dufo-Lo  L. Bernal-Agustín
Department of Electrical Engineering, University of Zaragoza, Calle María de Luna, 3, 50018 Zaragoza, Spain

a r t i c l e i n f o a b s t r a c t

Article history: Net metering and net billing are electricity policies that enable grid-connected customer-generators
Received 22 November 2014 (homes or businesses that own a PV (photovoltaic) or other generation technology connected to the grid)
Received in revised form to offset some or all their electricity consumption and get paid for excess energy injected into the grid.
25 February 2015
There are many policies of net metering and net billing used by different countries. In this paper we
Accepted 10 March 2015
propose a modified definition of some of the modalities that can be applicable to the two drafts of the
Available online 1 April 2015
royal decree for the Spanish regulation. Also we show, for the first time, the mathematical formulation of
a comprehensive methodology for the assessment of the different modalities of net metering and net
Keywords:
Photovoltaic
billing used in different countries.
Net metering We compare several cases, taking into account the actual two Spanish drafts, the two models proposed
Net billing by the Spanish National Energy Commission in its reports about the drafts and other modalities used in
Net present cost other countries, concluding that the first Spanish draft would have been a superior regulation for PV net
Levelised cost of energy metering; however, the second draft impedes the profitability of the PV so no user will install a grid-
connected PV system if this second draft is finally approved.
© 2015 Elsevier Ltd. All rights reserved.

1. Introduction government in 2012 (the Spanish government slashed all subsidies

The development of grid-connected PV (photovoltaic) genera-
tors has been implemented in different countries by different
programs: FiT (feed-in tariffs), feed-in premiums and quota system
[1], with the FiT the most widely used program [2]. Economic
analysis of grid-connected PV systems is shown in Refs. [3,4].
Net metering and net billing are policies that encourage the
installation of grid-connected PV generators owned by the con-
sumers of electricity. In the net metering modality, the electricity
injected into the grid is preferably valued the same as that
consumed from the grid (retail price); however, in net billing the
electricity injected is valued at a lower price (wholesale or “avoided
cost” price) than energy consumed from the grid. Net metering was
first introduced in the United States in the 1980s, and now almost all
the states include net metering policies: simple, with buy-back, with
rolling credit or with buy-back and rolling credit [5,6]. Later many
other countries included net metering (or net billing) policies [7].
In Spain, the PV generators have been encouraged since 2004
with FiT incentives. However, since the renewable cut-off of the
* Corresponding author. Tel.: þ34 876555124; fax: þ34 976762226.
pez), jlbernal@
E-mail addresses: rufo@unizar.es, rdufo@unizar.es (R. Dufo-Lo
unizar.es (J.L. Bernal-Agustín).
for renewable energy and announced the cessation of all calls for
the registration of new renewable energy projects), the PV sector
has been stopped [2]. Net metering or net billing policies are under
current consideration in the regulation of the electricity sector in
Spain. Two RD (royal decree) drafts regulating on-site generation
were issued but none was approved.
The Spanish National Energy Commission (“Comisio n Nacional
de la Energía”, CNE, the regulatory agency for energy in Spain) has
proposed two alternatives to the RD drafts. The regulation has high
significance in electricity markets and in general in the energy
sector, as shown in Refs. [8e10].
This paper is structured as follows. Section 2 shows the method-
ology. Section 3 and 4 shows the results and the discussion of the
application of the different net metering and net billing policies in
Spain. Finally, section 5 shows the conclusions and policy implications.
2. Materials and methods
2.1. Definitions and state of the art
Different terms of net metering and net billing have been used
by different authors [11e13], depending on the number of meters

http://dx.doi.org/10.1016/j.energy.2015.03.031
0360-5442/© 2015 Elsevier Ltd. All rights reserved.
 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo 685

(one bi-directional or two), on the price at which the net electricity

(or all electricity generated) should be paid (retail rate, or other
rate), on the requirement for a utility to buy excess power from the
PV system (buy-back), on the duration of the banking period (one
billing period or more). The confusion about the terms “net
metering” or “net billing” was clarified by Hughes and Bell [11] who
defined the different modalities of net metering and net billing.
Also, they defined the term “customer-generator” as “a typical grid-
connected home or business which meets on-site loads using a
combination of customer-generated electricity and electricity from
the grid”. In net metering, “the grid is essentially treated as a bat-
tery, meeting all or part of the load whenever the customer-gen-
erator's system is unable to do so” [14].
Yamamoto showed the difference between net metering and net
purchase and sale in Ref. [15]. Mir-Artigues defined net metering
and net billing in the following terms [16]: in net metering, there is
only one bi-directional meter, which can run forward and back- Fig. 2. Net billing scheme (also applied in some cases of net metering).
ward, measuring imported minus exported energy in kWh; in net
billing there are two meters so that exported and imported energy
are measured separately, as they have different prices: energy ex- 1) Net metering (simple): there is a bi-directional meter to mea-
changes are expressed in monetary terms. Figs. 1 and 2 show the sure the difference between IE and EE during the billing period
differences in their schemes, where DE is demand of energy (usually one or two months).
(electricity demanded by the load), GE is generation of energy  If IE e EE > 0: the customer-generator must pay the utility for
(electricity produced by the PV generator), EE is exported energy the difference.
(electricity injected to the grid), and IE is imported energy (elec-  If IE e EE  0: the customer-generator receives no
tricity consumed from the utility). compensation.
The main differences between net metering and net billing can 2) Net metering with buy-back: if IE e EE < 0 the customer-
be summarised as: generator is paid for the excess energy (EE e IE) generated
during the billing period, which can be valued below retail rate
- Net metering: the energy exported to the grid has the exact (typically avoided cost of generation, i.e., wholesale rate or cost
same value as the energy imported from the grid. In other to the utility), retail rate, or above retail rate.
words, the cost relation between the imported and exported 3) Net metering with rolling credit: the banking period extends
energy is 1:1. over a billing period (typically one year). If during a billing
- Net billing: all the energy exported to the grid is sold to the period there is excess energy (IE e EE < 0), this value (EE e IE) is
utility at a price (usually wholesale or “avoided cost” prices) and used as a credit to reduce the bill in future billing periods.
all the energy imported from the grid is bought at retail rate. 4) Net metering with rolling credit and buy-back: combination of
2) and 3.

In net metering modalities, the balance (IE e EE) is done in

2.2. Previous definitions of different modalities of net metering and
energy terms (kWh); however, in net billing the balance should be
net billing and proposal of changes in the definitions
done in monetary terms.
Some cases can be considered net metering (the balance is done
Hughes and Bell defined the different modalities of net metering
in energy terms) but they must use two meters because for all the
and net billing, showing the classification that follows [14]. We
energy imported from the grid some charges are applied, and in
have added definition # 5 (it was not defined in Ref. [14]) and we
these cases the cost relation is not strictly 1:1. They must be defined
have modified definition #7.
into net metering modalities as the balance (exports minus im-
ports) is quantified in physical terms (kWh) and not in monetary
terms. This is the case proposed in the first Spanish RD draft of 2011
[17], which ultimately was not approved.
A simple net billing modality has been added in this paper (next
definition # 5) as it was not included in the classification shown in
Ref. [17] but this is one of the alternatives proposed by the CNE in
2012 [18].

5) Net billing (simple): At the end of the billing period, if the cost of
all the energy imported from the grid (at a certain price, at
which the customer-generator purchases electricity for the
utility) is higher than cost of all exported electricity (at a certain
price, at which utility purchases electricity for the consumer-
generator), the customer-generator must pay the utility for the
difference between the two terms. If the cost of all the energy
imported is higher than cost of all energy exported, the
customer-generator receives no compensation.
6) Net billing with buy-back: At the end of each billing period, the
Fig. 1. Net metering scheme. customer-generator pays the utility for all the energy imported
686 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo

(at retail rate) and the utility purchases exported energy at a Other authors shown above have previously presented some
certain rate (retail, below or above). mathematical formulation but some of them are limited to net
metering schemes (they do not consider net billing) and others
Next definition (# 7) “Net billing with rolling credit” has been only include simple modalities (without buy-back nor rolling
modified, because as it is defined in Ref. [14] it is the same as net credit) of net metering or net billing. None of the previous works
metering with rolling credit (but using two meters). We propose studied complex net metering or net billing with rolling credit
that the amount of the balance should be referred to in monetary policies where generation is credited based on the hourly period of
terms. The new definition is shown below. the time-of-use tariff in which it occurs, also none of them included
the access charge, back-up charge or generation charge in their
7) Net billing with rolling credit: at the end of the billing period, formulation.
the customer-generators obtain a monetary rolling credit for
any excess in the cost of electricity generated (exported elec-
2.4. Net metering and net billing in Spain
tricity at a certain price, at which utility purchases electricity for
the consumer-generator, minus imported electricity at a certain
A draft of royal decree to regulate self-consumption and net
price, at which the customer-generator purchases electricity for
metering appeared in 2011 [17], in the modality of net metering
the utility), which can be used to offset charges in the next
with rolling credit (one year banking period). We call this modality
billing periods. This is the modality finally proposed by CNE in
“net metering” because excess electricity (kWh) generated in one
2012 [18].
billing period (exports minus imports) can be used as a credit to
8) Net billing with rolling credit and buy-back: combination of 6)
reduce the charges in the next billing periods (during one year);
and 7).
however, it is not strictly net metering because the energy involved
in net metering (the energy credits used during the billing period)
2.3. Recent research
should pay the access charge (charge for using the electrical grid)
and also a charge for the net metering service, so in fact the cost
More recently, other authors studied net metering and net
relation between the imported and exported energy is not 1:1, i.e.,
billing policies. In 2008, Mills et al. studied the impact of retail
this is not strictly net metering and two meters are needed. How-
electricity rate design in California, concluding that net metering is
ever, we classify this modality under “net metering” as it cannot be
quite valuable to commercial PV systems that serve a high per-
classified as “net billing” because the balance is not calculated in
centage of the load [19].
monetary terms. For customers with TOU (time-of-use) tariff PV,
Darghouth et al. compared the bill reduction for different cases
this draft proposes that the generation is credited based on the TOU
in California, using the net metering rules in force in California in
period in which it occurs.
2011 (net metering with rolling credit, banking period of one year)
The Spanish National Energy Commission presented in 2012 a
[20]. Later in 2014 they studied the impact of high renewable en-
report about that draft [18], proposing, as an alternative to chang-
ergy penetrations with net metering on electricity bill [21].
ing the draft, the modality of simple net billing (paying the access
Yamamoto presented a systematic methodology to evaluate FiT,
charge for the energy credits used during the billing period and also
net metering, and net purchase and sale [15]. However, net billing
paying a generation charge, i.e., a charge for all energy exported to
was not considered and the effect of charges such as access charge,
the grid) and finally this report encourages the alternative of net
generation charge or back-up charge, defined in the policy drafts
billing with rolling credit of one year. However, the government did
waiting to be approved in Spain, were not considered.
not approve that draft and did not change it, taking into account the
Poullikkas showed a comparative assessment of net metering vs.
comments of the CNE report. Instead, a second draft of the royal
FiT supporting schemes for residential PV systems [22]. The author
decree appeared in 2013 (apparently influenced by electric com-
compared FiT with simple net metering, net metering with buy-
panies) [26], which considers self-consumption but not net
back at below retail price and net metering with buy-back at
metering and included a back-up charge (“peaje de respaldo”, a
retail price. The author concluded that net metering performs
charge to be applied to the self-consumed energy generated by the
better than FiT when the household electricity bill is taken into
PV generator) which would imply the PV generators would not be
account. The methodology shown in this work is adequate for the
economically viable. CNE presented in 2013 a report about that
net metering rules of some countries; however, it is not valid for the
draft [27] encouraging the government to eliminate the back-up
rules defined in the policy drafts waiting to be approved in Spain.
charge. At the moment this second draft has still not been
Also, the author did not take into account net billing.
approved; however, it is expected to be soon. If this second draft is
In 2014, Holdermann et al. examined the economic viability of
finally approved, it will complicate the recovery of the Spanish PV
the PV net metering in Brazil [23]. Eid et al. studied, for a residential
sector, which has been stalled during the last few years and was
consumer, the effects on policy objectives, cross-subsidies and cost
waiting for a real net metering policy like that of other countries.
recovery in different PV net metering modalities and tariff designs
Even if the CNE report of 2013 [27] was accepted, the Spanish policy
[24].
would not allow net metering; it would only allow self-
In 2015, Watts et al. studied the application of net metering and
consumption, reducing considerably the profitability of the PV
net billing in several cities in Chile [25], applying the methodology
system (in many cases it would not be profitable at all) and it would
of [15] and [22] modified to consider net billing. However, the
not encourage the consumers to add a PV system in their homes or
authors did not consider rolling credit nor buy-back, which are
business.
modalities of net metering or net billing used in many countries.
In the present paper, we present a comprehensive methodology
for the assessment of net metering and net billing systems, showing 2.5. Economical evaluation of the electricity consumed by a typical
the model formulation for any modality of net metering or net customer (without a PV system)
billing used in the different countries. Unlike previous works, we
calculate the net present cost of the system considering the infla- In this section we show the economical evaluation (calculation
tion rate of the price of electricity, the inflation rate of the O&M of net present cost) of the electricity consumed by the typical
costs and the replacement cost of the components. customer (who has no PV generator) in order to compare later with
 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo 687

the same customer who owns a PV system (then the customer will
be a customer-generator) under net metering or net billing policies. X
Life system
ð1 þ gE Þi
For each hour h (where h ¼ 0,1,2, … ,23) of day d (where d ¼ 1,2, NPCsystem without PV ¼ CA $ (5)
i¼1 ð1 þ IÞi
… ,dmax, being dmax ¼ the last day of the billing period, if monthly it
can be 28, 30 or 31; if it is every two months it can be 59, 61 or 62)
where gE is the expected annual inflation for the cost of electricity
of billing period BP (where BP ¼ 1,2, … , BPmax, being BPmax ¼ 12 if
and I is the annual interest rate.
billing period is monthly and 6 if it is every two months), the load
consumed, i.e., the demand of energy is DEBP,d,h (kWh).
2.6. Techno-economical evaluation of the different modalities of net
In general, utilities offer the customers two kind of electrical
metering and net billing
tariffs: a non-time-differentiated (i.e., “flat”) rate and a TOU rate. In
the cases of TOU tariff, for each day there can be p hourly periods
In this section, we suppose the customer owns a PV system
with different hourly electricity prices, being p ¼ 1,2, … pmax where
(now he/she is a customer-generator) under net metering or net
pmax is the number of periods in the TOU tariff, usually 2 or 3;
billing policies. A technical and economical (NPC) evaluation will
pmax ¼ 1 is the case where a single hourly period is considered
be done for each modality of net metering and net billing.
(simple tariff, no TOU tariff). Let us define hpBP,d,h as the hourly
For each hour h of day d of billing period BP, the PV generated
period p for each hour h, day d, billing period BP. For each billing
energy (Figs. 1 and 2) is denoted as GEBP,d,h (kWh) and is calculated
period BP, the electricity demand for each hourly period p can be
as (considering an inverter includes MPPT (maximum power point
calculated as:
tracking)):

GEBP;d;h ¼ IBP;d;h $PPV $½1 þ aðTc  25Þ$hs (6)

X
d¼dmax X
DEBP;p ¼ DEBP;d;h
d¼1 hpBP;d;h ¼p
In Spain and other countries, the cost of electricity corre-
sponding to the volumetric energy charges (assessed on energy
consumption, kWh) is charged at the retail rate, which includes two
terms: the price of the consumed (imported from the grid) elec-
tricity for each billing period BP and hourly period p, IPBP,p (V/kWh)
and the access charge (charge due to the delivery of electricity from
the generation facility to the user), AChBP,p, so the total retail rate
(final sale price of electricity) per kWh of electricity consumed is
RPBP,p ¼ IPBP,p þ AChBP,p.
There is also a fixed charge or fixed cost (which is paid in the bill
in a fixed term, independently of the energy consumed), which
includes the basic charge or customer service charge (which
include having an electrical distribution system in place, plus the
cost of the meter and servicing and reading the meter) and also
includes a fixed cost due to the maximum power (kW) available,
limited by the power limiter or by the smart meter installed by the
electrical company (in the case of homes or other low power
consumers).
The total cost of the electricity demand of each billing period
would be the fixed cost plus the cost of energy (kWh) consumed
plus taxes:
(1)
where IBP,d,h is the available solar irradiation over the surface of
the PV modules in kWh/m2 (the hourly solar irradiation can be a
measured data set for the whole year or, if measured data is not
available, it can be synthetically generated from average
monthly irradiation data using the model of Graham and
Hollands [28], which includes the randomness of cloudiness);
PPV is the installed capacity of the PV system in kWp (kiloWatt
peak), a is the temperature coefficient in %/ C, Tc is the cell
temperature in  C and hS represents the losses (such as inverter
and wire losses, losses due to dirtiness and those due to MPPT
errors).
For each hour, the self-consumed energy is calculated as:
 
SEBP;d;h ¼ min GEBP;d;h ; DEBP;d;h (7)
The electricity imported from the grid during each hour is
(Figs. 1 and 2):
 
IEBP;d;h ¼ max 0; DEBP;d;h  GEBP;d;h (8)
And the electricity exported to the grid (excess of electricity
generated) during each hour is (Figs. 1 and 2):
 
EEBP;d;h ¼ max 0; GEBP;d;h  DEBP;d;h (9)

  In Spain, the net metering policy drafts and CNE reports

  TaxE consider net metering for each hourly period independently (if the
CBP;p ¼ CFBP; p þ DEBP;p $RP BP;p 1 þ (2)
100 customer-generator has a TOU tariff) so the calculation of bill
credits occurs separately within each TOU period (PV generation is
where CFBP,p (V) is the fixed cost for each billing period and hourly credited based on the TOU period in which it occurs). This is why in
period, and TaxE is the total tax (%) to be applied, which in Spain this section we will calculate the different energies and costs for the
includes the electricity tax and VAT. different hourly periods p (a unique hourly period, i.e., no TOU tariff
The total cost of the electricity demand for each billing period can be considered if pmax ¼ 1).
(CBP) and the total annual cost (CA) would be: The PV generation for each billing period BP and hourly period
p:
X
pmax
CBP ¼ CBP;p (3) X
d¼d max X
p¼1
GEBP;p ¼ GEBP;d;h (10)
d¼1 hpBP;d;h ¼p

The self-consumed energy for each billing period BP and hourly

X
BPmax
period p:
CA ¼ CBP (4)
BP¼1
X
d¼dmax X
The NPC (net present cost) of the electricity consumed during a SEBP;p ¼ SEBP;d;h (11)
d¼1 hpBP;d;h ¼p
number of years (Lifesystem) is:
688 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo
The electricity consumed (imported) from the grid for each
billing period BP and hourly period p:
X
d¼dmax X self-consumed energy (if applicable).
IEBP;p ¼ IEBP;d;h (12)
d¼1 hpBP;d;h ¼p
And the electricity exported to the grid for each billing period BP
and hourly period p:
X
d¼dmax X (16)
EEBP;p ¼ EEBP;d;h (13)
d¼1 hpBP;d;h ¼p
2.6.1. Net metering
In net metering policies, there is only one bi-directional meter
that must register for each hourly period the difference between
imported and exported energy of the billing period, i.e., (IEBP,p e
EEBP,p) [14]. However, smart meters also register other measures
such as total imported energy (IEBP,p) and total exported energy
(EEBP,p), which must be known in some modalities of net metering
that differ from the definitions of Hughes and Bell [14] such as the
cases of the Spanish policy drafts.
2.6.1.1. Simple net metering (no rolling period, no buy-back).
For each billing period, if IEBP,p > EEBP,p, the customer-generator
must pay the utility for the difference at the retail price; other-
wise the customer-generator receives no compensation [14]. Then
the total cost for each billing period would be:
 
    TaxE
CBP;p ¼ CFBP;p þmax 0;IEBP;p EEBP;p $RPBP;p $ 1þ
100
(14)
However, the net metering policy drafts for Spain are much
more complicated, proposing in some cases a charge for using the
electrical grid (access charge) to be applied to all the energy im-
ported from the utility, including the energy involved in net
metering (the energy credits used during the billing period, i.e., the
exported energy that is later imported).
In other cases there is a charge for the whole energy exported to
the grid (generation charge) and even a charge to be applied to the
self-consumed energy generated by the PV generator (back-up
charge). So a new, more general definition of CBP,p will be proposed,
which can consider the cases of the Spanish policy drafts and other
cases in different countries.
Let NMEBP,p define the energy credits used (energy involved in
net metering, i.e., minimum between exported and imported en-
ergy from the grid) for each billing period BP and hourly period p.
 
NMEBP;p ¼ min EEBP;p ; IEBP;p (15)
The simple net metering monthly cost is shown in Eq. (14) (cost
relation between the imported and exported energy is 1:1). How-
ever, we propose a more general definition for the total cost of
electricity for each billing period BP and hourly period p (CBP,p),
which can be applied for any policy of “simple net metering”,
including the cases that are not strictly net metering (cost relation
is not 1:1) but that are not “net billing” as the balance between
input and output is calculated taking into account energy and not
costs. For example, the case of the first Spanish decree draft of 2011
[17], if not considering the rolling credit, would be one of these
cases that are not strictly net metering but could be defined here as
the balance is done in energy terms.
The more general definition is shown below:
Fixed cost þ cost at retail price of energy imported minus energy
credits used þ cost of access charge for the energy credits used (if
applicable) þ cost of net metering service for the energy credits
used (if applicable) þ cost of generation charge for the energy
exported to the grid (if applicable) þ cost of back-up charge for the
  
CBP;p ¼ CFBP;p þ IEBP;p  NMEBP;p $RPBP;p þ NMEBP;p $AChBP;p $X
þ NMEBP;p $NMSChBP;p þ EEBP;p $GChBP;p

þ SEBP;p $BChBP;p $1 þ TaxE 100
where X is a binary variable: 1 if cost of access charge for the energy
credits used is applicable, 0 if it is not applicable; NMSChBP,p
(V/kWh) is the charge for the net metering service, applicable to
the energy credits used (if it is not applicable, NMSChBP,p ¼ 0);
GChBP,p (V/kWh) is the generation charge for the energy exported to
the grid (if it is not applicable, GChBP,p ¼ 0); BChBP,p (V/kWh) is the
back-up charge for the self-consumed energy (if it is not applicable,
BChBP,p ¼ 0).
Eq. (14) is a particular case of Eq. (16) where X ¼ 0,
NMSChBP,p ¼ 0; GChBP,p ¼ 0; BChBP,p ¼ 0.
Then Eqs. (3) and (4) (section 2.5) can be applied to calculate the
total cost for each billing period and for the whole year, as will be
done in the rest of the subsections of section 2.6 (different mo-
dalities of net metering and net billing).
In the next sections we will continue showing general equa-
tions, which could consider access charge applied and net metering
service charge to the energy credits used, generation charge and
back-up charge, taking into account that the cases considered by
Hughes and Bell [14] will be particular cases of the equations
shown below where X ¼ 0, NMSChBP,p ¼ 0; GChBP,p ¼ 0; BChBP,p ¼ 0.
2.6.1.2. Net metering with buy-back. Under this modality, the value
of the energy credits that are not used, i.e., EEBP,p e NMEBP,p, will be
paid by the utility at buy-back price, BBPBP,p (V/kWh). This will be
counted as an income so this term must be subtracted in Eq. (16),
obtaining Eq. (17).
  
CBP;p ¼ CFBP;p þ IEBP;p  NMEBP;p $RPBP;p
þ NMEBP;p $ATChBP;p $X þ NMEBP;p $NMSChBP;p

þ EEBP;p $GChBP;p þ SEBP;p $BChBP;p  EEBP;p
 
 NMEBP;p $BBPBP;p $1 þ TaxE 100 (17)
2.6.1.3. Net metering with rolling credit. The banking period where
the rolling credit can be used is defined as Z billing periods (for
example, if the banking period is one year and the billing is
monthly, Z ¼ 12). For each billing period and hourly period, the
available credits of energy ACEBP,p (kWh) are:
!
X
BP1 X
BP1
ACEBP;p ¼ max 0; EEBP;p  IEBP;p (18)
BPZ BPZ
where BP-1 means the previous billing period and BP-Z means Z
billing periods before.
The energy credits used (energy involved in net metering) for
each billing period BP and hourly period p are calculated as:
 
NMEBP;p ¼ min EEBP;p þ ACEBP;p ; IEBP;p (19)
Then Eq. (16) is used to calculate CBP,p.
2.6.1.4. Net metering with rolling credit and buy-back. Eqs. (18) and
(19) are applied. Then Eq. (17) is used to calculate CBP,p.
 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo 689

2.6.2. Net billing The energy credits used (energy involved in net metering) for
In net billing policies the total imported energy (IEBP,p) and the each billing period BP and hourly period p are:
total exported energy (EEBP,p) must be registered for each billing  
period and hourly period (two meters are used). EPBP;p IPBP;p
NMEBP;p ¼ min EEBP;p $ þ ACEBP;p ; IEBP;p $ (25)
IPBP;p EPBP;p
2.6.2.1. Simple net billing. This is one of the alternatives proposed
Then Eq. (16) is applied to calculate CBP,p.
by the Spanish National Energy Commission in 2012 [18]. During
In other countries, excluding access charge and other charges,
the billing period, if the monetary value of the energy exported to
the net billing with rolling credit methodology would be applied
the grid is lower than the cost of energy imported from the grid, i.e.,
using Eqs. (22), (26) and (27).
EEBP,p $ EPBP,p < IEBP,p $ IPBP,p, then the energy credits used are
NMEBP,p ¼ EEBP,p $ EPBP,p/IPBP,p; else NMEBP,p ¼ IEBP,p $ IPBP,p/EPBP,p, !
X
BP1 X
EPBP;p BP1 RPBP;p
where EPBP,p (V/kWh) is the price at which electricity exported to ACEBP;p ¼ max 0; EEBP;p $  IEBP;p $
the grid is valued, fixed by the government or agreed between the BPZ
RPBP;p mZ
EPBP;p
customer-generator and the utility [18], it is expected that it would (26)
be lower than IPBP,p.
Then the expression for the energy credits used is:  
EPBP;p RPBP;p
  NMEBP;p ¼ min EEBP;p $ þ ACEBP;p ; IEBP;p $ (27)
EPBP;p IPBP;p RPBP;p EPBP;p
NMEBP;p ¼ min EEBP;p $ ; IEBP;p $ (20)
IPBP;p EPBP;p
2.6.2.4. Net billing with rolling credit and buy-back. Taking into
For the alternative of modality shown in Ref. [18], then Eq. (16) is
account the methodology shown in Ref. [18], Eqs. (17), (24) and (25)
used to calculate CBP,p.
would be applied to calculate CBP,p.
In Spain the total price applied to the customer for the electricity
Excluding access charge and other charges, the net billing with
consumed from the grid is the retail price, i.e., the sum of cost of
rolling credit methodology would be applied using Eqs. (17), (26)
generating the electricity plus access charge
and (27) where X ¼ 0, NMChBP,p ¼ 0; GChBP,p ¼ 0; BChBP,p ¼ 0.
(RPBP,p ¼ IPBP,p þ AChBP,p). However, in other countries the net billing
methodology is applied with an easier methodology, taking into
account in Eq. (20) the retail price RPBP,p instead of IPBP,p, and the 2.7. Net present cost of the system and levelised cost of energy
price of the exported electricity EPBP,p would be the retail rate,
below retail or above retail rate. For example, in Jamaica [29] the We will assume the system lifetime, Lifesystem (years) is the
EPBP,p is the avoided cost (below retail rate). In these cases and lifetime of the PV panels (usually it is considered as 25 years;
assuming no access or other charges the net billing methodology however, it can be higher). The number of replacements of the
would be applied using Eqs. (21) and (22): inverter is calculated in Eq. (28):

   
EPBP;p RPBP;p Lifesystem
NMEBP;p ¼ min EEBP;p $ ; IEBP;p $ (21) Nrepinv ¼ Integer (28)
RPBP;p EPBP;p Lifeinv

  where Lifeinv is the inverter estimated lifespan (years).

    TaxE Let us define NPCrepinv as the net present cost of the replace-
CBP;p ¼ CFBP;p þ IEBP;p  NMEBP;p $RPBP;p $ 1 þ (22)
100 ment of the inverter (V), calculated as the addition of the
replacement costs during the system lifetime minus the revenues
Note that Eq. (22) is the same as Eq. (16) where X ¼ 0,
at the end of the system lifetime, which are due to its remaining
NMSChBP,p ¼ 0; GChBP,p ¼ 0; BChBP,p ¼ 0.
lifespan:
2.6.2.2. Net billing with buy-back. Taking into account the meth- !
Xj
Nrep
ð1þginv Þk$Lifeinv
odology shown in Ref. [18], if buy-back is applied, Eq. (20) should be NPCrepinv ¼ Costinv $
applied and then Eq. (17) to calculate CBP,p. k¼1 ð1þIÞk$Lifeinv
In other countries with an easier methodology, excluding the  
access charge and other charges, the net billing with buy-back Lifesystem Nrepinv $Lifeinv ð1þginv ÞLifesystem
Costinv $
methodology would be applied using directly Eq. (23): ð1þIÞLifesystem
  (29)
  TaxE
CBP;p ¼ CFBP;p þ IEBP;p $RPBP;p  EEBP;p $EPBP;p $ 1 þ
100 where Costinv (V) is the initial acquisition cost of the inverter and g
(23) is the annual inflation rate expected for that cost.
The net present cost of the operation and management (O&M,
Note that Eq. (23) is an easier but equivalent way to use Eqs. (21)
including annual cost of maintenance, insurance, etc.) during sys-
and (17) where X ¼ 0; NMSChBP,p ¼ 0; GChBP,p ¼ 0; BChBP,p ¼ 0 and
tem lifetime is calculated as:
BBPBP,p ¼ EPBP,p.
!
X
Lifesystem
ð1 þ gO&M Þk
2.6.2.3. Net billing with rolling credit. This is the policy proposed by NPCO&M ¼ CostO&M $ (30)
CNE in 2012 [18]. Considering the banking period where the rolling k¼1 ð1 þ IÞk
credit can be used over Z billing periods, for each billing period and
hourly period, the available credits of energy are: where CostO&M is the initial annual cost of O&M of the system
! (V/yr) and gO&M is the annual inflation rate for the O&M cost.
X
BP1 X
EPBP;p BP1 IPBP;p The NPC of the system during the lifetime of the system includes
ACEBP;p ¼max 0; EEBP;p $  IEBP;p $ (24) the initial acquisition cost of the PV generator (CostPV), the initial
BPZ
IPBP;p mZ
EPBP;p
cost of the inverter (Costinv), the NPC of replacements of the
690
R. Dufo-Lo
inverter (NPCrepinv), the NPC of the O&M (NPCO&M), and the NPC of
the electricity demand (last term):
NPCnet metering ¼ CostPV þ Costinv þ NPCrepinv þ NPCO&M
X
Lifesystem
ð1 þ gE Þi
þ CA $
i¼1 ð1 þ IÞi
Once the NPC is known, the calculation of the LCOE (Levelised
Cost Of Energy) can be done by dividing by the whole load during
the lifetime of the system:
NPC
LCOE ¼ ! (32)
PBPmax Ppmax
Lifesystem $ BP¼1 p¼1 DEBP;p
3. Results
In this section study cases for Spain are shown, comparing
different modalities of net metering and net billing.
A typical case of a home located in Zaragoza, Spain is analyzed.
Zaragoza has an annual irradiation near the average in Spain [30]
for the optimally-inclined photovoltaic modules (slope 35 , azi-
muth 0 ). For each month, the average daily irradiation over a
horizontal surface was obtained in Ref. [31], shown in Table 1. We
consider the PV generator slope is 35 (optimal for Zaragoza) and
fixed (no tracking system). Using the model of Graham and
Hollands [28], the hourly irradiation (IBP,d,h) is calculated. A total
annual irradiation over the tilted surface of 1771 kWh/m2 is ob-
tained. In Spain, values vary from about 1200 (north regions) to
2100 kWh/m2 (south regions).
A home has been considered with efficient appliances, without
electric heating nor air conditioning, with an average electrical load
of 6 kWh/day, distributed as shown in Fig. 3. A unique hourly period
has been considered (no TOU tariff), and monthly billing. The
maximum power available is 3.45 kW.
A crystalline silicon PV generator has been considered, with
total losses of 21.4% [32]: due to temperature and low irradiance,
10.3%; due to angular reflectance effects, 2.6%; other losses, such as
cables and inverter, are assumed to be around 10%. Then a PV
generator of 1 kWp will produce an annual amount of 1771 $
(1 e 0.214) ¼ 1392 kWh. So the peak power of the PV generator
needed to cover the whole annual electrical load
(6$365 ¼ 2190 kWh) would be 2190/1771/(1e0.214) ¼ 1.57 kWp.
We will consider two cases of PV systems:
 PV system of 1.5 kWp (annual generation a little lower than
annual load) with inverter of 1.5 kVA.
 PV system of 2 kWp (annual generation higher than annual
load) with inverter of 2 kVA.
We will consider PV panels of 100 Wp (acquisition cost of 110 V,
25 year lifespan) so we will use 15 panels for the case of 1.5 kWp
and 20 panels for the case of 2 kWp.
A mounting and installation cost of 300 V will also be consid-
ered and will be added to the cost of the PV panels so
CostPV ¼ 1950 V for the case of 1.5 kWp and CostPV ¼ 2500 V for the
case of 2 kWp.
Table 1
Average daily irradiation over a horizontal surface for each month, Zaragoza.
Month Jan. Feb. Mar.
Daily irradiation (kWh/m2) 1.89 3.03 4.32
pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
(31)
Fig. 3. Hourly electrical load during the day.
The inverter used is of 1500 VA with acquisition cost
Costinv ¼ 400 V for case of 1.5 kWp, and 2000 VA with
Costinv ¼ 600 V for case of 1.5 kWp. Efficiency is shown in Fig. 4
(including losses in cables). We consider 15 years for its lifespan.
The total installation cost of the system (PV
panels þ inverter þ mounting) would be 2350 V for the case of
1.5 kWp (i.e., 1.566 V/Wp) and 3100 V for the case of 2 kWp (i.e.,
1.55 V/Wp).
We will consider an O&M annual cost of CostO&M ¼ 30 V/yr. For
the economic calculations, we will consider the life of the system to
be 25 years, I ¼ 4%, gE ¼ 3%; gO&M ¼ ginv ¼ 2%.
We have studied 13 cases corresponding to the different mo-
dalities of net metering and net billing, summarized in Table 2.
 Case 1: Consumer without PV system
 Case 2: Simple net metering. (Eq. (14)) or Eqs. (15) and (16)
where X ¼ 0; NMSBP,p ¼ 0; GTBP,p ¼ 0; BTBP,p ¼ 0.
 Case 3: Net metering with buy-back. Eqs. (15) and (17) where
X ¼ 0, NMSBP,p ¼ 0; GTBP,p ¼ 0; BTBP,p ¼ 0.
 Case 4: Net metering with rolling credit of 1 year. Eqs. (16), (18)
and (19) where X ¼ 0, NMSBP,p ¼ 0; GTBP,p ¼ 0; BTBP,p ¼ 0.
 Case 5: Net metering with rolling credit of 1 year and buy back.
Eqs. (17)e(19) where X ¼ 0, NMSBP,p ¼ 0; GTBP,p ¼ 0; BTBP,p ¼ 0.
 Case 6: Simple net billing. Eqs. (21) and (22).
 Case 7: Net billing with buy back. Eq. (23)
 Case 8: Net billing with rolling credit of 1 year. Eqs. (22), (26) and
(27).
 Case 9: Net billing with rolling credit of 1 year and buy back. Eqs.
(17), (26) and (27) where X ¼ 0, NMSBP,p ¼ 0; GTBP,p ¼ 0;
BTBP,p ¼ 0.
 Case 10: RD Draft, 2011 [17]. Net metering (but access charge
applied to energy credits used) with rolling credit of 1 year. Eqs.
(16), (18) and (19) where X ¼ 1, GTBP,p ¼ 0.
 Case 11: CNE, 2012 [18]. Net billing with rolling credit of 1 year.
Eqs. (16), (24) and (25) where X ¼ 1.
 Case 12: RD Draft, 2013 [26]. No net metering. Self-consumption
with back-up charge. Eq. (16) where NMEBP,p ¼ 0, NMSBP,p ¼ 0;
GTBP,p ¼ 0.
 Case 13: CNE, 2013 [27]. No net metering, no back-up charge. Eq.
(16) where NMEBP,p ¼ 0, NMSBP,p ¼ 0; GTBP,p ¼ 0; BTBP,p ¼ 0.
Cases 2 to 9 do not consider generation charge, back-up charge
or net metering service charge. Also these cases do not consider the
Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
5.20 5.97 6.70 6.77 5.80 4.53 3.03 2.07 1.59
 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo 691

Table 3
Results of annual energy.

Cases of 1.5 kWp Cases of 2 kWp

Load (kWh/yr) 2190 2190

PV generation (kWh/yr) 1932 2577
Losses in inverter þ cables (kWh/yr) 109 114
Self-consumption (kWh/yr) 1031 1102
Exported (kWh/yr) 792 1361
Imported (kWh/yr) 1159 1088

In Figs. 6 and 7 the monthly total energy (load, PV generation,

Fig. 4. Inverter þ cables efficiency.
energy involved in net metering (the energy credits used) must pay
access charge. Cases 10 and 11 consider the energy credits used
must pay access charge and they include a net metering service
charge. Case 11 includes a generation charge (fixed by the regula-
tory laws in Spain like any other generator), and the price of the
energy exported to the grid (which should be agreed by the
consumer-generator and the utility) is considered a little lower
than the imported energy price. Cases 12 and 13 do not consider net
metering, including in case 12 the back-up charge. In the cases
including rolling credit only one year has been considered, as the
energy consumed is supposed to be the same every year so it would
be unnecessary to consider more than one. Cases including buy
back are at the price of electricity imported (below retail price).
The economic results are shown in Table 2 and the results of the
annual energy are shown in Table 3.
In order to illustrate the energy flow during a whole day (for
example, May the 1st), the simulation of the case of 2 kWp is shown
in Fig. 5.
self-consumed, imported and exported energy) is shown for cases
of 1.5 kWp and 2 kWp, respectively. The available credits of energy
are shown for case 10 (RD Draft, 2011 [17]) and for case 11 (CNE,
2012 [18]) and also the available credits in monetary terms for case
11. In the cases of 1.5 kWp (Fig. 6) the available credits for case 11
are zero for all the months so they are not shown; the available
credits for case 10 are zero every month except for July and August.
4. Discussion
For both cases of PV systems (1.5 kWp and 2 kWp), cases 2 to 9
are profitable (NPC and LCOE are lower than in the case of no PV
system, case 1). Case 10 (RD Draft, 2011 [17]) is also profitable,
though less profitable than case 4 (Net metering with rolling credit
of 1 year) due to the access charge applied to the energy credits
used. Case 11 (CNE, 2012 [18]) is still profitable compared to the
case without PV, but it could be unprofitable if the price at which
electricity exported to the grid is valued was lower (price that
should be agreed between the consumer-generator and the utility).
Case 12 (RD Draft, 2013 [26]) is obviously not profitable as there is
no net metering policy and also due to the back-up charge. The NPC
of Case 13 (CNE, 2012 [27]) for 1.5 kWp is a little lower than the case
of no PV system but for 2 kWp it is almost the same, so the policy
for case 13 would not encourage the installation of PV systems.

Table 2
Economic data and results.

Case

1 2 3 4 5 6 7 8 9 10 11 12 13

Data
CFBP,p (V/month)a 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1
RPBP,p (V/kWh) 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13
IPBP,p (V/kWh)b 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086 0.086
ATBP,p (V/kWh)a 0.044 0.044 0.044 0.044 0.044 0.044 0.044 0.044 0.044 0.044 0.044 0.044 0.044
TaxE (%) 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8
X e 0 0 0 0 0 0 0 0 1 1 e e
GTBP,p (V/kWh)c e 0 0 0 0 0 0 0 0 0 5.35$104 0 0
BTBP,p (V/kWh)d e 0 0 0 0 0 0 0 0 0 0 0.0676 0
NMSBP,p (V/kWh) e 0 0 0 0 0 0 0 0 0.01 0.01 0 0
EPBP,p (V/kWh)e e e e e e 0.086 0.086 0.086 0.086 e 0.07 0 0
BBPBP,p (V/kWh)f e 0 0.086 0 0.086 0 0.086 0 0.086 0 0 0 0
Z e 0 0 12 12 0 0 12 12 12 12 0 0
Results for case of 1.5 kWp
NPC (V) 11,178 8057 8043 8036 8036 8897 8897 8897 8897 9093 9417 12,601 10,581
LCOE (V/kWh) 0.2042 0.1472 0.1469 0.1468 0.1468 0.1625 0.1625 0.1625 0.1625 0.1661 0.1720 0.2302 0.1933
% over case 1 0.0 27.9 28.1 28.1 28.1 20.4 20.4 20.4 20.4 18.7 15.8 12.7 5.3
Results for case of 2 kWp
NPC (V) 11,178 8726 8067 8056 7840 9557 8898 9114 8898 9419 9678 13,326 11,182
LCOE (V/kWh) 0.2042 0.1594 0.1473 0.1471 0.1432 0.1746 0.1625 0.1665 0.1625 0.1720 0.1768 0.2434 0.2042
% over case 1 0.0 21.9 27.9 28.0 29.9 14.5 20.4 18.5 20.4 15.8 13.4 19.2 0.0
a
Prices according to Spanish regulatory laws (Decree IET/107, 2014).
b
Typical price offered by the utility.
c
Price fixed in (RD 1544, 2011) in 0.0005 V/kWh plus 7% of generation tax.
d
Price fixed in (RD Draft, 2013).
e
Price of electricity imported, lower than retail price.
f
Below retail rate, price of electricity imported.
692 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo

Fig. 5. Simulation of one day (May the 1st), case of 2 kWp.

Fig. 6. Energy for the cases of 1.5 kWp. Available credits of energy for case 10 (RD Draft, 2011). Available credits of energy for case 11 (CNE, 2012) are 0 every month.

Policies of cases 10 (RD Draft, 2011 [17]) and 11 (CNE, 2012 [18])
have been studied by a sensitivity analysis in order to evaluate the
effect on the total installation cost of the PV system (V/Wp) and the
electricity price annual inflation. The sensitivity analysis has been
conducted modifying the total installation cost of the whole PV
system (around the base case of the previous section, 1.566 V/Wp
for the case of 1.5 kWp and 1.55 V/Wp for the case of 2 kWp) and
also modifying the expected annual inflation rate for the price of
the electricity (around base case of previous sections, 3%).
For case 10 with 1.5 kWp (Fig. 8), all the combinations of cost
and electricity price inflation are profitable compared to the case
without PV systems.

Fig. 7. Energy for the cases of 2 kWp. Available credits of energy for case 10 (RD Draft, 2011) and available credits of energy and money for case 11 (CNE, 2012).
 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo
Fig. 8. Case 10 (RD Draft, 2011), PV system of 1.5 kWp.
Fig. 9. Case 10 (RD Draft, 2011), PV system of 2 kWp.
Case 10 with 2 kWp (Fig. 9) occur in the same way, except for the
case of low inflation (1%) and high PV cost (2 V/kWp).
In case 11 (Figs. 10 and 11) the situation is similar to case 10 but a
little less profitable.
A sensitivity analysis for case 11, 2 kWp has been done modi-
fying the price at which exported energy is valued (Fig. 11 is for
EPBP,p ¼ 0.07 V/kWh, Fig. 12 for EPBP,p ¼ 0.08 V/kWh and Fig. 13 for
EPBP,p ¼ 0.06 V/kWh). The effect of adding or subtracting 0.01 V/
kWh in the price of the energy exported does not greatly affect
profitability.
In general, the profitability of PV net metering or net billing
mainly depends on the modality, on the price and expected infla-
tion of the energy imported from the grid and on the cost of
Fig. 10. Case 11 (CNE, 2012), PV system of 1.5 kWp.
693
Fig. 11. Case 11 (CNE, 2012), PV system of 2 kWp.
photovoltaic panels and inverter. The most profitable modalities for
the consumer-generators are net metering with buy-back or with
rolling credit, while net billing modalities are generally less
profitable.
5. Conclusions
In this paper we have shown a comprehensive methodology for
the assessment of the different policies of net metering and net
billing used in different countries, including the policies shown in
the Spanish decree drafts.
A typical home located in Zaragoza (Spain) has been studied to
obtain the net present cost of the different net metering or net
billing policies (13 different cases of policies have been studied) for
two different PV generators (1.5 kWp, which generates a little less
than the annual load, or 2 kWp, which generates more energy than
the annual load).
The results show that the first draft of the royal decree, which
was published in Spain in 2011, would encourage the PV systems as
its policy of net metering with a rolling credit of 1 year allows the
PV system to be profitable compared to the system without a PV
generator. The CNE report of 2012, which proposes net billing with
rolling credit of 1 year, could also make PV systems profitable;
however, it would depend on the price at which electricity expor-
ted to the grid is valued (a price that should be agreed upon be-
tween the consumer-generator and the utility). The second draft of
the royal decree of 2013, which only considers self-consumption
and not net metering and includes a back-up charge, would imply
that no PV system would be profitable (it would be better to be just
a consumer) so the PV systems would not be encouraged to be
Fig. 12. Case 11 (CNE, 2012), PV system of 2 kWp. EPBP,p ¼ 0.08 V/kWh.
694 pez, J.L. Bernal-Agustín / Energy 84 (2015) 684e694
R. Dufo-Lo
Fig. 13. Case 11 (CNE, 2012), PV system of 2 kWp. EPBP,p ¼ 0.06 V/kWh.
installed. The CNE report of 2013, which is similar to the draft of
2013 but eliminates the back-up charge from the second draft,
imply in many cases very low profitability or even that the PV
system could not be profitable compared to the system that does
not have a generator.
We conclude that the first draft of the royal decree of 2011
would have been a good regulatory law for the development of the
PV sector in Spain. However, this kind of net metering policy ap-
plies an access charge to the energy credits used, i.e., the energy
exported is valued lower than the energy imported and also a net
metering service charge would be applied. A real net metering
policy (like in many states in the United States) where the energy
exported is valued the same (1:1) as the energy imported would
imply a much higher profitability for the PV system and would
encourage the development of the PV sector.
Acknowledgment
This work was supported by the Ministerio de Economía y
Competitividad of the Spanish Government under Project
ENE2013-48517-C2-1-R.
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