Industry 101 | Smart Meter Units and Tariffs

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7.4.1 ENERGY (kWh)

Energy is a measure of how much fuel is contained within something or used by something over a specific period of time.

The kilowatt hour is a unit of energy equivalent to one kilowatt (1 kW) of power sustained for one hour. If the energy is being transmitted or used at a constant rate (power) over a period of time, the total energy in kilowatt hours is the power in kilowatts multiplied by the time in hours.


7.4.2 POWER (kW)

Power is a measure of how fast something is generating or using energy.

The base unit of energy within the international system of units (SI) is the joule. The hour is a unit of time outside the SI, making the kilowatt hour a non-SI unit of energy. The kilowatt hour is not listed among the non-SI units accepted by the BIPM for use with the SI, although the hour, from which the kilowatt hour is derived, is.

Instantaneous Power

The instantaneous power (also known as instantaneous demand or instantaneous load) is the power that something is using (or generating) at any one moment in time. Put your laptop on standby and its instantaneous power will drop immediately. Bring it back to life and its instantaneous power will rise immediately.

If, at any particular moment, everything in an office building is switched on, that office building might be using 42 kW of power. That’s 42 kW of instantaneous power. If, at any particular moment, everything in the office building is switched off, that building should be using 0 kW of power. That’s 0 kW of instantaneous power.

The instantaneous power of most buildings varies constantly. People are constantly switching things on and off, and many items of equipment within the building have instantaneous power that is constantly changing too.

Average Power

The average power represents the power that something uses or generates, on average:

  • Over a specific period of time, e.g. yesterday.
  • Over multiple periods of time,e.g. across all the weekends on record.
  • Throughout a certain type of operation, e.g. typical laptop usage or typical building usage on Monday to Friday 09:00 to 17:00, or typical efficiency for something that’s generating power.

You can easily use these average-kW figures to compare the energy consumption of different periods and even different buildings.



The relationship between energy and power is similar to the relationship between distance and speed:

  • Energy is like distance. The amount of energy that you used over a specific period of time is like the distance that you travelled over a specific period of time, e.g. when driving to work you travelled 2 miles between 08:04 and 08:57.
  • Power is like speed. Your instantaneous power is like your speed at a specific instant in time, e.g. right now. Your average power over a specific period of time is like your average speed over a specific period of time, e.g. when driving to work you travelled at an average speed of 2.26 mph.

Both distance and speed are useful measures; and both are closely related. Sometimes it makes sense to talk in terms of distance, and sometimes it makes sense to talk in terms of speed. It’s the same for energy and power – you need both, but usually one makes more sense than the other.

In many cases, electricity use is metered and charged in two ways by utilities. First, based on total consumption in a given month (kWh). Second, the demand, based on the highest capacity you required during the given billing period (kW).

Depending on your rate structure, peak demand charges can represent up to 30% of your utility bill. Certain industries, like manufacturing and heavy industrial, typically experience much higher peaks in demand. This is largely due to the start up of energy-intensive equipment, making it even more imperative to find ways to reduce this charge. Regardless of the industry, taking steps to reduce demand charges will save money.



Reactive power (kVArh) is the difference between working power (active power measured in kW) and total power consumed (apparent power measured in kVA). Some electrical equipment used in industrial and commercial buildings requires an amount of reactive power in addition to active power in order to work effectively. Reactive power generates the magnetic fields which are essential for inductive electrical equipment to operate – especially transformers and motors. This load is measured via the reactive register on your half-hourly meter.

The theoretical definition of the reactive power is difficult to implement in an electronic system at a reasonable cost. It requires a dedicated DSP to process the Hilbert transform necessary to get a constant phase shift of 90° at each frequency.

The power triangle is based on the assumption that the three energies – apparent, active, and reactive – form a right-angle triangle that can then be processed by estimating the active and apparent energies and applying.

The reactive power: Sqrt[(Apparent power)^2-(Active power)^2]

Although this gives excellent results with pure sinusoidal waveforms, noticeable errors appear in presence of harmonics.



Time of use, or TOU as it is commonly called, is the segregation of energy rates based on the time in which the energy is being consumed. TOU is a way in which utility providers attempt to alleviate demand during peak periods by enforcing a tariff structure that charges an increased rate within the typical peak consumption time periods. TOU is broken into three structures or groupings with various names in reference to peak, off peak, and the time of moderate use referred to as shoulder time or mid-peak. These TOU groupings can vary based on region and have become increasingly deployed in utility electricity charges.

TOU has been implemented to change consumer behavior and to ease the strain of energy usage required at its most in-demand time, thus decreasing the likelihood of power outages and overgenerated power. TOU has become an effective way for utilities to manage their production and allow for consumers to take control of their energy bills. This added control has led some savvy consumers to dramatically cut costs by reviewing their cost allocation and making use of tools and practices such as load shedding and running machines at off-peak hours.


Time of Use Power Meter

A time of use power meter is a multifunction power meter equipped with TOU for single- and three-phase circuits. It features a Modbus RS485 serial connection in which the meter can connect to the free data logging software to take advantage of this feature. While connected to the software, the meter is able to segregate up to four different tariffs, twelve seasons, and fourteen schedules.

This option is a cost-effective solution for users monitoring a single circuit that are able to connect the meter to a dedicated computer and are typically featured in smaller applications where TOU billing has been implemented.


Time of Use Power and Energy Meter

A time of use power and energy meter is an intelligent multifunction power meter with TOU enabled for single- and three-phase circuits. The meter features Modbus RS485 communication standard and can be upgraded to include Modbus TCP Ethernet, BACnet, Profibus, and a variety of other communication protocols and I/O expansions for added versatility. The meter can be serially connected to a computer hosting the free software or can be remotely connected to the computer utilizing an ethernet connection.

As this meter has remote metering capabilities, multiple units are able to be connected to the same central computer or system allowing for utilization in larger projects with multiple users such as residential or commercial buildings or for a more granular look at machines and devices in order to take control of operating costs, generate cost allocation, and determine if load shedding is required.



Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a residential customer has a photovoltaic (PV) system on the home’s rooftop, it may generate more electricity than the home uses during daylight hours. If the home is net-metered, the electricity meter will run backwards to provide a credit against what electricity is consumed at night or other periods where the home’s electricity use exceeds the system’s output. Customers are only billed for their net energy use. On average, only 20-40% of a solar energy system’s output ever goes into the grid. Exported solar electricity serves nearby customers’ loads.

While net metering policies vary by state, customers with rooftop solar or other distribution grid systems usually are credited at the full-retail electricity rate for any electricity they sell to electric utilities via the grid. The full-retail electricity rate includes not only the cost of the power, but also all of the fixed costs of the poles, wires, meters, advanced technologies, and other infrastructure that make the electric grid safe, reliable, and able to accommodate solar panels or other DG systems. Through the credit they receive, net-metered customers effectively avoid paying these costs for the grid. BENEFITS OF NET METERING
  • The system is easy and inexpensive. It enables people to get real value for the energy they produce without having to install a second meter or a battery storage system.
  • It allows homeowners and businesses to produce energy, which takes some of the pressure off the grid, especially during periods of peak consumption.
  • Each home can potentially power two or three other homes. If enough homes in a neighborhood use renewable energy and net metering, the neighborhood could potentially become self-reliant.
  • It encourages consumers to play an active role in alternative energy production, which both protects the environment and helps preserve natural energy resources.


  • Homes that use net metering tend to be more aware of, and therefore more conscientious about, their energy consumption.
  • It saves utility companies money on meter installation, reading, and billing costs.
  • The following graph illustrates the benefit of using net metering system for kw demand registers NET METERING GUIDING PRINCIPLES

Established in 1974, the Solar Energy Industries Association is the national trade association of the U.S. solar energy industry. Through advocacy and education, SEIA is working to build a strong solar industry to power America. As the voice of the industry, SEIA works with its 1,100 member companies to make solar a mainstream and significant energy source by expanding markets, removing market barriers, strengthening the industry, and educating the public on the benefits of solar energy. As the national trade association for the solar industry, SEIA continues to advocate equally for all forms of solar energy including residential, commercial, and central-station solar generation as well as solar heating and cooling applications. The following are guiding principles:


Right to self-generate, connect to the grid, and reduce grid electricity use: Every retail electricity customer has the right to install solar generation equipment at the customer’s site, interconnect to the utility grid without discrimination, and reduce his or her grid electricity use. Reductions in customer grid electricity use due to solar generation should not be imputed as a cost to the utility.


Properly valuing solar electricity and adequately compensating solar customers: Customer-sited solar generation offers many benefits to the electric grid system and by extension to non-solar customers, including but not limited to: reduction in utility energy and capacity generation requirements, reduction in system losses, avoidance or deferral of distribution and transmission investments, localized grid support including increased reliability benefits, fuel-price certainty, and reductions in air emissions and water use.  The aforementioned benefits should be quantified, and solar customers should be adequately compensated for the value their solar energy is delivering to the grid.


Non-discriminatory practices within cost of service recovery: In determining cost allocation, net energy metering customers should not be treated unfairly vis-à-vis other ratepayers and all benefits should be accounted for.  Punitive and non-cost based charges should be prohibited.  Consistent with SEIA’s rate design principles, a utility should have the opportunity to recover its costs of providing service and earn a return on investment as determined by regulators.


No net energy metering caps: Consistent with the policies laid out in these guidelines, no aggregate or statewide limit for net energy metering should exist.


Statewide application: Net energy metering rules, regulations, and practices should be standardized statewide.


Transparency, access to data: Customers, or solar companies on customers’ behalf, should have access to data regarding their own electricity consumption, such as load data including hourly profiles, with transparency into the tariffs available to them.  Billing statements from utilities should clearly show the net energy metering consumed from the utility, and any energy or dollar credits carried forward as a result of solar generation in previous billing periods. IMPLEMENTATION BEST PRACTICES

Individual System Capacity: Any individual system size limitation should be based only on the host customer’s annual load or consumption.

REC ownership: The owner of a net energy metered system should retain ownership of renewable-energy credits (RECs) produced by their owned system, unless transferred to the utility or another party in exchange for acceptable compensation.

Restrictions on “rollover”: Indefinite rollover, credited at retail rate, should be an option for customers. The only exception is allowing for payments for annual net excess generation.

Metering equipment: Consistent with all retail applications, the utility shall provide a meter that is capable of net energy metering.  Retail electric customers utilizing net energy metering must not be required to purchase new energy metering equipment.

Customer classes: All customers should be able to participate in net energy metering.

Aggregation: Virtual net energy metering and meter aggregation options should be available to all customers.


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Here is a list of relevant reading material our expert identified as sources for additional information: