Utility companies across the country have begun to raise concerns that the rates and credits given to homeowners with rooftop solar installations — which commonly include payments for any excess power they generate and send back to the grid — may actually be transferring costs back to non-solar customers and the utilities that maintain the electric grid. And they’re pushing for the system to be changed.
But now, new research suggests this is an empty concern. A paper published Monday by researchers from the Brookings Institution reviews a number of studies conducted by state utility commissions, academic institutes and think tanks and suggests that rooftop solar actually benefits all consumers — whether they’re solar customers or not.
Debates about the costs and benefits of rooftop solar tend to revolve around a practice known as “net metering.” This system allows solar customers to sell any excess electricity they generate to their local utility at a retail, rather than wholesale, rate.
However, extra power generated by rooftop solar panels takes the place of electricity the local utility would have otherwise sold. And since those sales are used to help maintain the electric grid, some utilities have argued that net metering unfairly shifts those costs back onto their non-solar customers.
The issue has come to a head in several states already. In California, for instance, investor-owned utilities proposed gradually reducing the rates paid to homeowners with rooftop solar installations for the energy they generated, while the solar industry lobbied for the retail rates to be preserved. In February, the solar backers won out by a narrow vote.
A similar struggle has been playing out in Arizona for the past several years, although a decision on whether to change the rates has yet to be made. And last year, Hawaii actually ended its retail-rate net metering program for new solar customers.
Perhaps the most dramatic example yet, though, took place in Nevada at the end of last year, when the state’s public utilities commission made the decision to cut its net metering rates, as well as apply higher fixed charges to solar customers — both new and existing. The changes have reportedly been a major blow to the rooftop solar business in Nevada, with several large solar installers moving to exit the state’s market entirely.
“Across the country state legislatures and/or utility regulatory commissions in more than 30 states are evaluating current net metering policies and are taking steps to update them to eliminate the shift in costs from customers with private solar systems to customers without these systems,” said Jeff Ostermayer, a spokesman at Edison Electric Institute (an association representing investor-owned electric companies in the United States) by email.
But the Brookings review suggests that these types of policy changes may not be warranted after all — that, rather, the benefits provided by rooftop solar actually outweigh their costs. The review points to state-commissioned studies from Vermont, Mississippi, Minnesota, Maine and even Nevada that suggest net metering results in net benefits for all energy customers.
Similar conclusions appear in several independent studies as well. The Brookings report refers to a study from Lawrence Berkeley National Laboratory, for instance, that suggested that even at a significantly higher rate of solar penetration, net metering would have a modest impact on taxpayers as a whole. And several others, including a review from Environment America Research and Policy Center, suggested net benefits for all customers, whether they employed rooftop solar or not.
Altogether, the authors conclude in the paper that “regulators everywhere need to put in place processes that fairly consider the full range of benefits (as well as costs) of net metering as well as other policies as they set and update the policies, regulations, and tariffs that will play a critical role in determining the extent to which the distributed solar industry continues to grow.”
Meanwhile in Nevada, solar supporters have not yet given up on reversing the state’s decision. And a separate paper, also released this week by solar company SolarCity and the Natural Resources Defense Council (NRDC), may help aid their case.
By examining the industry’s impact on a variety of variables — including energy prices, the utility’s capacity for transmission and distribution and the impact of solar on the environment and public health — the researchers concluded that the benefits of rooftop solar generation in Nevada far outweigh their costs.
The study finds that the Nevada program produces at least $7 million in benefits each year for all utility customers — and that’s only when the program’s environmental and health benefits are not considered. When these factors are accounted for, the value soars to $14 million in benefits annually.
The study used a tool developed back in 2014 for a Nevada Public Utilities Commission study on net metering, which identified 11 different variables that could affect the value of the program’s benefits. However, during last year’s negotiations, the Public Utilities Commission stated that it did not have the time or data to quantify nine of those variables, according to Jon Wellinghoff, SolarCity’s chief policy officer and former chairman of the Federal Energy Regulatory Commission. And, ultimately, the state moved forward with its rate-cutting measures.
However, Wellinghoff added that the utilities commission encouraged all parties in any future proceedings to repeat the process including all 11 variables. So, in conjunction with the NRDC, SolarCity re-ran the study with updated information from the local utilities.
“Based upon that new updated data, we determined that … there is a net benefit to the system of over $7 million annually, as opposed to somewhere between $10 and $16 million in costs that were determined when you only put in two of the benefits,” Wellinghoff said. He added that SolarCity will submit these new findings in a general rate case that’s set to be filed in the next week or so.
A statement from Nevada’s Public Utilities Commission, emailed to The Washington Post by spokesman Peter Kostes, noted that “the PUCN continues to be a national leader in adopting progressive approaches to utility regulation that recognize the dynamic nature of energy markets, and it looks forward to receiving any new evidence that will aid the agency in maintaining Nevada’s status as the country’s top state in per-capita solar and geothermal energy development, while also avoiding unnecessary increases to customers’ bills.”
The discussions surrounding net metering are likely just the beginning of a much bigger conversation surrounding the policies that shape our energy landscape. For instance, experts are increasingly suggesting that current utility business models are becoming outdated as more distributed energy resources are coming online.
“Until broad changes are made to the increasingly outdated and ineffective standard utility business model, which is built largely around selling increasing amounts of electricity, net-metering policies should be viewed as an important tool for encouraging the integration of renewable energy into states’ energy portfolios as part of the transition beyond fossil fuels,” the authors of the Brookings report write.
But they’ve suggested a number of other possible reforms as well that could help states arrive at fair rate designs that don’t challenge the expansion of the solar industry. For instance, they suggest that states could adopt a “value of solar approach,” a kind of alternative to traditional net metering that credits solar owners for factors like avoiding less environmentally friendly energy sources and reducing wear and tear on the electric grid.
These types of decisions will likely have an important effect on how easily solar and other renewables can continue integrating into the country’s energy landscape. For the nation to meet its climate goals, it will be crucial to continue evaluating the policies that affect renewable energy sources, and whether they promote — or discourage — their expansion.