Net Metering: Who Subsidizes Solar Power?

The CPUC’s final report on net metering was delivered to the Legislature this week and highlights equity concerns about sales of residential solar. Clean, green power should be affordable, but the study confirms that rooftop solar actually shifts costs from wealthier customers to lower income ones.

The draft report points to the need for changes that benefit all customers, not just the few that have solar panels.

The Sun Also Sets

A solar system produces energy when the sun shines, so rooftop output is greatest during summer afternoons.  But many customers use more electricity in the morning or the evening than during the day, so even a solar system that is properly sized will over-produce during some hours and under-produce during other hours.

Under net metering, homeowners receive a bill credit for any output that flows into the ‘grid’ at times of over-production. The resulting “billing credits” are carried forward until they are “netted out” at the end of the year. With solar, summer months may often yield credits that are consumed in winter months. Net metering allows periods of excess production to offset times when a system produces less electricity than a household or business uses.

Subsidies Worth Millions

Such a system of bill credits essentially means that utility ratepayers “pay” a solar customer for any solar production that is not immediately consumed, like during a summer afternoon. The solar customers get paid at the full retail rate, which includes components for generation, transmission and distribution. Unfortunately, this amounts to an overpayment by the rest of utility customers, for whom clean renewable energy can be purchased from commercial solar systems for much less.

Under tiered rates, customers get credited a different “price” for their solar output depending on what tier their total monthly consumption pus them in. Tiered rates encourage efficiency and conservation when applied to consumption, but have the opposite effect on generation. A solar customer who uses more electricity get a much bigger bill credit than one who conserves, even if they produce the same amount of solar energy.

The result is that net metering is a subsidy from all ratepayers to those individuals or business that have the ability to invest in rooftop solar on their premises.

The CPUC net metering report estimated that net metering will shift about $359 million in costs annually from customers who have solar panels to those who don’t.  

Inequities

The solar industry has argued that all solar customers are ones with average incomes. But the net metering report conducted the first detailed analysis of incomes, and found that the average median household income of customers with home solar is $91,210, compared with the state’s median income of $54,283. In other words, subsidies are flowing from lower income customers to wealthier ones.

To add insult to injury, the utilities are not allowed to count their purchases of home solar toward required renewable goals, because owners get to keep their ‘renewable energy credits’ (RECs). TURN believes ratepayers should receive RECs for renewable energy purchased by their electric company with customers’ money.

Our Goals: TURN supports a clean, sustainable energy future. We thus support net metering, but we must balance the interests of all ratepayers so that we do not reward only those who can afford to install expensive solar panels.  All solar customers should be paid the same fair, wholesale price for the excess solar electricity they generate but don’t need to use.

I have greatly enjoyed seeing the negative numbers on my PG&E bill since I installed a 3 kW solar system this past July. However, I made the solar decision knowing that it is unfair to expect other ratepayers to continue to subsidize my solar production at 25 cents/kWh, when large renewable projects cost less than 12 cents/kWh. We must balance the interests of individuals to invest in solar with the need to use ratepayer funding to increase renewable generation as much as possible and as soon as possible.

-Marcel Hawiger