Almost overnight, it seems, the decade-long expansion of rooftop solar in the U.S. has come to an end. Installations are set to fall by 2 percent this year, according to Bloomberg New Energy Finance. Partly to blame is a widening campaign to end a key customer incentive, homeowners’ ability to sell their extra energy back to the grid at retail prices.
Power companies pressing for this change argue that the practice shifts costs from the affluent owners of solar-powered homes to poorer ratepayers. That’s misleading. Net metering, as it’s called, has a negligible effect on most utilities’ retail rates, especially in states where rooftop solar has only just begun to catch on.
Still, getting these prices right, and treating all consumers fairly, is a complicated business. To encourage wider use of emissions-free energy, state regulators need to carefully weigh all the costs and benefits – including the cost of greenhouse-gas emissions to the climate – and set an appropriate price for rooftop solar power that’s returned to the grid.
As things stand in many states, rooftop solar users get full credit for the excess power they generate and return to the grid – a deduction from their monthly electricity charges. The utilities are thus expected to pay retail for rooftop solar, with no accounting for the grid costs involved. This amounts to a subsidy.
Solar power should indeed be subsidized, relative to carbon-based energy – to protect against climate change and the lung-damaging pollution that comes from burning fossil fuels. The question is how big that subsidy should be. The best way to put different energy sources on the same footing would be through a national carbon tax. By raising the cost of coal and natural gas, this would give the utilities the correct incentive to buy rooftop solar. Since the U.S. has no such tax, net metering (together with the national 30 percent tax credit for residential solar systems) is a workable, albeit inferior, alternative.
That said, it makes sense for states to calculate the net-metering subsidy carefully. The rooftop-solar users’ grid costs should be accounted for, alongside the benefit to the utilities (less required capacity) and to society at large.
New York State has taken a step in the right direction by adopting rates for rooftop solar that account for such variables, including even the relative value of electricity at different times and locations. If all goes to plan, New York will eventually do away with net metering altogether, paying rooftop-solar users an arranged price that strikes the right balance.
In the long run, the dispute over net metering will likely diminish, as costs fall and better batteries make storing surplus power economic. In the meantime, states should dispel needless uncertainty about solar by assuring users and utilities alike that a fair price will be paid for sending power back onto the grid.
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