Net Metering Review: Value of Solar Energy Higher Than Retail Electric Rates

If there’s one aspect of residential solar that the anti-solar crowd, especially utility companies, loves to gang up on, it’s probably net metering. You could argue that the 30% Federal Residential Renewable Energy Tax Credit is right up there on the list as well, but for some reason a year-end tax credit seems a lot less contentious than the idea of your neighbor selling her excess solar electricity production back to grid at a fair price, so net metering tends to be one of those anti-solar talking points that people think they understand.

What is net metering? The practice of net metering allows the owner of a solar energy system, such as a standard solar photovoltaic panel array commonly seen on residential rooftops, to be credited for the electricity their system sends back onto the grid. The practice essentially runs the electric meter backwards during periods of high solar production / low electric consumption, because optimum solar electricity production happens during the day, yet many solar homeowners also use the least amount of electricity during that time.

During the day, excess solar electricity produced by the solar array flows back onto the grid, where it is used by those who are drawing power at that time. When the sun is down and the residents are at home using electricity, they pull power from the grid, like any other house, but because their solar array has been crediting their account with electricity production all day long, they only pay the net difference between their solar production and their electricity consumption.

While it might be nice to think that the neighbors are sitting around counting all their solar money from their rooftop panels, it’s not nearly as lucrative as it seems (though it certainly makes many solar homeowners’ utility bills rather low), and unless you’ve got a veritable solar farm out back, a home solar system with a net metering agreement isn’t exactly a get-rich-quick scheme. According to the Solar Energy Industries Association (SEIA), the average residential solar energy system only sends out between 20-40% of its output to the grid, and this exported electricity goes to serve nearby customers’ electric loads.

Opponents of solar net metering like to argue against it by proclaiming that the utilities are forced into paying retail prices for electricity they could get elsewhere at a cheaper cost, that other utility customers have to pay a higher price to subsidize the net metering program, that solar homeowners are using the utility’s infrastructure as an energy storage program without having to shoulder the costs of it, and that it’s not sustainable once large numbers of people go solar. But a recent review of 11 net metering studies found that if anything, solar energy is undervalued, and that it delivers benefits far beyond what the owners receive in net metering credits.

The review, from the Environment America Research and Policy Center, looked at 11 previous studies of net metering’s effects on both the grid and on society as a whole, all of which found that owners of grid-connected solar arrays offered net benefits to the electricity system, including reduced environmental compliance costs, reduced costs in capital investments, and in avoided energy costs. In particular, the studies determined the median value of solar power as being “nearly 17 cents per unit,” which contrasts with the US average retail electricity rate of about 12 cents per kWh, which means that not only has solar net metering not been harmful to markets, but that utilities have actually been underpaying for the use of this solar electricity.

“The solar studies reviewed in this report confirm that huge amounts of solar have already been developed without paying the full value that solar brings. Not only does that mean that solar customers have likely been subsidizing non-solar customers and the utility, but that over the long term, continued development of solar promises downward pressure on electric rates for all.” – Karl Rábago, Executive Director of the Pace Energy and Climate Center

In addition to the more obvious solar benefits, such as avoided energy costs and reduced capital investment costs, the review also pointed to distributed solar as being important in grid resiliency and in helping to stabilize electricity prices by mitigating some of the fluctuation in fossil fuel prices, thereby reducing financial risks and saving money for all grid users.

The review also makes a great case for the increased and widened adoption of net metering policies in order to keep up the momentum of solar growth in the US.

“Net metering is a critical tool to ensure fair compensation for owners of solar energy systems and to continue to fuel the growth of solar energy. Public officials should support and strengthen net metering as sound public policy to stimulate private investment and job growth, and to encourage utilities to diversify and strengthen the grid.” – Shining Rewards

The document suggests that states should “lift arbitrary caps” on net metering in fast-growing solar markets, should include environmental and societal benefits when evaluating the benefits and costs of net metering programs, “consider the simplicity of net metering” when looking at programs that will compensate customers for their solar production, and “ensure that all people can take advantage of net metering policies” with virtual net metering programs for homes that aren’t able to install solar.

“While some utilities claim they’re subsidizing solar panel owners, our report shows the opposite is probably true. If anything, utilities should be paying people who go solar more, not less.” – Rob Sargent, co-author of the report, and senior program director at Environment America

The full review is available as a download from Environment America: Shining Rewards – The Value of Rooftop Solar Power for Consumers and Society

Find out how solar and net metering can benefit you today!

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