EMRF Study Confirms Drop in Value of Rooftop Solar, Cost Shift to Non-Solar Customers As Net Metering Increases

WASHINGTON, Feb. 10, 2017 /PRNewswire-USNewswire/ -- An  Electric Markets Research Foundation study released today found that as the value of solar diminishes with growing market penetration, greater participation in solar net metering will increasingly shift costs from homeowners with rooftop solar to customers without solar power.

"Unless rooftop solar is somehow expected to be self-contained by economic or technical feasibility, our results show that the risk and severity of a consumer cost shift increase with the penetration of rooftop solar net metering," the study found.  

At 10 percent solar penetration, the retail price of electricity for non-solar customers increased at most six percent. If adoption of rooftop solar with net metering is relatively low, then cost-shifting will be limited because solar replaces more expensive power and net-metering costs are spread over a larger number of consumers, the study added.

But at 20 percent rooftop solar penetration, cost-shifting from net metering is likely to increase retail electricity prices for customers without solar by as much as 17 percent. 

The study demonstrated why the risk increased with rooftop solar net metering participation. "If the penetration is expected to be limited, any cost shift is more likely to be limited—in part because rooftop solar displaces more valuable electricity … but also because any distortion can be spread over a larger base of retail kWh sales.  However, as rooftop solar penetration increases and its value decreases, any cost shift caused by net metering must be spread over a smaller base of retail kWhs."

The study concluded, "We have shown, for every location studied, that revisiting the use of a net metering tariff is increasingly justified with increasing rooftop solar penetration."  

The study builds on an EMRF white paper on net metering released at the annual meeting of the National Association of Regulatory Utility Commissioners last November.

Other recent analyses have reached similar conclusions. "But this study is unique because of the robust dataset used and comprehensive electricity models constructed. To my knowledge, no other research effort has modeled both the transmission and distribution side of the grid with increasing penetrations of rooftop solar energy using consistent assumptions across three disparate regions of the United States. Our model of the distributed grid is detailed and includes 10 years of solar data with time steps as small as one minute," said Jared Moore of Meridian Energy Policy.  He is author of the study, entitled "Customer Cost Shifts Caused by Rooftop Solar and Net Energy Metering Policies."

Net metering is the practice of compensating rooftop solar generators at the fixed, full retail rate for the electricity they produce instead of at a dynamic rate that reflects the costs that a utility actually avoids by buying power from the rooftop solar facility. 

The study expands the scope of inquiry on solar net metering beyond earlier research by evaluating the effect of rooftop solar on the distribution network and compiling and analyzing data from three regions – Arizona, Tennessee and Texas.

Among the report's other findings:

• At low energy penetrations, solar largely displaces reasonably expensive wholesale electricity.  However, the value of additional solar energy decreases steeply with energy penetration.
• While solar is initially effective at offsetting both generation and distributed capacity needs, it becomes less and less effective with penetration as peak load moves to nighttime hours.
• Rooftop solar is generally effective at reducing loading of most distribution equipment, but the extent that it reduces costs of operation distribution equipment is highly uncertain because the variability and intermittency of solar energy supply.
• If other additional social costs were priced into electricity markets, the value of solar would still decrease with penetration because increasing penetrations offsets increasingly cleaner electricity.

More information on the Electric Markets Research Foundation is available at www.emrf.net.

Contact: W. John Moore   
703-624-2308  

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SOURCE Electric Markets Research Foundation