MIT Economists Say Net Metering Wrong Model for Solar

In past months, PACE has argued that the practice of retail net metering, i.e. paying solar customers the full retail rate for excess electricity they produce, is poor public policy and ultimately unsustainable for everyone. Now, economists at the Massachusetts Institute of Technology (MIT) agree.

Solar Panel

In a recent study, a team of economists chaired by Dean Richard Schmalensee concluded that the United States should move away from net metering policies for rooftop solar. They say doing so is not only in the best interest of customers, but of the solar industry, as well, in the long term.

See the Full Study Here

“I think we’ve got to find a better way to do it, because I think net metering is going to result in a pushback against residential solar,” explained Richard Schmalensee, who also serves as an economics professor at MIT’s Sloan School of Management.

MIT’s study has implications for arguments about the value of solar, as well. For example, while the solar industry claims that rooftop solar provides net benefits to the grid, Professor Schmalensee and his team found the opposite. In general, rooftop solar results in higher distribution costs because of the need to accommodate two-way power flow.

“Residential solar doesn’t have greater external benefits; it has greater external costs,” said Schmalensee.

Also, since utility-scale solar delivers the same product as rooftop solar, there is no justification or giving residential solar preferential treatment. Days ago, PACE reported on a new utility-scale solar project being undertaken by Entergy New Orleans that will be the first of its kind in the city. We believe that such projects represent a responsible way forward for solar deployment, as opposed to overpaying residential customers for excess solar generation. MIT’s team of economists seems to agree.

“We’re not anti-residential, because some people love the thought of solar on their roof, and if you’re going to subsidize solar, there’s no reason not to subsidize them,” he added. “But there’s no reason to excessively subsidize them, or to subsidize them in a way, as net metering does, that’s going to produce a pushback.”


Save the Date for Gulf Coast Energy Forum 2015!

This past summer, PACE teamed with with the Consumer Energy Alliance to host the first-ever Gulf Coast Energy Forum, an event that brought together energy stakeholders to discuss emerging energy topics that affect consumers. We are proud to announce details of a follow-up conference this year!

GCEF 15 Logo

On August 26th, 2015, the organizations will host the second annual Gulf Coast Energy Forum  in Tampa, Florida, at the Renaissance Tampa International Plaza Hotel. The event aims to bring together energy stakeholders from Louisiana, Mississippi, Alabama, and Florida for open discussions about the future of energy production and the impact of policy-making on energy consumers. A dinner will be held the evening of August 25th for speakers, panelists, and sponsors, and other guests.

Registration and other details for this exciting event will be forthcoming shortly from PACE and other partners, although a hotel group code is already available for booking (linked below). We encourage you to save the date today and make plans to join us for this unique event!

Hotel Group Rate Available Here

Scheduled for a full day (9:00 AM – 4:00 PM), the Gulf Coast Energy Forum 2015 features a stimulating agenda of energy presentations and discussions. The agenda will include a CEO Roundtable featuring energy executives from the region; a regulators panel where members of regional public service commissions discuss emerging trends; state reports from elected officials and business leaders; and keynote speeches from notable figures from the Gulf Coast states.

The Gulf Coast Energy Forum 2015 will be supported by a range of partners. Partnership and sponsorship opportunities remain available for companies and organizations that would like to support this effort. For more information on how to plug in, contact PACE Executive Director Lance Brown at


Entergy New Orleans Taking Responsible Approach to Solar

In a blog piece published last week, PACE explained that taking a stance against taxpayer subsidy of rooftop solar generation doesn’t mean you have to oppose solar technology in general. We have praised approaches such as community solar, for example, that work well with the grid and that help hedge against cost shifts. Other approaches, such as overpaying customers for their excess solar through retail net metering, make less sense. In the end, the question isn’t whether solar should be part of our energy future, but how it will be.


That’s why an announcement by Entergy New Orleans is particularly timely. The utility, which serves more than 171,000 customers in the metro area, plans to build a utility-scale solar project in the city, using property it already owns. The 1-megawatt project will be the first of its kind for the utility and the only one in the city. Importantly, the project will also incorporate battery storage as a way to make the solar installation more useful to customers. Because peak solar generation comes earlier in the day than peak customer use, solar projects often provide less value to the grid than they could. Battery storage helps alleviate that timing issue by storing electrons for when they are needed the most.

According to information released by the utility, officials expect the project to be in service in a little more than a year, with more details about vendors and other participating parties yet to be released.

The addition of battery storage to a utility-scale solar project sets a good precedent for future projects of this kind, but the approach being taken from a taxpayer standpoint is equally meaningful. Entergy New Orleans is pursuing the project because it makes sense for its customers and for city leaders, not because it is being propped up by subsidies. It is the kind of approach to solar that seems to be a win for everyone, not the least of whom are taxpayers who aren’t being asked to pony up pricy subsidies. In short, this is the kind of solar project Louisiana needs more of.

This October, Entergy New Orleans is scheduled to begin work on its 2015 Integrated Resource Plan (IRP), a plan for how the utility will meet future energy demand in the city. With an eye toward responsible approaches to diversifying energy sources in the area, city leaders begin asking in September for utility-scale solar to be considered in that plan. Although there are lots of details yet to come, it looks like city leaders might see utility-scale solar on the grid earlier than expected. Customers, too, have cause to be optimistic; their utility has taken the responsible approach of answering the city’s call for more solar, without sticking taxpayers with the bill. Hopefully, Louisiana’s energy leaders will take note – this is the way solar ought to be done.