Earlier this month, the Sacramento Municipal Utility District (SMUD) released an independent report detailing how its ratepayers without rooftop solar subsidize its customers with rooftop solar systems at a rate between $25 million and $41 million annually. In a nutshell, the report found that “while net-metered [rooftop] solar provides a benefit…it causes electric rates to increase for other customers.”
Over the last year, we’ve written extensively about how many states are reexamining the compensation electric utilities pay for the excess power produced by their ratepayers with rooftop solar systems – otherwise known as net metering.
Our examination of net metering has been prose of our own opinion to op-eds from academics and policymakers alike. Most recently, Sandy Byrd from the Arkansas Rural Electric Association, asked – in light of a recent decision by Gem State’s Public Service Commission (PSC) – “why…would public servants of the second poorest state in the nation force the state’s residents to subsidize the wealthier folks who can afford to purchase solar facilities.”
This sentiment from Ms. Byrd – a former chairman of the state’s PSC – was also expressed by Harvard’s Ashley Brown last August. The former Ohio PUC commissioner –called the continued use of retail net metering policies “a socially regressive regime in which lower-income customers pay more for the benefit of more affluent customers. It is a ‘Robin Hood’ in reverse.”
As we have argued over the past decade – net metering is, indeed, a cost-shift that impacts less affluent ratepayers.
Why did SMUD, the nation’s sixth-largest publicly owned utility serving the capital of the state with the most rooftop solar penetration, feel the need to conduct a study addressing the inequities of net metering?
The answer is quite simple: 1) Rooftop solar customers aren’t required to pay the full costs for keeping the lights on. 2) SMUD buys all excess electricity from rooftop solar customers at $0.12 c/kWh when the actual value is, at most, $0.07 c/kWh. 3) If left unchanged, the total system subsidy provided to rooftop solar systems by 2025 could increase by $51/year, and in 2030 it could be $90/year.
Whether in Arkansas, Sacramento, or any other state, policymakers must consider the cost-shift current net metering policies foster and look at fairer ways to change the system.
All consumers are ratepayers. It is merely not “Energy Fairness” to continue compensating rooftop solar consumers for excess power sold to the utility at full retail when the value of that electricity is considerably less.
Without a doubt, the future for renewable energy throughout the U.S. is bright, as we’ve discussed in numerous articles over the last year. Whether it’s hydropower, wind, utility-scale solar, or rooftop solar, all will play an integral role in meeting future carbon emission targets. Yet, in adopting and shifting to these renewable sources of energy, we must ensure that this shift is equitable and treats all ratepayers fairly.
With that perspective in mind, future net metering policies must 1)Treat all customers fairly by avoiding cost-shifting. 2) Accurately reflect the benefits and costs to the grid of rooftop solar. 3) Not distort the energy marketplace with inequitable rates for excess rooftop generation.