MIT Economists Say Net Metering Wrong Model for Solar

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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.

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.”