Net Metering Missteps Provide Important Warning

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The following blog piece is provided by John Grimes, Associate Director of PACE. Mr. Grimes joined PACE in August, 2013.

For the past several years, PACE has been concerned about net metering programs and their impact on middle class consumers. These programs were created to give consumers a financial incentive to install renewable customer distributed generation, in particular rooftop solar capability.

Net metering users receive a bill credit for generation that is exported to the electric grid during times when it is not serving its onsite load. In some of the models, including California and Arizona, the bill credits are applied at the same retail rate that the customer would have paid for energy consumption.

The problem that these models are facing is a lack of sustainability. They were created to jump-start the solar industry, but as solar customers continue to increase, the math stops making sense. As the customer bill savings become greater than the corresponding reduction in utility costs, the utility must adjust its rates to compensate for the shortfall. That means a cost shift from solar customers to non-solar customers.

Who ends up paying for this free ride? It’s usually middle- and lower-income families who cannot afford expensive arrays of solar panels.

Now, a recent report in California has confirmed these fears. The California Public Utilities Commission contracted with an independent consulting firm to assess the costs and benefits of the state’s net metering program. The report was released on September 26, and unfortunately the results are not surprising. The report concluded that non-solar customers will pay $1.1 billion per year in subsidies to solar customers by 2020. It also found that the average yearly income of solar users is $91,000 compared to the average California income of $54,000.

PACE is not an anti-solar organization. We believe all forms of energy generation should have a place at the table. However, financial incentives for affluent homeowners should not be paid by middle- and lower-income families that cannot afford spiked power bills. Unfair net metering policies are already having consequences for consumers in California and Arizona.

Policymakers in other states would be wise to look at these policies and craft net-metering frameworks that protect all consumers.