Net metering for solar power sounds simple, but is it fair?
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As solar power installations top the 1 million mark nationwide, state-by-state battles are confronting how rooftop solar customers should be billed for electricity. These battles will shape how quickly solar is adopted by homes and businesses and how those systems are used.

Forty-one states now require utilities to provide "net metering" — essentially, running the meter in reverse when the solar panels provide surplus power back to the grid. Since rooftop solar costs have fallen below retail electricity prices in about 20 states, valuing surplus solar at a retail rate makes solar a viable investment for many customers.

Net metering sounds simple. But is it fair?

Many utilities say no. They argue that net metering unfairly shifts the costs of maintaining the grid and transmitting electricity onto their non-solar customers. As solar panels proliferate, the fixed costs of the power grid must be shared over a smaller amount of electricity sold.

These arguments led Nevada and Hawaii to curtail their net metering programs last year. The impacts were especially pronounced in Nevada, as permits for new residential solar installations plummeted by 92 percent in the first quarter of 2016.

Solar advocates counter that the panels generate electricity during the daytime, when power demand peaks and prices tend to be higher. Adding solar power reduces the need to add costly generation capacity to meet peak demand. Solar power also reduces the water use, air pollution and climate-warming emissions associated with other sources of electricity.

With solar pricing policies up for debate in many states, a growing array of studies have compared the costs and benefits of net metering. A recent review of those studies by the Brookings Institution concluded that net metering yields more benefits than costs, even for non-solar customers. In other words, the savings from reduced need for infrastructure investments and peak generation outweigh the cost shifts to other customers. Benefits exceed costs even before considering the environmental benefits of solar.

The preponderance of evidence showing net benefits from solar is unlikely to quell efforts by utilities to quash net metering. Nevada's decision came even after a study by its Public Utility Commission found net metering to yield $36 million in net benefits overall.

What's missing from the complex analyses of overall costs and benefits is a simpler consideration of how individual customers respond to solar pricing. I write this as a solar customer myself, whose utility provides net metering even though it is not required in my home state of Texas.

With net metering, power produced or consumed any time of day is equally valuable. If surplus solar is instead valued less than purchased power, costs can be saved by shifting activities like dishwashing and clothes drying to daytime hours. However, that shifts power use to times when wholesale electricity tends to be more costly and scarce, at least while solar remains a small portion of the market.

Battery storage provides a far costlier option for addressing price differentials. Beyond the upfront cost of batteries, some of the power used to charge the batteries is inevitably lost to inefficiencies. That makes sense only if solar becomes a large share of the market, shifting peak power needs to the evening hours.

In addition to paying less for surplus solar, some utilities have also sought to assess fixed monthly charges to solar customers. However, any shifting of payments from per-kilowatt-hour to fixed amounts reduces incentives to conserve electricity.

Thus, despite the shortcomings of net metering, its alternatives may prompt responses from existing solar customers that do more harm than good. Prospective customers may opt against solar altogether, as evidenced by recent trends in Nevada.

That may help utilities hold on to more customers. However, in a time of falling solar costs, rising solar industry employment and urgent needs to curtail greenhouse gas emissions, it is hard to see how policies unfavorable to solar would benefit society overall.

Cohan is associate professor of civil and environmental engineering at Rice University.