EMRF Study: Net Metering Imposes Significant Costs on Non-Solar Customers

The Electric Markets Research Foundation (EMRF) released preliminary results on December 2 of a research study on The Sustainability of Net Metering, indicating that the value of solar diminishes as more rooftop solar is added to the grid –  and that the costs of net metering to customers without rooftop solar become so significant over time that it is not a sustainable policy.

“A uniform net metering tariff is generally unlikely to be appropriate at high …rooftop solar photovoltaic penetrations, due to its diminishing value to the electricity system,” the researchers posited.

The EMRF was formed in February 2013, the group says, in order “to fund unbiased research that will examine the track records of centralized electricity markets and traditionally regulated markets in providing affordable and reliable supplies of power; as well as meeting clean energy, transmission and environmental needs.”

The research paper, first released at the annual meeting of the National Association of Regulatory Commissioners (NARUC) in mid-November, also demonstrated that, as market penetration of rooftop solar increases, the cross-subsidies from net metering that result in higher costs to customers who have not installed rooftop solar can become quite substantial and are probably not sustainable – particularly when there already is excess capacity in the system.

For example, while a 10 percent market penetration results in only about a $5/megawatt-hour (mWh) increase in the rates of non-participants; at 40 percent market penetration, the costs climb to roughly$50/mWh. Based on typical rates in the area studied, this would amount to about a 50 percent rate increase for non-participants, the study found.

“Regardless, as the penetration of solar increases, its value decreases, implying that a uniform net metering tariff will eventually result in a cross-subsidy that is unlikely to be economically efficient,” the researchers emphasized.

The paper was prepared for EMRF by Jared Moore of Meridian Energy Policy; along with Jeremy Keen and Jay Apt, both at Carnegie Mellon University.

The researchers did find that rooftop solar can provide significant, site-specific benefits, including increased grid reliability, displaced marginal fuel costs, and reduced peak demand, in some limited cases.

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