Solar net metering is a powerful green incentive that allows photovoltaic (PV) customers to sell excess solar electricity into the grid – usually at full retail rates.
Available in most states, these net metering programs have helped jumpstart the solar industry and made PV systems more attractive for homeowners and businesses all over the country.
But obviously, utility companies don’t like compensating customers for solar power. And that’s why they continue to fight against net metering – sometimes successfully– and sometimes not.
Utilities argue that net metering places an unfair burden on those who don’t go solar. And in order to maintain the grid, utility providers must spread fixed costs over fewer and fewer customers.
This imbalance creates a vicious cycle known as the “utility death spiral.”
- As grid electricity prices go up, more customers are incentivized to install solar panels.
- As more people go solar, grid prices go up for the remaining utility customers.
- Remaining utility customers are then incentivized to install their own solar panels.
And the process continues.
However, researchers from Stanford University believe they’ve found a potential compromise that could fix this problem.
Making Solar Net Metering Work for Everyone
Right now, utilities are required to pay retail rates for the solar electricity they receive from homeowners and businesses. The problem is that utilities could buy power from cheaper sources – at wholesale rates.
So in effect, utility companies are losing money.
But if you allow them to pay net metering customers “wholesale” prices, fewer people would go solar. Lower payouts would make it much more difficult for customers to break even on their clean power investments.
According to new research from Stanford, solar net metering should use the “levelized cost of electricity” (LCOE) as the compensation point. This LCOE represents the “expected lifetime costs of generating electricity” – a metric that includes maintenance, taxes, financing, construction, and regulations.
If the wholesale price of electricity is $0.06 – and the retail price is $0.18, the LCOE might be closer to $0.12.
This price point is attractive enough to still incentivize solar investments. But it’s also low enough so that utilities don’t continue hemorrhaging money.
Moreover, the LCOE is a moving target. As solar power becomes more mainstream, the levelized cost of electricity goes down. And this would allow state regulators to slowly phase out net metering over time.
It’s an interesting concept. And only time will tell if this truly is a workable compromise.
But for now, California still has very attractive solar net metering rules. And if you enroll in this program today, you’ll get grandfathered in under the current program.
To learn more about going solar or participating in California net metering, contact us today for a free consultation.
