Aligning Benefits with Costs
Robert Borlick is an energy consultant with more than forty years of experience. He was a partner at Putnam, Hayes & Bartlett, Inc., and Hagler Bailly, Inc. He conducted a number of studies examining state subsidies residential rooftop solar receives and authored a report published by the Consumer Energy Alliance, Incentivizing Solar Energy: An In-Depth Analysis of U.S. Solar Incentives.
Over the past ten years annual installations of rooftop solar PV have soared, partly due to the rapidly declining costs but also due to the generous incentives provided by federal, state, and local governments, and electric utilities.
One of the largest subsidies is provided through Net Energy Metering (NEM), which allows the solar customer to only pay for the net amount of electric energy delivered to the meter, i.e., the amount consumed onsite less that produced by the customer's solar facility.
On first impression NEM sounds reasonable — and it would be if the volumetric energy prices in the tariffs truly reflected the utility's costs of procuring the energy it delivers to the customer's meter — but that is not the case. Just about every residential tariff in the U.S. collects some of the distribution utility's fixed costs through volumetric energy prices. Thus, NEM enables the customer with solar to avoid paying a portion of the utility's fixed costs.
For example, suppose a solar customer produces excess energy during the daylight hours that exactly equals the amount of energy the customer consumes during the night hours. Since the net energy delivered by the utility in that billing period is zero the customer pays nothing. Yet, clearly, the customer has utilized the utility's system to support the two-way energy flows.