We are pleased to announce a new Berkeley Lab study, Putting the Potential Rate Impacts of Distributed Solar into Context.

Concerns about the potential impacts of distributed solar on retail electricity prices have led to an array of proposals to reform rate structures and net-metering rules for solar customers. These proposals have typically been met with a great deal of contention and often absorb substantial time and administrative resources, potentially at the expense of other issues that may ultimately have greater impact on utility ratepayers (and over which state regulators and utilities might also have some control). 

Given these trade-offs, this paper seeks to help regulators, utilities, and other stakeholders gauge how much attention to devote to evaluating and addressing the possible effects of distributed solar on retail electricity prices. Drawing on a combination of back-of-the-envelope style analyses and literature review, we estimate ranges for the potential effects of distributed solar on retail electricity prices, at both current and projected future penetration levels, and compare to the potential effects of a number of other important drivers. Indicative ranges of the potential effects on retail electricity prices, shown in the figure below, are intended to provide a rough sense of the relative significance of each of these drivers. Other considerations are, of course, also relevant to evaluating these resources and policies; this comparison focuses narrowly on potential retail electricity price effects simply because this is one of the key issues motivating current debates about rate reforms for distributed solar customers.

The most basic conclusion of this paper is that, in most cases, the effects of distributed solar on retail electricity prices are, and will continue to be, quite small compared to many other electricity-price drivers. That is not to say that reforms of net metering rules or retail rate structures for distributed solar customers are unwarranted; this comparison focuses narrowly on just one of the issues (cost-shifting) motivating retail rate reforms, and other motivations may continue to provide a compelling rationale. However, at least insofar as managing retail price escalation is concerned, other areas of activity (for example, utility capital expenditures) will likely have much greater impact.

For states and utilities with exceptionally high penetration levels, the effects of distributed solar on retail electricity prices could approach the same scale as other important drivers. In these cases, questions about retail rate structure and the value of solar become more important to assessing, and potentially mitigating, any cost-shifting. These states may also look to experiences with energy efficiency programs and policies, which has had, and is likely to continue to have, a far greater impact on electricity sales than distributed solar.

We appreciate the funding support of the U.S. Department of Energy's Solar Energy Technologies Office in making this work possible.

Electricity Markets and Policy Group, Lawrence Berkeley National Laboratory | emp.lbl.gov