Increasing the production of renewable energy is crucial to decreasing our national (and global) dependence on fossil fuels. While it is important that corporations and large organizations switch to renewable energy sources, inspiring people to make the switch to solar power for their residences can create a large impact too.[1] Solar panels can be installed on homes or apartment buildings in areas where there is direct sunlight for much of the year (not just in states we traditionally think of as the sunniest).[2] Once the panels are installed and begin generating electricity, they power part (or all) of the residence. If there is any solar power leftover, it gets fed back into the grid and the electric company credits the household at the retail rate for their input in the system (called net metering).[3] Not only does this power one dwelling (home, apartment building, etc.) with solar energy, but it can contribute solar energy to the entire system! It’s important to continue net metering at retail rates to incentivize individuals to adopt solar power. If the crediting rates are lowered, it will decrease the long-term additive incentive for solar adoption.
While 38 states currently allow for net metering, unfortunately, some states are transitioning away from using the retail rate for crediting and adopting wholesale rates instead.rates are lower, as much as three times lower (or more), potentially disincentivizing people from installing solar panels and participating in net metering. This mainly occurs due to pressure from electric companies about the cost of crediting customers and the idea that the cost of infrastructure (power lines, etc.) are not paid by solar-utilizing customers.[5] There is already a high barrier to becoming a given that the cost of installation is high, so the decreased in payback only further discourages installation and use of residential solar panels.[6] For example, in Nevada, when the rate of crediting decreased drastically, the rate for new solar installation permits dropped 92% (in the first quarter following the change).[7]
When all of the costs and benefits are taken into account, net metering at retail rates generally comes out as a net positive for the producer-consumer system (made up of the electric company and all of its customers, solar-utilizing or traditional).[8] In order to encourage more residences to install and use solar panels, not only should there be a national policy guiding metering rates toward retail level, but there should also be state-by-state incentive programs for residents. Federal policy requiring retail net metering will ensure that there is flexibility to match local retail rates and consistency across states in retail versus wholesale pricing. The federal policy should target both those who can reasonably afford to install solar panels without financial assistance AND areas where financial assistance would be needed through informational campaigns and subsidies and/or special credit lines (possibly through multiple policies).
Currently, the only federal incentive offered is the option to deduct 26% of the cost of installation from federal tax filings (both residential and commercial with no cap).[9] When this was implemented, more and more people began installing solar panels on their residences. With this, prices of solar panel installation went down as demand went up.[10] New federal policies targeting retail net metering rates could contribute even more greatly to this cycle and help with the eventual transition away from fossil fuel dependency. Together, with the support of federal and state governments, we can empower individuals and help not only ourselves, but also each other and the Earth.
[1] “Rooftop Solar: Net Metering Is a Net Benefit,” accessed June 8, 2020, https://www.brookings.edu/research/rooftop-solar-net-metering-is-a-net-benefit/.
[2] “Net Metering,” SEIA, accessed June 8, 2020, https://www.seia.org/initiatives/net-metering.
[3] “Net Metering.”
[4] “State Net Metering Policies,” accessed June 8, 2020, https://www.ncsl.org/research/energy/net-metering-policy-overview-and-state-legislative-updates.aspx.
[5] “Rooftop Solar: Net Metering Is a Net Benefit.”
[6] “Net Metering – Solar United Neighbors,” accessed June 8, 2020, https://www.solarunitedneighbors.org/learn-the-issues/net-metering/.
[7] “Rooftop Solar: Net Metering Is a Net Benefit.”
[8] “Rooftop Solar: Net Metering Is a Net Benefit.”
[9] “The Solar Tax Credit Explained | EnergySage,” accessed June 18, 2020, https://www.energysage.com/solar/cost-benefit/solar-investment-tax-credit/.
[10] “Solar Incentives, Rebates & Tax Breaks by State | EnergySage,” accessed June 8, 2020, https://www.energysage.com/solar/cost-benefit/solar-incentives-and-rebates/.
Thank you for this Sofia! It definitely got me thinking about the need for widespread residential solar power installations and how this can be achieved. First and foremost, it should definitely be a priority for the USA to have all utilities produce energy from renewable sources as soon as possible. Not only is renewable energy the future of sustainable development, but it comprises a large step in the direction of emissions reductions (such as the US should absolutely begin to take). One way to do this would be to devise a campaign to encourage people to not only ask their energy suppliers to switch them to green energy, but to undertake a solar panel installation at home. As you mention, when solar panel installation demand increases, the price decreases. By encouraging people to take this step, solar panel installation would become more accessible and more widespread. This encouragement campaign of sorts is a decision that the federal government will need to make eventually. It is only logical to take a stronger stance on renewable energy, since fossil fuels are limited, detrimental to the environment, and subject to price volatility. Renewable energy is the future, why not get a head-start?
Hi Sofia! I absolutely agree with your view on solar subsidies and net metering. From a climate perspective, an economic perspective, and an equity perspective, it makes sense to expand solar power to as many people as possible. Solar panels shouldn’t be a luxury, and the only way to ensure their proliferation is to make it financially worthwhile for the majority of Americans. Since the technology is still fairly new, and solar power is intermittent, net metering is the best way to balance energy supply and demand while keeping the solar industry competitive. One thing that I’ve found pretty crazy is that despite the fact that fossil fuels are still being subsidized, lawmakers are not only pulling back on net metering but also on that 26% tax deduction for solar installation that you mentioned. Solar power is generally only competitive when external costs are taken into account, and this tax rebate helps to address that (take a look at this interactive map from UT Austin for cheapest energy sources, with and without external costs: http://calculators.energy.utexas.edu/lcoe_map/#/county/tech).
As the US moves towards a more sustainable energy system, artificial political barriers like a prohibition of net metering will only get in the way of progress. It goes to show the outsize influence that the fossil fuel industry has on American politics, and I agree that we as the public have to fight hard for what is in our best interest.
Hi Sofia! I really enjoyed reading your post. I wanted to share something I learned while studying the Energiewende, or energy transition, in Germany. There, they have an auction where buyers purchase the right to install solar panels that feed back in to the grid. While this seems like it should be a negative thing, they provide these buyers with a flat rate that will be paid per unit energy for the life of the solar installation. This means that despite changes in costs of energy, solar installers are insured about the amount of money they will be paid. This greater certainty has made it so that people can make better economic calculations, and solar panels are now very competitive. While this flat rate has dropped over time for new installations due to falling costs of solar, it has helped a lot in contributing to Germany’s solar industry despite not being a very sunny country. I think that assurance of payments is definitely an important factor for those seeking to install solar, and I wonder how we could give people greater certainty here.
I completely agree. I had no idea that net metering at retail rates did not occur across all 50 states as it definitely should. I believe that solar is one of the most vital forms of renewable energy for the United States moving forward, as there is potential for rapid expansion and a vast area, both urban and rural, where they can be built. Furthermore, the technology only becomes more efficient and cheaper each year. Government incentives for installation would be excellent, as that would not only increase the percentage of total US energy that is clean and renewable, but also it would pour more money into the solar industry, increasing R&D budgets and lowering prices.
I agree with what you say in your article. I hadn’t heard of this before but I think I agree with your conclusions. That said, I really wish there was more data supplied. The only data that backs up your claim that lower net-metering rates reduce the installation of solar panels is that Nevada drastically lowered their rates and then solar panel installation dropped 92%. That feels a little extreme to me. Are people really thinking so much of how they’ll be compensated for their possible excess energy? Or is this just a seasonal thing (i.e., the next quarter happened to be winter)? Also, I looked up the Nevada net-metering rates and saw that they start at 95% of the retail rate and only goes down to at the minimum 75% at the energy production levels a home would have (>= 25 kilowatts). I expected it to be more. I think the points you make are valid I just would feel more secure with a little more evidence. That said, I think this is an important issue that deserves more publicity.