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Regulatory and ratemaking approaches to mitigate financial impacts of net-metered PV on utilities and ratepayers

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  • Satchwell, Andrew
  • Mills, Andrew
  • Barbose, Galen

Abstract

The financial interests of U.S. utilities are poorly aligned with customer-sited solar photovoltaics (PV) under traditional regulation. Customer-sited PV, especially under a net-metering arrangement, may result in revenue erosion and lost earnings opportunities for utility shareholders as well as increases in average retail rates for utility ratepayers. Regulators are considering alternative regulatory and ratemaking approaches to mitigate these financial impacts. We performed a scoping analysis using a financial model to quantify the efficacy of mitigation approaches in reducing financial impacts of customer-sited PV on utility shareholders and ratepayers. We find that impacts can be mitigated through various incremental changes to utility regulatory and business models, though the efficacy varies considerably depending on design and particular utility circumstances. Based on this analysis, we discuss tradeoffs policymakers should consider, which ultimately might need to be resolved within broader policy contexts.

Suggested Citation

  • Satchwell, Andrew & Mills, Andrew & Barbose, Galen, 2015. "Regulatory and ratemaking approaches to mitigate financial impacts of net-metered PV on utilities and ratepayers," Energy Policy, Elsevier, vol. 85(C), pages 115-125.
    • Handle: RePEc:eee:enepol:v:85:y:2015:i:c:p:115-125
    DOI: 10.1016/j.enpol.2015.05.019
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    References listed on IDEAS

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    Cited by:

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    14. Aksornchan Chaianong & Athikom Bangviwat & Christoph Menke & Naïm R. Darghouth, 2019. "Cost–Benefit Analysis of Rooftop PV Systems on Utilities and Ratepayers in Thailand," Energies, MDPI, vol. 12(12), pages 1-26, June.
    15. Say, Kelvin & John, Michele & Dargaville, Roger, 2019. "Power to the people: Evolutionary market pressures from residential PV battery investments in Australia," Energy Policy, Elsevier, vol. 134(C).
    16. Nikolaidis, Alexandros I. & Charalambous, Charalambos A., 2017. "Hidden financial implications of the net energy metering practice in an isolated power system: Critical review and policy insights," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 706-717.
    17. Mokgonyana, Lesiba & Zhang, Jiangfeng & Li, Hailong & Hu, Yihua, 2017. "Optimal location and capacity planning for distributed generation with independent power production and self-generation," Applied Energy, Elsevier, vol. 188(C), pages 140-150.
    18. Ossenbrink, Jan, 2017. "How feed-in remuneration design shapes residential PV prosumer paradigms," Energy Policy, Elsevier, vol. 108(C), pages 239-255.
    19. Comello, Stephen & Reichelstein, Stefan, 2017. "Cost competitiveness of residential solar PV: The impact of net metering restrictions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 46-57.
    20. L. (Lisa B.) Ryan & Sarah La Monaca & Linda Mastrandrea & Petr Spodniak, 2018. "Harnessing electricity retail tariffs to support climate change policy," Open Access publications 10197/9911, School of Economics, University College Dublin.
    21. Cole, Wesley & Lewis, Haley & Sigrin, Ben & Margolis, Robert, 2016. "Interactions of rooftop PV deployment with the capacity expansion of the bulk power system," Applied Energy, Elsevier, vol. 168(C), pages 473-481.
    22. Peter M. Schwarz, Nathan Duma, and Ercument Camadan, 2023. "Compensating Solar Prosumers Using Buy-All, Sell-All as an Alternative to Net Metering and Net Purchasing: Total Use, Rebound, and Cross Subsidization," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    23. Junhyung Kim & Keon Baek & Eunjung Lee & Jinho Kim, 2023. "Analysis of Net-Metering and Cross-Subsidy Effects in South Korea: Economic Impact across Residential Customer Groups by Electricity Consumption Level," Energies, MDPI, vol. 16(2), pages 1-14, January.
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