Net Metering in the States A primer on reforms to avoid regressive effects and encourage competition

Policymakers enact net metering policies to encourage consumers to install rooftop solar by increasing the return on investment from solar panels. The justification for this is based on the potential benefits of having solar power as part of the grid. This research reviews the academic research on net metering and finds that net metering is ineffective as an environmental policy and also creates serious regressive effects. The authors conclude that compared to utility scale solar, distributed solar is an expensive means of lowering carbon emissions and can discourage other environmentally conscious choices. Net metering also imposes a regressive cost-shift from solar adopters onto non-solar adopters. Although part of net metering’s appeal is its simplicity, when rooftop solar owners net to zero, that is, when they do not pay a bill because their production equals their consumption, they do not cover the costs of maintaining the wires and transmission lines. This cost-shift is estimated to be between $45 and $70 per month per rooftop solar owner that nets to zero. Wealthy households therefore benefit disproportionately from this hidden subsidy because they tend to be the ones who are able to pay the high upfront cost of installing solar panels. The authors suggest several potential reforms that would reduce or eliminate the cost-shift without restricting an interested individual from installing solar panels.