In California, People Without Rooftop Solar Panels Pay a $65 Per Year Subsidy to Those With Them

Solar power is a wonderful thing but the benefits are not evenly distributed.

UPDATE: A commenter points to a Brookings Institute study Rooftop solar: Net metering is a net benefit. which clearly contradicts the back of the envelope article I reference and build this post around. It concludes:

In short, while the conclusions vary, a significant body of cost-benefit research conducted by PUCs, consultants, and research organizations provides substantial evidence that net metering is more often than not a net benefit to the grid and all ratepayers.

I have decided not to remove the post because I believe that my basic complaint, that we are putting solar panels on roofs and stressing net zero over building efficiency, still applies. But as Brookings notes, utilities could get on this bandwagon instead of fighting it. This would also address my issues of inequality.

Utilities, most notably, have the opportunity to adjust their existing business models by themselves owning and operating distributed PV assets (though not to the exclusion of other providers). On this front, utilities could move to assemble distributed generation systems, such as for rooftop solar, and sell or lease them to homeowners.

What's not to love about rooftop solar power? It is clean energy and it reduces demand for power from the grid, which is often generated from fossil fuels. It often goes hand-in-hand with Net Zero, where electricity from the roof is fed into the grid and the building takes back from the grid when needed, say at night or in the winter when the sun is low and the days are shorter.

I have complained in the past that rooftop solar disproportionately favors those who have rooftops, preferably big ones on one-story houses on big suburban lots without a lot of trees. I have also worried that this created a situation where others who couldn't afford the installation or lived in apartments or rentals were subsidizing the people with rooftop solar. The response usually has been that I am writing unsubstantiated drivel.

So here is some substantiation: Lucas Davis from the Energy Institute at The Haas School of Business at the UC, Berkeley asks, Why Am I Paying $65/year for Your Solar Panels? Davis notes that in California, which has net metering, "every time another neighbor installs solar, my rates go up." That's because there are serious fixed costs in building and maintaining the electrical grid, which are divided up among users in proportion to their electrical consumption.

"Solar homes use the grid just as much as other households, as they are always either importing or exporting electricity, it’s just that they consume much less grid-electricity. What this means is that good people like my neighbor contribute much less to paying for utility fixed costs. The fixed costs haven’t gone away, but my neighbor now has a lower electricity bill so pays far less of them. This leaves the utility with a revenue shortfall, and it is forced to raise prices. So who pays for the fixed costs my neighbor used to pay? Everyone else."

He calculates that in California, where 700,000 homes have rooftop solar, there is a cost shifting from those with solar panels to those without to be about $ 840 million per year, or about $65 per year for the average California household.

"So why am I paying $65/year for other people to have solar? It doesn’t make sense. Sure, I’m concerned about climate change, but my $65/year could go a lot farther if it was used instead for grid-scale renewables. Moreover, this is almost certainly bad from an equity perspective, as we know that high-income households adopt solar much more often than other households. Rooftop solar isn’t getting rid of the utility. It’s just changing who pays for it."

SolarCity/Promo image

Commenters note that the solar power from the rooftops is reducing the need to build more power plants. They also note that it reduces pollution and greenhouse gases generation; there are all kinds of benefits that accrue to everyone. Also, subsidies are often needed to kick-start infant industries. Things will change as big batteries kill the duck and more communal solar installations are built. But as another commenter summarized, for now:

"It would be nice if everyone had a south-facing rooftop, on a $1.5 million home, which could be decked with solar panels to get free electricity – but they don’t. And because the infrastructure everyone uses costs money to maintain, to expand, to retrofit, to power with fossil fuel when the sun isn’t shining, electricity for those unlucky customers costs hard money."

I feel I have to reiterate, I think rooftop solar power is wonderful. I just wish as much attention was given to reducing demand, reducing sprawl, and planting trees. And clearly, the California economic model isn't fair.