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One
of the most divisive
topics among
environmental
advocates and
researchers is the
claim that the growth
of rooftop solar leads
to a concerning
transfer of costs from
households that have
solar to those that
don’t.
Most people who have
studied this agree
there is some shift in
costs, but they
disagree on how much
and whether it’s too
much.
A recent working paper from economists at the
University of Maryland
offers a novel way of
looking at this issue
by examining how
rooftop solar and
electric vehicles
affect electricity
demand for the
population as a whole,
and how each
contributes to changes
in electricity costs
for the public as a
whole.
The results, I
suspect, will be
frustrating for solar
advocates and
encouraging for EV
advocates. But let’s
not get ahead of
ourselves.
The paper was written
by a team that
includes Joshua Linn,
who teaches economics
at the University of
Maryland and is a
senior fellow at
Resources for the
Future, a think tank
that studies energy
and the environment.
As is common for
economics research,
the authors are
gathering feedback and
will revise the paper
with the aim of
publishing a
peer-reviewed version.
Linn and his
co-authors found that
adoption of rooftop
solar has led to a
2.35 percent decrease
in electricity
utilities’ revenue,
which the companies
have partially
recovered by
increasing customer
rates by 1.48 percent.
Those are small
numbers. But they
become more
significant when the
authors zoom in on the
effects on low-income
households without
solar. The upshot is
that these households
experience, by far,
the most significant
negative effects,
while high-income
households have a net
benefit because they
gain a large share of
the cost savings from
using rooftop solar.
The authors found that
the use of EVs helps
to reduce electricity
rates for all
consumers, with
utilities benefitting
from a 0.44 percent
increase in revenue
and consumers a 0.23
decrease in costs.
Again, small numbers.
The larger point is
that rooftop solar
increases costs for
other consumers while
EVs lower them; the
size of these effects
is likely to increase
as market share for
solar and EVs rises,
according to Linn.
The analysis looks at
electricity consumers
as a whole, including
some with solar and
some with EVs, some
with both, and a large
majority that have
neither.
“When you put solar
panels on your home,
you're imposing a cost
on somebody else,”
Linn said in an
interview.
Linn is not suggesting
that the costs exceed
the environmental
benefits. He argues
that policymakers
should understand the
amount of the cost
shift to make informed
decisions when
crafting policies
related to rooftop
solar.
The authors make clear
that their findings
should be understood
as short-term effects
which cover two to
three years. So, we
cannot extrapolate the
effects on rates in a
decade or more.
One of my initial
reactions was that the
findings could be used
to justify policies
that support the
business interests of
utility companies.
Utilities tend to
oppose rooftop solar
and want to encourage
EVs, and the companies
have used their
lobbying power to
change net metering
policies in states
such as California,
reducing the financial
benefits of solar.
Linn said he doesn’t
intend to support any
industry’s agenda and
that this research
didn’t receive any
corporate funding. His
larger concern, he
said, was quantifying
how solar and EVs
affect the roughly 95
percent of consumers
who have neither.
I asked John Farrell,
a rooftop solar
advocate and
co-director of the
Institute for Local
Self-Relience, to read
and respond to the
paper. His
organization views
customer-owned energy
resources as essential
for creating a more
equitable economy and
counteracting the harm
often done by monopoly
utilities.
Farrell said that the
paper’s focus on
short-term effects is
a serious flaw because
investments in rooftop
solar and other
energy-saving
technologies yield
benefits best
understood in
timelines that are
decades long.
“In a short timeframe,
my purchase of solar
panels or an
energy-efficient
fridge will reduce
demand and (very
slightly) increase the
necessary rates to
recover costs,” he
said, in an email.
“But over the lifetime
of that investment,
the utility can reduce
supply contracts,
defer transformer
upgrades, etc.”
His conclusion: “Doing
this study is an
interesting
intellectual exercise
but … it loses sight
of the forest for the
trees.”
I wouldn’t go that
far. I think we need
to continually monitor
how the growth in
rooftop solar and EVs
will affect the
electricity system and
the prices paid by
other consumers.
It’s worth noting that
the cost shifts in the
paper appear small
relative to the large
rate increases that
have happened this
year as utilities
upgrade their systems
to accommodate data
centers and other
large users.
To put it another way,
the cost shifts linked
to rooftop solar are
not near the top of my
list of problems to be
solved right now. But
10 years from now,
following more
consumer adoption, it
may be a different
story.
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