Brattle Economists Assess the Magnitude of Residential Net Metering Subsidies in Several U.S. States

Brattle economists have conducted a study to assess the residential net metering subsidies of more than a dozen US utilities of varying size, geographic location, rooftop solar penetration, and net energy metering (NEM) policy.

The article, “Quantifying Net Energy Metering Subsidies,” is authored by Brattle Principals Sanem Sergici and Ahmad Faruqui, Senior Research Analyst Maria Castañer, and former Senior Associate Yingxia Yang. Net energy metering policy is available in several states and compensates customers who own distributed generation (DG) resources, such as solar panels, for each kWh of energy generated at the retail rate. However, most U.S. residential rates are volumetric in nature and, when DG customers reduce their consumption of grid power, the burden of paying the fixed grid costs shifts to other customers.

The authors developed a methodology and applied it consistently to all of the utilities based on a cost-of-service approach that specifically identifies the costs avoided by NEM customers. The authors found that NEM policy has led to a substantial subsidy issue between DG and non-DG customers, ranging in $20–$100/customer/month, representing roughly 25%–200% of the monthly bills for residential DG customers of these utilities. These subsidies reach several hundred million dollars for utilities with high DG penetration and cause non-DG customers to pay tens to millions to hundreds of millions of dollars more per year than they should be paying.

The full report can be accessed using the link below.