Putting the Potential Rate Impacts of Distributed Solar into Context
Concerns about the potential impacts of net-metered PV on retail electricity prices have led to an array of proposals to reform rate structures and net metering rules for solar customers. These proposals have typically been met with a great deal of contention and often absorb substantial time and administrative resources, potentially at the expense of other issues that may ultimately have greater impact on utility ratepayers. Given those tradeoffs, this paper seeks to help regulators, utilities, and other stakeholders gauge how much attention ought to be given to evaluating and addressing the possible effects of distributed solar on retail electricity prices. Drawing on a combination of back-of-the-envelope style analyses and literature review, we characterize the potential effects of distributed solar on retail electricity prices, at both current and projected future penetration levels, and compare these estimates to a number of other important drivers for future retail electricity prices. The objective is neither to dismiss concerns nor to raise alarm, but rather to provide metrics and benchmarks that may help to set priorities.