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Brookings Institution: For the most part, solar energy is worth it

Location plays a key role

The demand for solar energy is surging, but not everyone, especially the companies involved, is on board with the idea.

There's one group that is struggling with what they say is creating a financial burden for them and non-solar panel homeowners. This group consists of the utility companies and the public utilities commissions that regulate them.

The problem: Some utilities contend that the “net-metering” fees paid to homeowners with rooftop installations for excess solar power they send back to the grid unfairly transfer costs to the utilities and their non-solar customers.

recent article from the Brookings Institution attempts to solve the problem and answers the question, "Does net metering really represent a net cost shift from solar-owning households to others?

Here's what it found:

As to the answer, it’s getting clearer (even if it’s not unanimous). Net metering — contra the Nevada decision — frequently benefits all ratepayers when all costs and benefits are accounted for, which is a finding state public utility commissions, or PUCs, need to take seriously as the fight over net metering rages in states like Arizona, California, and Nevada. Regulators everywhere need to put in place processes that fairly consider the full range of benefits (as well as costs) of net metering as well as other policies as they set and update the policies, regulations, and tariffs that will play a critical role in determining the extent to which the distributed solar industry continues to grow.

What's the Nevada decision? 

The local utility in Nevada successfully wielded the cost-shift theory last winter to get the Nevada Public Utilities Commission to drastically curtail the state’s net-metering payments, prompting Solar City, Sunrun, and Vivint Solar — the state’s three largest providers of rooftop panels—to leave the Nevada market entirely. The result: New residential solar installation permits plunged 92% in Nevada in the first quarter of 2016.

Despite this information, there is still a lot of debate around the issue since there are legitimate cost-recovery issues associated with net metering, and they vary from market to market.

For instance, a Louisiana Public Utility Commission study last year found that that state’s net-metering customers do not pay the full cost of service and are subsidized by other ratepayers. How that squares with other states’ analyses is hard to parse.

The Brookings Institution, as a result of the information, urges regulators and utilities to engage in a broader and more honest conversation about how to integrate distributed-generation technologies into the grid nationwide.

For background, solar energy is a growing trend. A study conducted last year revealed that there is demand from homebuyers for green-energy homes, finding that people are consistently willing to pay more for homes with solar panels.

And as far as location goes, although homeowners in the South can reap financial benefits sooner, it doesn’t mean there isn’t a benefit in other states that aren’t as sunny.

Sandra Adomatis, an Appraisal Institute designated member and expert in solar energy, explained to HousingWire in previous coverage that if a homeowner's electric rate is above the regular 11 or 12 cents for a kilowatt-hour, there can definitely be value in the system.

Further, the consensus is that people spend an average of 11 years in a home, and if they don’t reap the financial benefits of a solar energy home in that time, they are not willing to pay.  

In places like the Midwest, the payback period is longer. But in California, the electricity rate is around 22 cents for a kilowatt-hour, so the payback period could be less than five years.

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