IDEAS home Printed from https://ideas.repec.org/a/aen/journl/ej38-3-brown.html
   My bibliography  Save this article

Designing Compensation for Distributed Solar Generation: Is Net Metering Ever Optimal?

Author

Listed:
  • David P. Brown
  • David E. M. Sappington

Abstract

While several studies have examined the effect of renewable portfolio standard laws on renewable generation in states, previous literature has not assessed the potential for spatial dependence in these policies. Using recent spatial panel methods, this paper estimates a number of econometric models to examine the impact of RPS policies when spatial autocorrelation is taken into account. Consistent with previous literature, we find that RPS laws do not have a significant impact on renewable generation within a state. However, we find evidence that state RPS laws have a significant positive impact on the share of renewable generation in the NERC region as a whole. These findings provide evidence that electricity markets are efficiently finding the lowest-cost locations to serve renewable load in states with more stringent RPS laws. In addition, our results suggest that RPS laws may be more effective tools for environmental policy than for economic development.

Suggested Citation

  • David P. Brown & David E. M. Sappington, 2017. "Designing Compensation for Distributed Solar Generation: Is Net Metering Ever Optimal?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    • Handle: RePEc:aen:journl:ej38-3-brown
    as

    Download full text from publisher

    File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=2925
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Darghouth, Naïm R. & Barbose, Galen & Wiser, Ryan, 2011. "The impact of rate design and net metering on the bill savings from distributed PV for residential customers in California," Energy Policy, Elsevier, vol. 39(9), pages 5243-5253, September.
    2. James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2008. "Vertical Arrangements, Market Structure, and Competition: An Analysis of Restructured US Electricity Markets," American Economic Review, American Economic Association, vol. 98(1), pages 237-266, March.
    3. Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(1), pages 1-17, April.
    4. Branker, K. & Pathak, M.J.M. & Pearce, J.M., 2011. "A review of solar photovoltaic levelized cost of electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4470-4482.
    5. Severin Borenstein, 2017. "Private Net Benefits of Residential Solar PV: The Role of Electricity Tariffs, Tax Incentives, and Rebates," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(S1), pages 85-122.
    6. Eid, Cherrelle & Reneses Guillén, Javier & Frías Marín, Pablo & Hakvoort, Rudi, 2014. "The economic effect of electricity net-metering with solar PV: Consequences for network cost recovery, cross subsidies and policy objectives," Energy Policy, Elsevier, vol. 75(C), pages 244-254.
    7. Erin T. Mansur, 2008. "Measuring Welfare in Restructured Electricity Markets," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 369-386, May.
    8. Thomas Taylor & Peter Schwarz & James Cochell, 2005. "24/7 Hourly Response to Electricity Real-Time Pricing with up to Eight Summers of Experience," Journal of Regulatory Economics, Springer, vol. 27(3), pages 235-262, January.
    9. Darghouth, Naïm R. & Barbose, Galen & Wiser, Ryan H., 2014. "Customer-economics of residential photovoltaic systems (Part 1): The impact of high renewable energy penetrations on electricity bill savings with net metering," Energy Policy, Elsevier, vol. 67(C), pages 290-300.
    10. James Bushnell, 2007. "Oligopoly equilibria in electricity contract markets," Journal of Regulatory Economics, Springer, vol. 32(3), pages 225-245, December.
    11. Paul, Anthony & Myers, Erica & Palmer, Karen, 2009. "A Partial Adjustment Model of U.S. Electricity Demand by Region, Season, and Sector," RFF Working Paper Series dp-08-50, Resources for the Future.
    12. Couture, Toby & Gagnon, Yves, 2010. "An analysis of feed-in tariff remuneration models: Implications for renewable energy investment," Energy Policy, Elsevier, vol. 38(2), pages 955-965, February.
    13. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
    14. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    15. Steven L. Puller, 2007. "Pricing and Firm Conduct in California's Deregulated Electricity Market," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 75-87, February.
    16. Narayan, Paresh Kumar & Smyth, Russell, 2005. "The residential demand for electricity in Australia: an application of the bounds testing approach to cointegration," Energy Policy, Elsevier, vol. 33(4), pages 467-474, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David P. Brown & David E. M. Sappington, 2017. "Optimal policies to promote efficient distributed generation of electricity," Journal of Regulatory Economics, Springer, vol. 52(2), pages 159-188, October.
    2. David P. Brown & David E. M. Sappington, 2016. "On the optimal design of demand response policies," Journal of Regulatory Economics, Springer, vol. 49(3), pages 265-291, June.
    3. David P. Brown & David E. M. Sappington, 2022. "Vertical integration and capacity investment in the electricity sector," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 193-226, February.
    4. Brown, David P. & Sappington, David E.M., 2018. "On the role of maximum demand charges in the presence of distributed generation resources," Energy Economics, Elsevier, vol. 69(C), pages 237-249.
    5. David P. Brown & Andrew Eckert, 2018. "Analyzing the Impact of Electricity Market Structure Changes and Mergers: The Importance of Forward Commitments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 101-137, February.
    6. Severin Borenstein & James Bushnell, 2015. "The US Electricity Industry After 20 Years of Restructuring," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 437-463, August.
    7. Meredith Fowlie, 2008. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage," NBER Working Papers 14421, National Bureau of Economic Research, Inc.
    8. Koumparou, Ioannis & Christoforidis, Georgios C. & Efthymiou, Venizelos & Papagiannis, Grigoris K. & Georghiou, George E., 2017. "Configuring residential PV net-metering policies – A focus on the Mediterranean region," Renewable Energy, Elsevier, vol. 113(C), pages 795-812.
    9. L. (Lisa B.) Ryan & Sarah La Monaca & Linda Mastrandrea & Petr Spodniak, 2018. "Harnessing Electricity Retail Tariffs to Support Climate Change Policy," Working Papers 201822, School of Economics, University College Dublin.
    10. Kubli, Merla, 2018. "Squaring the sunny circle? On balancing distributive justice of power grid costs and incentives for solar prosumers," Energy Policy, Elsevier, vol. 114(C), pages 173-188.
    11. Fikru, Mahelet G., 2019. "Estimated electricity bill savings for residential solar photovoltaic system owners: Are they accurate enough?," Applied Energy, Elsevier, vol. 253(C), pages 1-1.
    12. Mah, Daphne Ngar-yin & Cheung, Darren Man-wai & Leung, Michael K.H. & Wang, Maggie Yachao & Wong, Mandy Wai-ming & Lo, Kevin & Cheung, Altair T.F., 2021. "Policy mixes and the policy learning process of energy transitions: Insights from the feed-in tariff policy and urban community solar in Hong Kong," Energy Policy, Elsevier, vol. 157(C).
    13. Fabian Feger & Nicola Pavanini & Doina Radulescu, 2022. "Welfare and Redistribution in Residential Electricity Markets with Solar Power [Residential Consumption of Gas and Electricity in the US: The Role of Prices and Income]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 3267-3302.
    14. Castaneda, Monica & Jimenez, Maritza & Zapata, Sebastian & Franco, Carlos J. & Dyner, Isaac, 2017. "Myths and facts of the utility death spiral," Energy Policy, Elsevier, vol. 110(C), pages 105-116.
    15. Dufo-López, Rodolfo & Bernal-Agustín, José L., 2015. "A comparative assessment of net metering and net billing policies. Study cases for Spain," Energy, Elsevier, vol. 84(C), pages 684-694.
    16. David P. Brown & Derek E. H. Olmstead, 2017. "Measuring market power and the efficiency of Alberta's restructured electricity market: An energy-only market design," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 838-870, August.
    17. Mark Miller & Anna Alberini, 2015. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," CER-ETH Economics working paper series 15/223, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    18. Schill, Wolf-Peter, 2011. "Electric Vehicles in Imperfect Electricity Markets: The case of Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 39(10), pages 6178-6189.
    19. Xuejuan Su, 2015. "Have customers benefited from electricity retail competition?," Journal of Regulatory Economics, Springer, vol. 47(2), pages 146-182, April.
    20. Wolf-Peter Schill & Claudia Kemfert, 2011. "Modeling Strategic Electricity Storage: The Case of Pumped Hydro Storage in Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 59-88.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:journl:ej38-3-brown. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Williams (email available below). General contact details of provider: https://edirc.repec.org/data/iaeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.