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Peak shifting and cross-class subsidization: The impacts of solar PV on changes in electricity costs

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  • Johnson, Erik
  • Beppler, Ross
  • Blackburn, Chris
  • Staver, Benjamin
  • Brown, Marilyn
  • Matisoff, Daniel

Abstract

The expansion of distributed solar necessitates additional research into the impacts on both utilities and their customers. In this paper we use New Jersey solar data, PJM market data, and demand profiles from a PJM utility to investigate rate and bill impacts of large-scale solar penetration. In addition to the subsidization of solar adopters by non-participants, we highlight the channels through which cross-subsidization of rate classes can arise in practice. The results of our study indicate that the fear of a utility “death spiral” may be exaggerated. Significant solar can be incorporated with only a 2% increase in non-participant bills. At high levels of penetration, distributed solar has the potential to alter the system peak hour which affects the allocation of costs across rate-classes. As the peak hour shifts to the evening when solar production diminishes, residential customers face higher distribution costs. Policy makers and utilities need to be aware of these challenges in designing the next generation of rates that are better aligned with cost causality.

Suggested Citation

  • Johnson, Erik & Beppler, Ross & Blackburn, Chris & Staver, Benjamin & Brown, Marilyn & Matisoff, Daniel, 2017. "Peak shifting and cross-class subsidization: The impacts of solar PV on changes in electricity costs," Energy Policy, Elsevier, vol. 106(C), pages 436-444.
    • Handle: RePEc:eee:enepol:v:106:y:2017:i:c:p:436-444
    DOI: 10.1016/j.enpol.2017.03.034
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    6. Peter Cappers & Andrew Satchwell & Will Gorman & Javier Reneses, 2019. "Financial Impacts of Net-Metered Distributed PV on a Prototypical Western Utility’s Shareholders and Ratepayers," Energies, MDPI, vol. 12(24), pages 1-19, December.
    7. Ansarin, Mohammad & Ghiassi-Farrokhfal, Yashar & Ketter, Wolfgang & Collins, John, 2022. "A review of equity in electricity tariffs in the renewable energy era," Renewable and Sustainable Energy Reviews, Elsevier, vol. 161(C).
    8. Jia, Zhijie & Lin, Boqiang, 2021. "The impact of removing cross subsidies in electric power industry in China: Welfare, economy, and CO2 emission," Energy Policy, Elsevier, vol. 148(PB).
    9. Qiu, Yueming & Kahn, Matthew E. & Xing, Bo, 2019. "Quantifying the rebound effects of residential solar panel adoption," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 310-341.
    10. Ross C. Beppler & Daniel C. Matisoff & Matthew E. Oliver, 2023. "Electricity consumption changes following solar adoption: Testing for a solar rebound," Economic Inquiry, Western Economic Association International, vol. 61(1), pages 58-81, January.
    11. L. (Lisa B.) Ryan & Sarah La Monaca & Linda Mastrandrea & Petr Spodniak, 2018. "Harnessing electricity retail tariffs to support climate change policy," Open Access publications 10197/9911, School of Economics, University College Dublin.
    12. Marilyn A. Brown & Shan Zhou & Majid Ahmadi, 2018. "Smart grid governance: An international review of evolving policy issues and innovations," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 7(5), September.
    13. Saumweber, Andrea & Wederhake, Lars & Cardoso, Gonçalo & Fridgen, Gilbert & Heleno, Miguel, 2021. "Designing Pareto optimal electricity retail rates when utility customers are prosumers," Energy Policy, Elsevier, vol. 156(C).
    14. Cohen, Jed J. & Azarova, Valeriya & Kollmann, Andrea & Reichl, Johannes, 2021. "Preferences for community renewable energy investments in Europe," Energy Economics, Elsevier, vol. 100(C).
    15. Ansarin, Mohammad & Ghiassi-Farrokhfal, Yashar & Ketter, Wolfgang & Collins, John, 2020. "Cross-subsidies among residential electricity prosumers from tariff design and metering infrastructure," Energy Policy, Elsevier, vol. 145(C).
    16. Gao, Xue & Zhou, Shan, 2022. "Solar adoption inequality in the U.S.: Trend, magnitude, and solar justice policies," Energy Policy, Elsevier, vol. 169(C).
    17. Felipe Moraes do Nascimento & Julio Cezar Mairesse Siluk & Fernando de Souza Savian & Taís Bisognin Garlet & José Renes Pinheiro & Carlos Ramos, 2020. "Factors for Measuring Photovoltaic Adoption from the Perspective of Operators," Sustainability, MDPI, vol. 12(8), pages 1-29, April.

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