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Rooftop Solar with Net Metering: An Integrated Investment Appraisal

Author

Listed:
  • Majid Hashemi

    (Department of Economics, Queens University, Kingston, Ontario Canada and Cambridge Resources International Inc.)

  • Glenn P. Jenkins

    (Department of Economics, Queens University, Kingston, Ontario, Canada and Cambridge Resources International Inc.)

  • Frank Milne

    (Department of Economics, Queens University, Kingston, Ontario, Canada)

Abstract

This paper develops a framework for a financial, economic, and stakeholder analysis of a residential rooftop solar net-metering program. The empirical focus of the paper is the net metering program in Ontario, Canada, but the methodology is applicable to evaluating other public programs. The results highlight that without the Federal Government’s subsidy for the initial investment cost, net-metered solar systems are not financially viable for representative households. Moreover, the stakeholder analysis reveals that for each additional net-metered system installed in Ontario, non-net-metered households experience financial losses of eight times the benefits to the net-metered households. The net losses to the Federal Government of Canada and the Canadian economy are six and twelve times the benefit to the net-metered households, respectively. The only stakeholder who benefits marginally is the Government of Ontario. In terms of environmental benefits, our estimate of the cost of greenhouse gas abatement by residential net-metered solar is 413 CAD per ton of CO2e, which is significantly higher than the current (65 CAD in 2023) and future (170 CAD by 2030) social cost of carbon set by the Government of Canada.

Suggested Citation

  • Majid Hashemi & Glenn P. Jenkins & Frank Milne, 2023. "Rooftop Solar with Net Metering: An Integrated Investment Appraisal," Development Discussion Papers 2023-01, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:4598
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    References listed on IDEAS

    as
    1. Axel Gautier & Julien Jacqmin & Jean-Christophe Poudou, 2018. "The prosumers and the grid," Journal of Regulatory Economics, Springer, vol. 53(1), pages 100-126, February.
    2. Chun-Yan Kuo & Glenn Jenkins, 2007. "The Economic Opportunity Cost Of Capital For Canada - An Empirical Update," Working Paper 1133, Economics Department, Queen's University.
    3. Bahramian, Pejman & Jenkins, Glenn P. & Milne, Frank, 2021. "A stakeholder analysis of investments in wind power electricity generation in Ontario," Energy Economics, Elsevier, vol. 103(C).
    4. Steffen, Bjarne, 2020. "Estimating the cost of capital for renewable energy projects," Energy Economics, Elsevier, vol. 88(C).
    5. Gautier, Axel & Jacqmin, Julien & Poudou, Jean-Christophe, 2021. "Optimal grid tariffs with heterogeneous prosumers," Utilities Policy, Elsevier, vol. 68(C).
    6. Axel Gautier & Julien Jacqmin, 2020. "PV adoption: the role of distribution tariffs under net metering," Journal of Regulatory Economics, Springer, vol. 57(1), pages 53-73, February.
    7. 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).
    8. Jean-Christophe Poudou & Axel Gautier & Julien Jacqmin, 2018. "The prosumers and the grid," Post-Print hal-01810028, HAL.
    9. Severin Borenstein, 2022. "Author Correction: It’s time for rooftop solar to compete with other renewables," Nature Energy, Nature, vol. 7(6), pages 561-561, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    rooftop solar; net metering; greenhouse gas emissions; renewable energy; the social cost of carbon; Canada;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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