From Net Metering to Net Billing: An econometric analysis of Arizona's solar energy policy

This study investigates the impact of Arizona's 2017 net billing policy change on the quantity of solar energy sold back to the grid by residential customers, known as Net Metering Per Customer (NMPC). Using data from 2014 to 2019 to avoid COVID-19-related distortions, the analysis employs a synthetic control method to estimate counterfactual NMPC trends for both Arizona (state-level) and Tucson Electric Power (utility-level) to overcome the issue of missing control units. Control variables include average temperature, cloud cover, energy price, income, and geographic location. Results show minimal change in NMPC post-policy implementation, with Arizona and TEP's post-treatment trajectories closely tracking their synthetic counterparts. Placebo and ratio tests were conducted and these further indicate that any observed gaps are not statistically significant. The results suggest that the rate change did not significantly alter customer behavior, partially due to policy features such as grandfather clauses and solar rebates. Although the synthetic control method offers valuable information, further robustness checks using alternative models and refined variables are needed, such as a revised definition of cloudy days, to fully validate the effect of the policy.