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Cost Competitiveness of Residential Solar PV: The Impact of Net Metering Restrictions

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  • Comello, Stephen

    (Stanford University)

  • Reichelstein, Stefan

    (Stanford University)

Abstract

The policy of net-metering allows the operators of residential- and commercial solar PV systems to sell surplus electricity back to their utility at the going retail rate. This policy has recently been criticized on the grounds that it provides a subsidy for solar installations, a subsidy that is paid for by all ratepayers. In response, public utility commissions have begun to take up this regulatory issue. This paper presents a theoretical and empirical analysis of the effects of net metering restrictions. We examine the impact that feed-in tariffs (FiT), set below the going retail rate, will have on the volume of future residential PV investments. Our calculations focus on three representative locations in the states of California, Nevada and Hawaii. We find that a FiT set at or above the levelized cost of electricity (LCOE) for solar PV power would provide sufficient incentives for investors to continue on the current path of residential solar installations, even though the profitability of these investments would be lowered substantially. At the same time, we find that the LCOE is a tipping point insofar as feed-in tariffs set below that level would have a sharply negative effect on the volume of new installations.

Suggested Citation

  • Comello, Stephen & Reichelstein, Stefan, 2016. "Cost Competitiveness of Residential Solar PV: The Impact of Net Metering Restrictions," Research Papers 3418, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3418
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    File URL: http://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/415886
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    Cited by:

    1. Opoku, Richard & Obeng, George Y. & Adjei, Eunice A. & Davis, Francis & Akuffo, Fred O., 2020. "Integrated system efficiency in reducing redundancy and promoting residential renewable energy in countries without net-metering: A case study of a SHS in Ghana," Renewable Energy, Elsevier, vol. 155(C), pages 65-78.
    2. Avilés A., Camilo & Oliva H., Sebastian & Watts, David, 2019. "Single-dwelling and community renewable microgrids: Optimal sizing and energy management for new business models," Applied Energy, Elsevier, vol. 254(C).
    3. Fridgen, Gilbert & Kahlen, Micha & Ketter, Wolfgang & Rieger, Alexander & Thimmel, Markus, 2018. "One rate does not fit all: An empirical analysis of electricity tariffs for residential microgrids," Applied Energy, Elsevier, vol. 210(C), pages 800-814.
    4. Ossenbrink, Jan, 2017. "How feed-in remuneration design shapes residential PV prosumer paradigms," Energy Policy, Elsevier, vol. 108(C), pages 239-255.
    5. Horváth, Dóra & Szabó, Roland Zs., 2018. "Evolution of photovoltaic business models: Overcoming the main barriers of distributed energy deployment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 90(C), pages 623-635.

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