U.S. CHAMBER OF COMMERCE

Did You Know Your Neighbor’s Solar Panels Can Increase Your Electric Bill?

Installation of solar on residential homes is gaining in popularity.   “Private solar” is the term used for those shiny solar panels that are popping up on residential rooftops. 

Many years ago, electric companies and local regulators created a way to credit these homeowners for generating electricity—called net metering.

Sounds like a good deal, right?  Not so fast.  Development of private solar is helping America meet its energy demands and giving consumer choices—both good things.   But unfortunately, net metering policies haven’t been updated in a long time, and are creating an unfair playing field for consumers. 

While your neighbor is receiving a credit (in the form of a reduced electricity bill) for putting excess energy back on the electricity grid, these older net metering policies overlook the costs to use, maintain, and update the grid.  So, who is actually paying those costs?  You--and everyone else!

That’s right, when your neighbor installs solar panels on his roof, you’re subsidizing his costs.  His electricity bills may go down, but yours will go up because he won’t be paying the costs of maintaining the electricity grid even though he’s still using it.   

Still confused? Check out our video explaining how private solar and net metering work.

So, how did this happen? 

Let’s take a step back and examine changes to our electricity mix. 

Just a few decades ago, almost all of our electricity came from large power plants running on coal, natural gas, and nuclear generation technologies.  Hydroelectric dams also played a role, utilizing water and favorable geography to produce electricity.  Wind and solar were rare, with nobody aspiring to generate their own electricity when electric utilities did so in an affordable, reliable, and safe manner.

Fast forward to today.  We have seen a remarkable 70% decline in solar panel prices between 2009 and 2013.  This dramatic price drop provides some homeowners the ability to install their own electricity-generating solar panels, thereby spurring unprecedented growth in the solar industry. 

There are now scores of companies, both big and small, offering to install these private solar panels for homeowners who can afford the expensive install.  When the sun is shining, these solar panels can provide electricity for basic household tasks.  Sometimes, they may even supply surplus electricity, which can then be delivered to the electric grid for use by other electric customers. 

In order to promote the early emergence of private solar, many states implemented rate structures to compensate early adopters with an electric bill “credit” that equaled the full retail electricity rate.  Thus, these early net metering customers received a full credit for the generation, transmission, and delivery of electrons to their home, even though their private solar panels were only offsetting the generation portion of their electric bill.  As a result, net metering policies have enabled private solar customers to avoid paying for the transmission and delivery portions of their bill when their rooftop panels produce more energy than these customers need. 

Now that the adoption of solar generation technology is becoming more common, and is actually mandated by law in some jurisdictions, these outdated rate structures can have an adverse impact on everyone else’s electric rates.  Unfair net metering policies quite literally shift the costs to operate and maintain the electric grid to those customers that cannot or choose not to own private solar panels. 

Even if you don’t have solar panels on your roof, unfair net metering policies can force you to pay higher electric rates.

Stay tuned for more on this topic, in the weeks and months to come.

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