Solar Energy

Solar energy is a form of “distributed generation.” This means solar energy generates electricity at the point of consumption. There are three types of solar energy:

• Rooftop solar: Individual households generate solar energy through panels on their roofs. Solar panels have become more popular in recent years because of price decreases and new financing models. This investment significantly reduces the customer’s electricity bill. Solar panels can be placed directly on the roof of a house or other building on the customer’s property.
• Community solar: Private developers or the utility create a solar farm and sell a portion of the solar energy to individual customers. A community solar project does not require the solar panels to be connected to individual homes. It allows multiple families or businesses to buy a share of the solar energy produced and get a credit on their bill.
• Utility-scale solar: The utility owns or buys large-scale solar generation facilities. The renewable energy from these investments is paid for by all customers and reflected in the generation provided for all customers. This is how most solar energy is produced.

Importantly, the cost of these programs varies greatly. Rooftop and community solar programs typically depend on ratepayer-funded subsidies, which increase the consumer cost of electricity. Utility-grade solar projects, on the other hand, reflect the actual costs of the project and are typically significantly less expensive for ratepayers.

Solar panel customers rely on their rooftop solar system to power their needs during sunny hours of the day. In other hours, they draw on the distribution and transmission grid. They also rely on the local distribution utility for billing, metering, and reliability of service.

Customers who create more electricity than needed send that excess generation back into the grid. A key consumer issue is how much credit the homeowner or participant in the community solar program gets on their electric bill for sending solar into the electric grid. Another question is how much they should pay for their use of the local distribution utility services and public purpose programs.

Many states allow customers to be reimbursed at the full retail rate, known as net metering. However, consumer advocates argue that the full retail rate is too high because customers do not pay their fair share of costs. For example, customers do not pay the approved cost in rates for the billing and metering systems, reliability and storm response investments, and customer care programs, such as the call center and public purpose programs.

When solar customers get back more than their energy is worth, nonsolar customers must pay more through higher rates. That means that nonsolar customers subsidize the costs of these important aspects of the electric system. Several studies have documented that this shift in costs means that all customers pay more to make up for the lost revenues. These increases are particularly harmful to households with lower incomes.

Some states and municipal utilities have estimated the value that solar brings into the system. They use this estimate to determine the rate of reimbursement. The resulting rate is lower than the full retail rate. This is known as a value of solar rate (VOS). The VOS payment is based on an analysis of the value that the solar energy brings to the utility system. Under VOS, solar customers continue to pay appropriate costs for transmission, distribution, and customer functions. This reduces the risk of cross-subsidy by nonsolar customers.

Some solar customers feel entitled to the higher payments. They may have based their decision to invest in solar panels in part on the promise of full retail rate payments or credits from their utility. One option has been to create a transition period in which existing solar customers move toward the new rat

Solar lending: Many consumers installing solar panels choose to finance them, which adds to the already substantial costs of ownership. Consumer advocates have found that solar financing in particular is rife with misleading sales practices and unfair lending terms. For example, the cost of financing is sometimes hidden because it is described as a dealer fee that inflates the price of the solar system. Consumers have also complained that tax and energy savings have been misrepresented.