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Net Metering and Market Feedback Loops: Exploring the Impact of Retail Rate Design on Distributed PV Deployment

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The advent of net metering has spurred growth in the PV market by allowing PV users to sell excess electricity back to the grid at retail price. This study examines two feedback loops caused by net metering. A positive feedback loop is created due to increased DG solar leading to under-recovery of fixed costs by the utility and thus higher retail electricity prices. A negative feedback loop is made because increased PV deployment leads to a shift in the timing of peak pricing to where solar is less cost efficient, raising solar user’s bills. The authors found that, through 2050, these two feedback effects nearly offset each other, producing a modest, positive effect on solar PV deployment, which vary by state and customer segment. The authors also examine different rate structures and net metering rules. They find that future PV deployment is very sensitive to net metering rules; that flat, time-invariant net metering leads to higher aggregate PV levels and that fixed monthly charges drastically lower aggregate PV adoption by 2050.