Net Metering Is A Rooftop Rip-Off

Zack Christenson and Steve Pociask American Consumer Institute

new survey finds consumers strongly support policies that help homeowners put solar panels on their rooftops. Home solar panel systems are certainly a worthwhile endeavor — they save consumers money over time while reducing their reliance on the electrical grid, all while utilizing a clean form of energy. This is all well and good on its own, but it takes a decidedly anti-consumer turn when governments get into the business of promoting and subsidizing these rooftop solar panels.

These solar energy programs, referred to as net metering, encourage consumers to generate their own electricity through solar panels and to offset the cost of energy purchased from utility companies. However, while net metering has a lot of benefits, it can have greater adverse consequences on all consumers.

As many policymakers want to incentivize consumers to utilize carbon-free energy, lawmakers and regulators at the federal and state level have begun to offer credits and tax breaks for the installation of these solar panels. In addition, once these panels are installed and after the tax breaks have been given, many states require electric utilities to buy homeowners’ excess solar power at prices close or equal to the price that these utilities sell its energy to the public.

Though at first glance this might seem like a good deal for consumers (getting clean energy while putting some money in your pocket), overall it can increase costs for consumers. When utility companies are forced to purchase excess power from consumers at or near retail prices, they’re potentially doing so at a time when they may not need the excess energy and at a price that is costly to the utility.

When an electric utility pays the retail price for solar energy, it loses the revenue from its own customers that would have contributed to its fixed costs, including the dollars needed to maintain the electric grid. As more and more panels are installed on rooftops, electric utility payments to net metering customers effectively underfund the electric infrastructure, which raises public utility costs. This increased burden of cost is eventually passed onto the utility’s retail consumers through higher electricity rates.

And who, primarily, are those increased rates passed onto? While those having solar panels installed on their house are getting tax breaks, those who don’t have them obviously aren’t, which means that everyone else is paying higher taxes to finance these projects.

In addition, those least able to afford solar panels usually end up being lower income households that, even with tax breaks, can’t afford the upfront costs to having them installed. Effectively, when electric utilities are forced to pay too much for excess solar energy, lower income consumers, those without solar panels, are paying more on their utility bills in order to subsidize higher-income consumers who can afford solar panels.

As an example, the California Public Service Commission reports that homes with solar panels installed had incomes 68 percent higher than the average household. So these tax breaks and subsidies represent “welfare for the rich,” as the American Consumer Institute has pointed out. Providing cheap, clean energy is a noble cause, but not one that should come at the expense of those least able to afford it.

Not only are the tax breaks and subsidies costly for most consumers, but many of the companies offering installation of these solar panels employ very questionable and deceptive sales tactics. From tricking consumers into signing long term leases  to vastly overstating the cost savings — many consumers have found themselves mired in debt due to the costs they incurred from shady solar panel leasing companies. Some consumers have incurred difficulty and expense trying to repair their leaky roof or sell their home. In this way, some net metering consumers are getting ripped off.

Promoting solar energy is a great idea, but it shouldn’t come at the cost of low-income consumers or taxpayers, and it should not encourage consumer fraud for those wanting solar energy. If policymakers want to incentivize clean energy through solar panels, they should make sure prices are set correctly — that net metering customers receive compensation commensurate with the direct costs that electric utilities would save from buying excess solar energy. This would ensure that the costs being imposed are good for the consumer.

That would be a win-win for consumers and the environment.

Zack Christenson and Steve Pociask write for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.  For more information, visit www.theamericanconsumer.org.