Brookings expert says net metering creates cost shift, rebutting colleagues' study

June 15, 2016

A Brookings Institution fellow calls the cost shift created by net metering “the elephant in the room” that must be reformed to make the transition to a cleaner energy future affordable for all customers.

Lisa Wood, a Brookings nonresident senior fellow and executive director of the Institute for Electric Innovation, challenged the findings of a Brookings report published in May by senior fellow Mark Muro and associate fellow Devashree Saha. Their analysis concluded that net metering (NEM) is a net benefit for a utility and non-solar customers.

Woods responded by writing, “I fundamentally disagree with their findings, and argue that NEM is not a net benefit; it is, in fact, a tariff that much of the time results in a subsidy to NEM customers and a cost shift onto non-NEM customers.”

She argues that too much debate is focused on the “value” of the solar energy sold back to a utility by private rooftop solar customers. Instead, the emphasis should be on the issue of solar customers not paying fully for the grid services they use, which is created by net metering and outdated rate design.

“However, the fundamental source of the NEM subsidy is the failure of NEM customers to pay fully for the grid services that they use 24/7, and the cost of these services can be quite substantial,” Woods writes.
“When a NEM customer doesn’t pay for the grid, the cost is shifted onto non-NEM customers. It is a zero-sum game; plain and simple. This is the elephant in the room.”

APS has requested to reform net metering in the rate review request filed June 1. By the time the rate review is resolved in mid-2017, the 20-year total of the net metering subsidy will grow to more than $1 billion.