{"id":9942,"date":"2016-11-03T23:09:08","date_gmt":"2016-11-04T03:09:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/getting-messy-by-going-green-the-unintended-economic-burden-of-net-metering-policies\/"},"modified":"2016-11-03T23:09:08","modified_gmt":"2016-11-04T03:09:08","slug":"getting-messy-by-going-green-the-unintended-economic-burden-of-net-metering-policies","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/getting-messy-by-going-green-the-unintended-economic-burden-of-net-metering-policies\/","title":{"rendered":"GETTING MESSY BY GOING GREEN: THE UNINTENDED ECONOMIC BURDEN OF NET METERING POLICIES"},"content":{"rendered":"

Conversation around climate change has been inextricably linked to global income inequality as many scientists predict that shifting weather patterns and rising sea levels will most significantly impact those living in developing countries[1]<\/a>.\u00a0 However, less attention has been focused on this issue at a domestic level as it is only recently that scientists and economists have begun to study the unintended consequences stemming from the proliferation of residential solar.\u00a0 Net metering programs have caused a shifting of the economic burden of electric utilities to households of lower economic means and caused utility companies such as Lafayette Utilities System (\u201cLUS\u201d) to revisit their pricing policies.<\/p>\n

Over the past decade, spurred in part by incentive schema, U.S. solar has experienced a compound annual growth rate of ~60%[2]<\/a>.\u00a0 In Louisiana, households may be eligible for solar incentives at the federal, state and local level in addition to preferential feed-in tariffs[3]<\/a>.\u00a0 Feed-in tariffs refer to the price at which households may sell electricity back into the grid, a practice known as net metering (\u201cNEM\u201d).\u00a0 Under NEM, excess energy can be sold back into the grid at the residential rate.\u00a0 Households with solar panels recognize savings stemming from lower grid energy consumption as well as the credits provided by NEM.\u00a0 Increased adoption of residential solar exerts pressure on revenues for utility companies but simply revisiting utility rates ignores the outsized impact these policies have on lower income households.<\/p>\n

Utilities charge consumers a fixed and variable charge with the fixed charge purportedly representing the cost of administering customers and the variable charge representing electricity distribution and usage.\u00a0 Non-solar customers of LUS were charged a monthly $6.00 fixed charge, representing less than 10% of the average household\u2019s monthly electric bill[4]<\/a>,[5]<\/a><\/sup>.\u00a0 However, NEM customers incur low variable costs and a study conducted by the Louisiana Public Service Commission (\u201cLPSC\u201d) found that, \u201con average, solar NEM installations are estimated to make a 64% contribution to overall utility costs across all LPSC-jurisdictional utilities. \u00a0Any level below 100% indicates that solar NEM customers are estimated to pay less than 100% of their full cost of service\u201d[6]<\/a>.\u00a0 This becomes an issue of socioeconomic status as not only are residential solar systems unattainable for renters, who tend to be of lower economic means, but households in lower income brackets tend to be unable to either afford the upfront investment to purchase a solar system or do not have the credit to qualify for solar leases or loans.\u00a0 Tellingly, the LPSC study found that NEM households have a median household income of $60,460 as compared to statewide median income of $44,673[7]<\/a>.\u00a0 A report by MIT on the Future of Solar produced similar findings, showing that by NEM policies have effectively shifted costs to non-solar households who are now shouldering an outsize portion of energy distribution costs[8]<\/a>.<\/p>\n

In response to these findings, LUS recently introduced a new pricing schema.\u00a0 The most significant changes were the introduction of a $11.31 monthly service charge and a $15.95 monthly wire fee for NEM customers[9]<\/a>.\u00a0 While this pricing adjustment addresses problems for LUS in the short-term, it is unclear whether LUS has truly addressed inherent frictions in the system.\u00a0 By reducing energy savings, LUS may stifle further adoption of solar as costs of solar systems outweigh benefits from energy savings.\u00a0 However, if solar penetration continues to grow, LUS is likely to continue to face challenges to its operating and pricing model.\u00a0 For LUS to be successful in the shifting energy landscape, it must adapt rapidly to change and be proactive in addressing shifting consumer energy consumption patterns. \u00a0However, given the role that regulatory bodies play in the utility space, I believe it falls on governmental bodies to put forth coherent energy policies that do not benefit certain economic groups at the expense of others.<\/p>\n

\u00a0<\/strong><\/p>\n

Word Count: 787<\/strong><\/p>\n

 <\/p>\n

[1]<\/a> Henry Shue, Climate Justice: Vulnerability and Protection, <\/em>Cambridge: Cambridge University Press, 2014.<\/p>\n

[2]<\/a> “Solar Industry Facts and Figures.” SEIA. Solar Energy Industries Association, n.d. Web. 03 Nov. 2016.<\/p>\n

[3]<\/a> “Louisiana Solar.” SEIA. Solar Energy Industries Association, n.d. Web. 03 Nov. 2016.<\/p>\n

[4]<\/a> $0.0401 \/ kWh energy charge plus $0.038 \/ kWh fuel charge at average of 901 kWh per month resulting in average monthly electric bill of $70.36<\/p>\n

[5]<\/a> Rate information from: “Electric Rates – Residential.” Residential Rates. Lafayette Utilities System, n.d. Web. 03 Nov. 2016. \u00a0Usage stats from: “U.S. Energy Information Administration – EIA – Independent Statistics and Analysis.” How Much Electricity Does an American Home Use? U.S. EIA, n.d. Web. 03 Nov. 2016.<\/p>\n

[6]<\/a> David E. Dismukes, Ph.D. \u201cEstimating the Impact of Net Metering on LPSC Jurisdictional Ratepayers\u201d Louisiana Public Service Commission,<\/em> February 27, 2015.<\/p>\n

[7]<\/a> Ibid. \u201cEstimating the Impact of Net Metering\u201d<\/p>\n

[8]<\/a> Richard Schmalensee, Future of Solar Energy, <\/em>MIT Energy Initiative, 2015.<\/p>\n

[9]<\/a> Ibid. \u201cElectric Rates \u2013 Residential\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

While the rise of residential solar has been a major win for clean energy advocates, net metering policies have put undue burden on low income households<\/p>\n","protected":false},"author":2007,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[1528,179,1240],"class_list":["post-9942","hck-submission","type-hck-submission","status-publish","hentry","category-metering","category-solar-energy","category-utilities"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nGETTING MESSY BY GOING GREEN: THE UNINTENDED ECONOMIC BURDEN OF NET METERING POLICIES - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/getting-messy-by-going-green-the-unintended-economic-burden-of-net-metering-policies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"GETTING MESSY BY GOING GREEN: THE UNINTENDED ECONOMIC BURDEN OF NET METERING POLICIES - 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