Op-ed: Sometimes rooftop solar energy is overvalued.

Requiring electric companies to pay more for rooftop solar energy than it is worth produces several undesirable consequences.

Across the country, the way we produce and distribute energy is rapidly changing. Increasingly, renewable sources are being integrated into the energy mix. These efforts have been particularly successful in Utah, where Rocky Mountain Power is ranked third in the nation for connecting the most solar power to the energy grid. They alone have overseen the incorporation of more than 81,000 solar panels into Utah’s grid.

While this progress should be celebrated, the rapid expansion of solar energy use must also be sustained. Right now, Utah’s Public Service Commission is examining whether the policies currently in place facilitate solar’s long-term growth and expand accessibility for customers.

The state’s current policy pays households with rooftop solar for the energy they add to the grid. When priced competitively, this sell-back method is a smart way to grow renewable energy. But today, Utah’s electric companies buy back the energy from private residents with a credit that is three times higher than if they purchased the solar energy from other, more efficient and cost-effective solar sources. What the Public Service Commission is currently assessing is not whether those with rooftop solar should be compensated for their energy. They are simply reconsidering how much that compensation should be.

A paper I coauthored in 2014, “Valuation of Distributed Solar: A Qualitative View,” notes that, in many cases, rooftop solar energy is overvalued. Requiring electric companies to pay more for rooftop solar energy than it is worth produces several undesirable consequences. Most notably, the artificially high buy-back rate of the extra power from solar panels results in above-market energy prices. It also results in an unfair cost shift wherein wealthier households that can afford to install solar panels on their homes receive incentives. Lower income households who can’t afford to install panels are forced to pick up the tab in the form of higher electricity bills and subsidies to their more affluent neighbors who can.

To make matters worse, solar customers use the energy grid on a 24/7 basis for import, export, and storage, but do not pay their full share of the costs associated with that. Again, all other customers are penalized. Non-solar customers end up paying more not just for the energy they use, but also for the operation and maintenance of the grid.

There’s also a question of timing. When the current policy was developed, solar energy was just getting started. Panels cost 100 times what they do today. Since then, adoption has exploded and costs to install rooftop panels have dropped drastically, resulting in the Utah legislature considering a bill to phase out the state solar tax credits. But utility subsidies for residents to adopt rooftop solar have remained the same. The effect of this actually discourages technological innovation that could make solar energy even more attractive and beneficial.

The overarching goal of state legislators and major energy stakeholders should be to balance the energy needs of all customers in an efficient and cost effective way that increases accessibility and affordability of low cost renewable energy resources.

Paying rooftop solar customers the same competitive prices that electric power companies pay for other solar energy is an approach that enables growth of rooftop solar in a sustainable way, without compelling customers to pay above-market prices. Many in Utah—such as the Division of Public Utilities and Office of Consumer Services—recognize the opportunity at hand to adjust current policies so that they get closer to this balance.

Electric companies have demonstrated an unwavering commitment to expanding solar in Utah in ways that benefit all customers. The degree to which they’re able to continue to do so for all customers—not just those who can afford rooftop solar—will depend on the Public Service Commission’s upcoming decision.

Ashley Brown is Executive Director of the Harvard Electricity Policy Group and is a former commissioner of the Public Utilities Commission of Ohio.