Fairly Compensating Sun Power

Fairly Compensating Sun Power: Challenges to Rooftop Solar Development

By Howard Crystal, Contributor and Principal at the Law Office of Howard Crystal 

INTRODUCTION

Rooftop solar power has the potential to play a significant role in our Nation’s transition to clean energy. As the National Renewable Energy Laboratory (“NREL”) concluded earlier this year, more than half of the states receive sufficient sun to provide more than 20% of their electricity from solar panels installed on small buildings. [1]

Nonetheless, while homeowners are motivated in part by environmental considerations, at the end of the day “economics drive most purchasing decisions” for rooftop solar.[2] A solar system is a $20,000 or more investment.[3] Most rooftop solar customers also have to continue to rely on the grid for electricity at night and when the sun is not shining.[4] Thus, the payback period for a solar system depends largely on the extent to which the panels reduce bill payments to the utility.[5]

There are two ways to reduce those bills. First, the panels provide the home with free energy previously purchased from the utility. Second, the homeowner often receives credit for excess energy sent back to the grid at the same Kilowatt/hour (“kw/hr”) retail rate the utility charges for power, called “net metering.”[6] Taken together, these compensation methods for rooftop solar have allowed homeowners to recoup their investments in the range of ten to twenty years, or even sooner.[7]

That all changed recently in Nevada, with dramatic results. Late last year, the Public Utility Commission (“PUC”) restructured electricity rates for residential solar customers, raising their monthly bills and thereby significantly lengthening the payback period for new solar systems.[8] As a result, the rapidly expanding residential solar market in that state largely collapsed.[9] Similarly, since Hawaii’s PUC terminated net metering last year, the residential solar market has precipitously declined.[10]

These developments raise questions as to whether, instead of appropriately valuing the benefits of residential solar development, PUCs are instead improperly discouraging it. For example, as discussed below, by excluding any of the externality costs associated with traditional power sources like coal – particularly greenhouse gas (“GHG”) emissions – the Nevada PUC arguably undervalued electricity generated from solar power as compared to traditionally generated power. As also discussed below, it is questionable whether regulators should treat power used in the home in the same manner as excess generation returned to the grid. At the very least, State legislators should insure unelected utility regulators do not make rate changes that discourage rooftop solar development.

BACKGROUND

Electricity generation used to be the domain of large utility monopolies regulated by PUCs, with utilities centrally generating and distributing reliable power through the “grid,” and obtaining increasing profits tied to increasing electricity usage.[11] In recent years, a new utility player has emerged in the same markets: distributed energy generation from grid connected rooftop solar panels. From only approximately 30,000 U.S. homes in 2006, today there are more than 1,000,000 residential solar providers.[12]

Widely expanding rooftop solar can and should be a vital tool to reduce GHG emissions and combat global climate change.[13] However, by reducing customer reliance on utility-generated power, residential solar also reduces utility profits. As residential solar has grown, utilities have been fighting back, proposing PUCs revise rate structures to increase charges on solar customers.[14]

Rather than arguing for preserving profits, utilities generally argue that solar providers are no longer paying their fair share for grid services. In most states, residential customers pay a flat kw/hr. rate, intended to allow the utility to recover not just the costs of power generation – e.g., the fuel – but also costs associated with power plants, transmission lines, and otherwise maintaining a reliable and secure transmission grid.[15] Utilities have been arguing that, by reducing their electricity bills, solar providers are no longer paying their share for these non-fuel costs, but instead are relying on the rest of the customer base to subsidize these expenses – often called “cross-subsidization.”[16]

There are several approaches a PUC can adopt to shift additional costs to solar providers, including:

  1. adding “fixed” charges for all residential customers, or even just solar customers, shifting costs regardless of energy usage;[17]
  2. adding Time of Use rates that increase charges during peak demand, Demand Charges which vary rates based on time of usage, or Standby Charges for solar generators – all of which reduce the value of net metering;[18]
  3. putting solar customers into their own separate rate class, charged a higher rate structure than other residential customers;[19] and/or
  4. replacing net metering with net “billing,” which means compensating solar providers at less than the retail rate for their excess power (or not at all).[20]

Among the many recent actions by State PUCs implementing these changes are:

  • Wisconsin’s PUC increasing monthly charges – paid by all customers regardless of energy usage, and replacing net metering with a lower than the retail rate.[21]
  • Nevada’s PUC adding fixed monthly charges, reducing the compensation for excess generation, and moving solar customers into their own rate class; [22]
  • Hawaii’s PUC terminating compensation for excess power – e., net metering and net billing – altogether;[23]
  • Arizona’s Tucson Electric Power proposing three new residential rate options, each of which would include increases in residential fixed charges, as well as moving from net metering to net billing, where generation would be credited at a utility-scale renewable energy purchase rate;[24] and
  • One utility in Florida proposing to reduce the rate paid for excess compensation, and another proposing increased fixed charges.[25]

DISCUSSION

  1. The Benefits Of Rooftop Solar Need To Be Fairly Considered In The Ratemaking Process. 

During last year’s ratemaking proceeding in Nevada, many parties – including the PUC’s own Staff – urged the Commission to consider all the benefits that solar generation provides, rather than limiting itself to the narrow question whether solar customers are paying their fair share for grid services.[26] The PUC rejected these requests, finding that utility rates should not “reflect external benefits or costs for any ratepayer class.”[27] As a result, the PUC concluded that non-solar customers were being forced to provide an “unreasonable” subsidy for solar provider’s use of the grid, and restructured rates in an effort to address these purported millions of dollars of cost-shifting between residential customers. [28]

Contrary to the PUCs conclusion, there is no reason the Commission, with its broad mandate to set “just and reasonable” rates, could not have considered all of the benefits of rooftop solar development.[29] Thus, for example, Minnesota reconsidered its rates by considering external values, restructuring rates in a manner that measured the “‘value of energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value.’”[30] The resulting rate for excess generation is something less than the net meter rate, but took these values into account.

In addition to its value as electricity, among the numerous other values of rooftop solar that can – and should – be calculated and considered, include:

  • saving utilities the costs of generating their own power[31];
  • saving utilities the costs of obtaining additional capacity[32];
  • increasing service reliability[33];
  • reducing other fuel prices due to lower demand;
  • reducing utility exposure to price volatility for other fuels;
  • reducing exposure to criteria pollutants from traditional fuels;
  • as compared to utility scale solar or other power generation in unpopulated areas, adding to the land available for wildlife and natural habitat; and
  • adding to the resilience of the grid.[34]

Moreover, as noted, over and above these benefits, solar generation has enormous and calculable environmental benefits because it does not generate GHG emissions. See supra n. 13 (outlining GHG emissions from coal).[35] Taking these factors into account, numerous studies have concluded that rooftop solar provides net benefits, rather than net costs.[36]

For example, an independent study from Lawrence Berkeley National Laboratory (LBNL) found that solar providers cause little in the way of cross-subsidies.[37] Rather, the study concluded, the real threat posed by solar providers is to significantly decrease utility earnings.[38] Another recent study similarly found that solar providers are not receiving cross-subsidies.[39]

On the other hand, a new Report issued just last month and prepared for the Nevada PUC purported to conclude that, even taking these external benefits into account, rooftop solar customers were being substantially subsidized.[40] The report reached this conclusion by ignoring all of the environmental and other benefits of solar generation on the grounds that they will occur regardless of rooftop solar development, because Nevada’s utilities are required to provide renewable energy resources in order to comply with the States’ Renewable Portfolio Standard (“RPS”).[41]

There are several problems with this approach to valuing rooftop solar. First, the RPS itself is an artificial factor imposed by the legislature, which can be increased at any time. Thus, if there is a certain amount of utility-scale solar that the utility can provide, the RPS could simply be raised to account for both additional rooftop solar and utility solar capacity.[42] Zeroing out the externalized value of rooftop solar simply because the same benefits can be obtained through utility-scale projects is arguably nothing more than mathematical sleight of hand, making invisible the concrete benefits of renewable and clean energy.

Second, this approach ignores important siting differences between the two types of solar generation. For example, it ignores the distances traveled between remotely sighted utility-scale solar projects and rooftop solar. At present, the grid loses approximately 6% of the electricity generated through transmission and distribution.[43] While line losses are even larger for remotely sighted utility-scale projects, they are obviously at a minimum when the power travels from the roof to the home.

Finally, simply asserting that utility-scale solar has the same benefits as rooftop solar – and comparing their relative costs on that premise – ignores the externalities associated with putting energy production facilities in remote areas. A number of utility-scale solar projects have proven highly controversial precisely because of their adverse impacts on birds and imperiled species, their destruction of sensitive habitat areas, and overall adverse impacts. Projects in the Mojave desert, for example, have killed thousands of birds, displaced the highly imperiled Desert Tortoise, and had other deleterious environmental impacts.[44] A meaningful comparison of the two types of solar generation must quantify the habitat loss, wildlife threats, and other compromised environmental values associated with utility-scale solar projects.[45]

In making its rate adjustments late last year, the Nevada PUC obviously did not rely on this very recent E3 Study. To the contrary, it considered – but rejected – a prior iteration of the same Study, which had concluded that Nevada solar providers were not being subsidized by other ratepayers.[46]

There is also a larger question embedded in the Nevada PUC’s decision to adjust rates to “fix” purported cross-subsidies going to solar providers. Contrary to the PUCs premise, electricity rates are often not aligned with customer reliance on either the grid or the electric power itself. Rather, it is well recognized that utility rate setting is “more art than science.”[47] For example, the “classic cross subsidy,” common in utility rates, is to have “industrial and commercial rate classes subsidize residential” rates.[48]

Another common example of cross-subsidization arises from the fact that, as noted, residential rates generally do not depend on the time of day power is used, but rather are based on a flat rate.[49] But utilities pay different rates for power depending on demand over the day – since peak power plants charging the highest rates must be used during hours of peak demand – and different rates at different times of year.[50] As a result, consumers using more power during non-peak demand periods are regularly subsidizing peak demand users.[51]

Accordingly, the Nevada PUC’s decision to substantially raise rates for solar providers was triply flawed. It failed to properly consider the external benefits of rooftop solar. It improperly elevated the issue of cross-subsidies that utilities and consumers have routinely tolerated as inherent in the ratemaking process. And, most insidiously, it devastated the market for rooftop solar development in a sun rich state.

2. Solar Generation Used In The Home May Warrant Special Treatment In Utility Rate-Making. 

It is also not clear that regulators should consider a solar provider’s reduced reliance on the grid in considering whether there are cross-subsidies. For example, in concluding that ratepayers are subsidizing solar customers, the recent E3 Report took into account the extent to which solar customers reduce their utility payments by virtue of their reliance on the power they generate for their own homes, as well as their excess generation.[52]

This is arguably unjust and unreasonable. There are multiple ways a homeowner can reduce her reliance on grid-produced electricity. First and foremost, energy conservation measures such as more energy efficient appliances, improved insulation (and thus less reliance on air-conditioning or electric heat), or even energy efficient light bulbs can lower demand than therefore utility bills. Second, appliances that rely on alternative traditional power sources – such as natural gas heating or dryers – can reduce electric bills. And finally, there are other renewable energy options, including not only residential solar, but geothermal, wind power, and even small-scale hydro-electric power.[53]

Under any of these approaches, a customer’s reduced reliance on the grid results in lower utility payments, and thus less support for the grid. However, it is difficult to imagine utilities arguing that all customers who have made the effort to use less electric power should be penalized for doing so with higher utility rates.

It is not immediately clear why rooftop solar customers should be treated differently than customers utilizing these other measures to reduce their electric utility bill. To the contrary, particularly given the value of encouraging steps toward green energy, all measures that reduce utility demand should arguably be deemed irrelevant in the ratemaking process.

There is one respect in which solar and wind power are in fact different than these other measures. At least until home storage capacity becomes commonplace, solar and wind power are only available at certain times of day. Thus, if designed properly, a Time of Use charge that reflects the fact that the power a solar provider generates during the day may be less valuable than the power the home relies on at night might not unjustly penalize them for reduced reliance on the grid – although it still may be unreasonable to the extent it discourages rooftop solar development.

3. Utility Rate-making Should Not Be Permitted To Discourage Rooftop Solar Development.

As noted, in the wake of increased rates in Nevada and Hawaii, the number of solar installations has precipitously declined. [54] In the Nevada proceeding, participants urged the PUC to take into account the impacts of new rates on rooftop solar development. The PUC declined, claiming that solar “system paybacks have nothing to do with establishing just and reasonable rates.”[55]

This short-sighted approach needs to change. Only with a broader lens for what is considered “reasonable,” and a more far-reaching examination of the relative costs of different electricity sources, can PUCs make appropriate judgments about how to treat residential solar customers in the ratemaking process.

As a threshold matter, regulators should properly account for all the externality benefits associated with rooftop solar development. This includes not only benefits like reduced GHG emissions that come from comparing rooftop solar to more traditional forms of energy generation like coal, but also the benefits of distributed solar over utility-scale solar development in remote areas.[56]

Regulators also need to account for the differences between solar generation used in the home and excess generation, rather than threating them as one and the same. While there may be some appropriate adjustment for home-used generation (due to the time of use issues discussed supra at 12), in general regulators should be treating it no differently than energy efficiency. As for excess generation, if not compensated at the net metered rate, it needs to be valued in a manner that takes all appropriate externalities into account.

Finally – and perhaps most importantly – regulators should insure that revised rates do not have the pernicious effect of discouraging consumers from investing in these clean energy technologies. One recent study found that that charging an extra $50/month to rooftop solar customers could reduce deployment by as much as 60% in coming decades.[57]

It is often said that we need an “all of the above” strategy to reduce GHG emissions and fight climate change.[58] As discussed at the outset, rooftop solar has the potential to be a significant part of that strategy. It is therefore incumbent upon regulators – and if they will not comply, the legislatures that control them – to protect rooftop solar development from utilities seeking to discourage an industry they view as a threat to their long-standing business model. Only by appropriately valuing rooftop solar energy, and ultimately insuring that revised rates do not discourage solar deployment, can regulators insure “just and reasonable rates” that benefit all consumers by reducing our reliance on fossil fuels, maximizing our energy independence, and maximally harnessing a truly renewable and costless form of energy.[59]


[1]                See Peter Gagnon et al., Rooftop Solar Photovoltaic Technical Potential in the United States: A Detailed Assessment, Nat’l Renewable Energy Lab. (Jan. 2016) at 25-27.

[2]           U.S. Homeowners on Clean Energy: A National Survey (2014), available at http://cleanedge.com/content/reports-download?fid=516&title=U.S.%20Homeowners%20On% 20Clean%20Energy:%20A%20National%20Survey (last visited Sept. 14, 2016)

[3]           David R. Baker, Solar Study Finds Prices Plunged 75 Percent Since ’09, San Francisco Chronicle, Aug. 28, 2016 (indicating that a typical solar installation costs $20,000); Galen Barbose, et al., “Tracking The Sun IX, The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States, Nat’l Renewable Energy Lab. (Aug. 2016) (indicating that prices continue to drop, and a 2015 median installed price of $4.1/W for residential systems); Solar Energy Industry Association, Solar Photovoltaic Technology (indicating the average residential system size is 5kW), available at http://www.seia.org/research-resources/solar-photovoltaic-technology (last visited Sept. 14, 2016).

[4]           Affordable storage of rooftop solar may one day permit homeowners to leave the grid altogether, but that step is still some time off. See, e.g., Giles Parkinson, Battery Storage Will Be As Common As Broadband In 10 Years, Says Simon Hackett, Sept. 1, 2015 (suggesting widespread storage use is coming in a decade), available at https://cleantechnica.com/2015/09/01/battery-storage-will-be-as-common-as-broadband-in-10-years-says-simon-hackett/ (last visited Sept. 14, 2016).

[5]           There are two other mechanisms that have also helped to encourage rooftop solar development: tax incentives and Solar Renewable Energy Credits, called “SRECS.” The federal tax credit allows homeowners to deduct up to 30% of the cost of a solar system. See Trieu Mai, et al., Impacts of Federal Tax Credit Extensions on Renewable Deployment and Power Sector Emissions (Nat’l Renewable Energy Lab. Feb. 2016) (discussing role of federal tax credits in encouraging residential solar). SRECs are credits purchased by utilities, and paid to renewable energy generators, to satisfy utilities’ state Renewable Portfolio Standards – requirements that utilities obtain a certain percentage of their power from renewable sources. See SREC Trade, SREC Markets, available at http://www.srectrade.com/srec_markets/ (last visited Sept. 14, 2016).

[6]           NC Clean Energy Technology Sector, The 50 States of Solar Q1 2016 Quarterly Update, April 2016 (“50 States of Solar Q1 2016 Update”) at 13 (explaining net metering and showing that many states have net metering policies).

[7]           See, e.g., Mathias Aarre Maehlum, How Long To Pay Off My Solar Panels?, Energy Informative, July 18, 2014, available at http://energyinformative.org/long-pay-solar-panels/ (last visited Sept. 14, 2016). Alternatively, in many states a homeowner can enter into a Power Purchase Agreement (“PPA”) with a solar provider, who then installs solar panels without any upfront cost to the homeowner. See Solar Power Rocks (identifying 25 states that permit PPAs), available at https://solarpowerrocks.com/solar-lease-map/ (last visited Sept. 14, 2016). The economic benefits of this approach also depend on the rates the homeowners pay when they rely on the grid, and the rate the homeowner is compensated for excess power.

[8]           See Modified Final Order, Application of Nevada Power Company d/b/a NV Energy for Approval of a Cost-of-Service Study and Net Metering Tariffs, Docket No. 15-07041 (Feb. 12 2016) (“NV Order”) at 52 (new rate class); 147 (service charges); 149-152 (changing net metering rates).

[9]           See Jaques Leslie, Nevada’s Solar Bait-and-Switch, New York Times, Feb. 1, 2016; Nat’l Public Radio, Nevada Solar Power Business Struggles To Keep The Lights On, Mar. 11, 2016, available at http://www.npr.org/2016/03/11/470097580/nevada-solar-power-business-struggles-to-keep-the-lights-on (last visited Sept. 14, 2016).

[10]         See 50 States of Solar Q1 2016 Q1 Update at 16; Nick Yee, Rooftop Solar Permits Plummet Following PUC Program Changes, Hawaii Public Radio, Aug. 16, 2016 (noting a 50% drop in Honolulu County residential solar permits in July 2016 as compared to July 2015).

[11]         See generally Air Peskoe, Unjust, Unreasonable, and Unduly Discriminatory: Electric Utility Rates and the Campaign Against Rooftop Solar, Texas Jrl. Of Oil, Gas and Energy Law (forthcoming 2016), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2735789 (last visited Sept. 14, 2016).  

[12]              Rebecca Harrington, The US Is About To Hit A Big Solar Energy Milestone, Tech Insider, Oct. 13, 2015, available at http://www.techinsider.io/solar-panels-one-million-houses-2015-10 (last visited Sept. 14, 2016).

[13]              Last December the United States entered into the United Nations Framework Convention on Climate Change (Paris Agreement), committing to reduce the GHG emissions from within our borders by 26-28% below 2005 levels by the year 2025. See Paris Agreement, available at http://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf (last visited Sept. 14, 2016). Rooftop solar has the potential to play a role in these reductions. See, e.g., Gagnon et al., supra n. 1, 26-27. In 2015, the U.S. generated 33% of its electricity from coal, and another 33% from natural gas, both of which generate significant GHG emissions. See U.S. Energy Information Agency, What Is U.S. Electricity Generation By Energy Source?, available at https://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3 (last visited Sept. 14, 2016); U.S. Energy Info. Agency, How Much Carbon Dioxide Is Produced When Different Fuels Are Burned?”, available at https://www.eia.gov/tools/faqs/faq.cfm?id=73&t=11 (last visited Sept. 14, 2016) (outlining GHG emissions by fuel).

[14]         See, e.g., 50 States of Solar Q1 2016 Update (showing that in the first quarter of 2016 alone, there were 35 actions in 22 states relating rooftop solar compensation); see also Natl Assn of Regulated Util. Comm’rs, Draft Manual On Distributed Energy Resources Compensation (2016) (“Draft NARUC Manual”) (outlining issues). This recent Draft Manual reflects the effort of Utility Commissions across the country to grapple with these questions. See also Jeffrey Tomich, Many Opinions, Little Consensus On Utility Net Metering,” E&E, July 27, 2016 (summarizing recent NARUC meeting on these issues).

[15]        See Draft NARUC Manual at 6-7. Commercial and industrial customers generally pay at different, higher rates. Id. at 34.

[16]              See Peskoe, supra n. 11, at 46 (summarizing utility cross-subsidy arguments against rooftop solar). In 2013, the Edison Electric Institute (“EEI”) published a report distilling the utility perspective on the competitive threat posed by rooftop solar. Peter Kind, Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business (EEI 2013) (“EEI Report”). In EEI’s view, “[a]ny recovery paradigms that force cost of service to be spread over fewer units of sales (i.e., kilowatt-hours or kWh) enhance the ongoing competitive threat” to traditional utilities. Id. at 3. As the Report further explains:

The financial implications of these threats are fairly evident. Start with the increased cost of supporting a network capable of managing and integrating distributed generation sources. Next, under most rate structures, add the decline in revenues attributed to revenues lost from sales foregone. These forces lead to increased revenues required from remaining customers (unless fixed costs are recovered through a service charge tariff structure) and sought through rate increases. The result of higher electricity prices and competitive threats will encourage a higher rate of DER additions, or will promote greater use of efficiency or demand-side solutions.

Id. at 6.

[17]         See 50 States of Solar Q 1 2016 Update at 32 and 39 (showing that this year alone more than half of the states have been considering fixed charge increases, including only for solar customers).

[18]         Id. at 41-43 (detailing six recent proposals). While solar customers generate the most energy in the afternoon, actual grid demand (and thus actual power costs) peak in the evening, and thus these approaches generally reduce the value of net metering. See, e.g., Why Home Solar Panels No Longer Pay In Some States, New York Times, Aug. 21, 2016 (discussing recent Time of Use charge in California).

[19]         See, e.g., NV Order at 52 (putting solar customers in a separate rate class).

[20]         See 50 States of Solar Q1 2016 Update at 11 (showing that there has been activity concerning net metering in more than half the states since the beginning of 52015). One net billing approach urged by utilities is to compensate excess residential solar power at the wholesale rates at which utilities purchase power from traditional power plants. Thus, EEI recommends that utilities revise “net metering programs in all states so that self-generated DER [Distributed Energy Resources] sales to utilities are treated as supply-side purchases at a market-derived price” (i.e., wholesale prices). See EEI Report at 18; see also Francisco Flores-Espino, Compensation for Distributed Solar: A Survey of Options to Preserve Stakeholder Value, Nat’l Renewable Energy Lab. (Sept. 2015) (discussing these various rate change alternatives).

[21]         See Peskoe at 50-52 (discussing Wisconsin rate decisions).

[22]         See NV Order at 52 (new rate class); 147 (service charges); 149-152 (changing net metering rates).

[23]         See 50 States of Solar Q1 2016 Update at 16.

[24]         See NC Clean Energy Technology Sector, The 50 States of Solar Q2 2016 Quarterly Update (“50 States of Solar Q2 2016 Update”) at 15 and 41.

[25]         Id. at 16 and 34. This is just a small sample of developments in states around the country. Another example is Connecticut, where the PUC allowed an increase in fixed charges (although the State legislature subsequently limited those charges to 10 dollars/month). See Peskoe at 55. Particularly pernicious in Connecticut was the utility’s argument that recouping revenue otherwise lost from distributed energy consumers would “‘remove any disincentive the utility may have to fully support” policies that seek to reduce end-use consumption.’” Id. at 54 (quoting Pre-filed Testimony of Charles R. Goodwin on behalf of Ct. Light and Power, at 6) (emphasis added).

Other states, like California, have kept net metering intact, or are exploring more cooperative approaches. See, e.g., Nichola Groom, California Narrowly Upholds Key Policy For Solar Growth, Reuters, Jan. 28, 2016. In April, 2016, a group of stakeholders in New York proposed a new approach designed to address utility revenue concerns while also continuing to encourage rooftop solar development. See In the Matter of the Value of Distributed Energy, Docket No. 15-E-0751, Comments of the Solar Progress Partnership On An Interim Successor To Net Energy Metering (Apr. 18, 2016); see also Peskoe at 80 (discussing New York efforts).

[26]         NV Order at 65.

[27]         Id. at 48.

[28]         Id. at 49 and 146-65.

[29]         See Nevada Revised Statutes s. 704.040(1); NV Order at 145. Many states impose this same general “just and reasonable” requirement. See Peskoe at 16.

[30]         Peskoe at 64 (quoting Minn. Stat. s. 216B.164, Subd. 10).

[31]         Peskoe at 61-6262 (citing studies).

[32]         See Draft NARUC Manual at 31

[33]         Id.

[34]         See R. Thomas Beach and Patrick G. McGuire, The Benefits and Costs of Solar Distributed Generation for Arizona Public Service (Feb. 25, 2016) at 6, 17-22.

[35]         The “social cost of carbon” is a well-recognized mechanism for valuing the relative costs associated with activities that generated GHG emissions. U.S. EPA, The Social Cost of Carbon, available at https://www3.epa.gov/climatechange/EPAactivities/economics/scc.html (estimating costs associated with carbon emissions) (last visited Sept. 14, 2016); see also Zero Zone, Inc. v. Dep’t. of Energy, No. 14‐2147, 2016 WL 4177217 (7th Cir. August 8, 2016) (upholding EPA’s reliance on social cost of carbon principles).

[36]         See SEIA, State Solar Cost-Benefit Analyses, available at http://www.seia.org/policy/ distributed-solar/solar-cost-benefit-studies (last visited Sept. 14, 2016) (linking to studies).

[37]         Andrew Satchwell, et al., Financial Impacts of Net-Metered PV on Utilities and Ratepayers: A Scoping Study of Two Prototypical U.S. Utilities (Lawrence Berkeley National Laboratory, Sep. 2014).

[38]         Id.

[39]         See Beach and McGuire, supra n. 34; see also, e.g., NRDC and SolarCity, Distributed Energy Resources In Nevada: Quantifying The Benefits Of Distributed Energy Resources (May 2016) (finding that rooftop solar provides net benefits of $7-14 million annually for all Nevada consumers), available at http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf (last visited Sept. 14, 2016).

[40]         Energy and Environmental Economics, Inc., Nevada Net Energy Metering Impacts Evaluation 2016 Update (Aug. 2016), available at http://pucweb1.state.nv.us/PDF/AxImages/DOCKETS_2015_THRU_PRESENT/2016-8/14264.pdf (last visited Sept. 14, 2016).

[41]         Id. at 10 (“Since distributed solar counts toward the state RPS requirement, if more NEM systems are installed then less utility-scale renewable generation will be installed to meet the standard [and] [t]herefore, there is no substantial net emissions reduction or additional health benefits attributable to NEM systems”); see also, e.g. Tim McDonnel, The Problem With Rooftop Solar That Nobody Is Talking About, Mother Jones, Jan./Feb. 2016 (discussing this concern).

[42]         See, e.g., U.S. Energy Inf. Agency, Today in Energy (Aug. 29, 2016) (explaining the District of Columbia recently increased its renewable portfolio standard (RPS) target from 20% by 2020 to 50% by 2032); Thomas Kimbis, New Solar Study In Nevada Sings Same Old I-Sung-It-Wrong Song, Huffington Post, Aug. 24, 2016 (criticizing new Nevada study).

[43]         U.S. Energy Inf. Agency, How Much Electricity Is Lost In Transmission and Distribution in the United States?, available at https://www.eia.gov/tools/faqs/faq.cfm?id=105&t=3 (last visited Sept. 14, 2016)

[44]         See, e.g., Louis Sahagun, This Mojave Desert Solar Plant Kills 6,000 Birds a Year. Here’s Why That Won’t Change Any Time Soon, L.A. Times, Sept. 2, 2016; Ted Nordhaus, California’s Energy Goals Collide with the Desert Tortoise, San Francisco Chronicle, Nov. 24, 2015 (noting California utility-scale solar plans’ adverse impacts on “fragile desert habitats”); Kiera Butler, Big Solar’s Death Panels, Could Solar-Energy Projects Destroy the very Ecosystems They’re Meant to Save From Climate Change?, Mother Jones, Mar./Apr. 2011 (discussing controversies with utility-scale Ivanpah project in California).

[45]       See Chris Mooney, The Government Just Decided the Future of California’s Desert, and Solar Companies Aren’t Happy, Washington Post, Sept. 14, 2016 (discussing opposing views on new plans to restrict utility- scale solar development on public lands); see also Rebecca Hernandez, et al., Solar Energy Development Impacts on Land Cover Change and Protected Areas, Proc. Nat’l Acad. Sci. USA (112:13579–13584) (Nov. 3, 2015).

[46]         In that 2014 Study, E3 had concluded it would be cost-prohibitive for the utilities to rely on utility-scale solar projects to satisfy RPS requirements. E3, Nevada Net Energy Metering Impacts Evaluation (E3 July 2014), available at http://puc.nv.gov/uploadedFiles/pucnvgov/ Content/About/Media_Outreach/Announcements/Announcements/E3%20PUCN%20NEM%20Report%202014.pdf (last visited Sept. 14, 2016). The Nevada PUC rejected these conclusions on the ground that utility-scale projects would not in fact be as expensive as E3 had assumed – but, as noted, also refused to consider external benefits of renewable projects in any event. It remains to be seen whether, or how, the Nevada PUC will take the August 2016 E3 Study into account.

[47]         Draft NARUC Manual at 6-7.

[48]         Id. at 34.

[49]         Peskoe at 19-20.

[50]         Id. at 25.

[51]         See also id. at n.135 (citing Ahmad Faruqui, The Ethics of Dynamic Pricing, 23 The Electricity Journal 13, 19 (Jul. 2010) (explaining how the flat rate cross-subsidy can “run into the billions of dollars”) (emphasis added)).

[52]         See E3 2016 Update, supra n. 40 at 23 (finding cross-subsidies by taking into account solar generators’ reduced reliance on the grid, including from generation used in the home).

[53]         See, e.g., http://windenergyfoundation.org/wind-at-work/wind-consumers/wind-power-your-home/ (discussing wind energy); DOE, Geothermal Basics, http://energy.gov/eere/ geothermal/geothermal-basics (discussing geothermal energy); DOE, Microhydropower Systems, http://energy.gov/energysaver/microhydropower-systems (discussing home-based hydro-electric systems) (all last visited Sept. 14, 2016).

[54]         See supra nn. 9 and 10; see also NPR, Nevada Solar Power Business Struggles To Keep The Lights On, Mar. 11, 2016, available at http://www.npr.org/2016/03/11/470097580/nevada-solar-power-business-struggles-to-keep-the-lights-on (last visited Sept. 15, 2016).

[55]         Nev. Order at 157 (emphasis added). As to Hawaii, it bears noting that the state is unique both because electricity rates are much higher than on the mainland (since the state imports all its traditional fuel) and excess power cannot be exported to other states. These factors arguably made it more difficult to sustain net metering once rooftop solar led to excess power generation. See Robert Fares, 3 Reasons Hawaii Put the Brakes on Solar–and Why the Same Won’t Happen in Your State, Scientific American, Dec. 15, 2015

[56]         There are certainly other utility-scale renewable energy resources, principally nuclear and hydro-electric power, as well as wind power. These also come with externality costs that should be appropriately considered in any comparison with rooftop solar.

[57]         Naim R. Darghouth, et al., Lawrence Berkeley Nat’l Lab., Net Metering and Market Feedback Loops: Exploring the Impact of Retail Rate Design on Distributed PV Deployment (Jul. 2015) at 21; see also id. at 4 (concluding “future adoption of distributed [solar] is highly sensitive to retail rate structures”).

[58]         E.g., Jason Furman, New Report: The All-of-the-Above Energy Strategy as a Path to Sustainable Economic Growth, White House Blog, May 29, 2014.

[59]         For further reports on these topics, see the Lawrence Livermore Laboratory’s “Future of Electric Utility Regulation” website at https://emp.lbl.gov/future-electricutility-regulation-series.

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