Impacts of Solar Power on Electricity Rates and Bills

Title: Impacts of Solar Power on Electricity Rates and Bills
Format: Other Publication

The goal of this analysis is to understand the impact that solar mandates may have on electricity rates and bills of customers of distribution utilities operating in competitive markets. We examine these impacts with and without an uptick in “naturally occurring” energy-efficiency improvements. Our modeling suggests that customer classes that install solar systems fare better than customer classes that do not, because of the way that distribution costs are allocated. For example, in the scenario with high solar penetration by commercial and industrial (C&I) customers, the residential portion of distribution costs increases and experiences a tick up when the system peak shifts to later in the afternoon. In addition, customers that install solar are able to reduce bills substantially and transfer costs to non-program participants. Solar renewable energy credit costs, ancillary services, transmission costs, and social benefits charges are allocated across all sold electricity. Solar-participants avoid these charges and non-participants see increases in prices and bills as a result. Rates, consumption, and bills are also influenced by increased energy efficiency. When consumption decreases with distributed solar and energy efficiency, the utility’s fixed costs must be distributed over a smaller volume of sales, reducing the bill savings enabled by improved energy efficiency. Together, these findings suggest the need for increased attention and analysis to understand the potential impact of alternative rate structures and the apportionment of fixed and volumetric costs.

Ivan Allen College Contributors:
External Contributors: Erik Johnson, Chris Blackburn
  • Energy Efficiency
Related Links:
Related Departments:
  • Climate and Energy Policy Laboratory
  • School of Public Policy