Consumers and utility companies have worried for years that solar panels drive up electricity costs for the people who don’t have panels. But Michigan Technological University renewable energy researchers show the opposite is actually true – grid-tied solar photovoltaic (PV) owners are actually subsidizing their non-PV neighbors.

Beyond the environmental benefits and lower electric bills, it turns out installing solar panels on your house actually benefits your whole community. Value estimations for grid-tied photovoltaic systems prove solar panels are beneficial for utility companies and consumers alike.

Joshua Pearce, Richard Witte Endowed Professor of Materials Science and Engineering and professor of electrical and computer engineering at Michigan Technological University, has shown the opposite is true – grid-tied solar photovoltaic (PV) owners are actually subsidizing their non-PV neighbors.

Most PV systems are grid-tied and convert sunlight directly into electricity that is either used on-site or fed back into the grid. At night or on cloudy days, PV-owning customers use grid-sourced electricity so no batteries are needed.

Pearce said, noting that when someone puts up grid-tied solar panels, they are essentially investing in the grid itself, “Anyone who puts up solar is being a great citizen for their neighbors and for their local utility. Customers with solar distributed generation are making it so utility companies don’t have to make as many infrastructure investments, while at the same time solar shaves down peak demands when electricity is the most expensive.”

Pearce and Koami Soulemane Hayibo, graduate student in the Michigan Tech Open Sustainability Technology (MOST) Lab, found that grid-tied PV-owning utility customers are undercompensated in most of the U.S., as the “value of solar” eclipses both the net metering and two-tiered rates that utilities pay for solar electricity. Their results are published online now at Renewable and Sustainable Energy Reviews.

The value of solar is becoming the preferred method for evaluating the economics of grid-tied PV systems. Yet value of solar calculations are challenging and there is widespread disagreement in the literature on the methods and data needed. To overcome these limitations, Pearce and Hayibo’s paper reviews past studies to develop a generalized model that considers realistic costs and liabilities utility companies can avoid when individual people install grid-tied solar panels. Each component of the value has a sensitivity analysis run on the core variables and these sensitivities are applied for the total value of solar.

The overall value of solar equation has numerous components:

  • Avoided operation and maintenance costs (fixed and variable)
  • Avoided fuel.
  • Avoided generations capacity.
  • Avoided reserve capacity (plants on standby that turn on if you have, for example, a large air conditioning load on hot day).
  • Avoided transmission capacity (lines).
  • Environmental and health liability costs associated with forms of electric generation that are polluting.

Pearce said one of the paper’s goals was to provide the equations to determine the value of solar so individual utility companies can plug in their proprietary data to quickly make a complete valuation.

Pearce explained, “It can be concluded that substantial future regulatory reform is needed to ensure that grid-tied solar PV owners are not unjustly subsidizing U.S. electric utilities. This study provides greater clarity to decision makers so they see solar PV is truly an economic benefit in the best interest of all utility customers.”

Solar PV technology is now a profitable method to decarbonize the grid, but if catastrophic climate change is to be avoided, emissions from transportation and heating must also decarbonize, Pearce argued.

One approach to renewable heating is leveraging improvements in PV with heat pumps (HPs), and it turns out investing in PV+HP tech has a better rate of return than CDs or savings accounts.

To determine the potential for PV+HP systems in Michigan’s Upper Peninsula, Pearce performed numerical simulations and economic analysis using the same loads and climate, but with local electricity and natural gas rates for Sault Ste. Marie, in both Canada and U.S. North American residents can profitably install residential PV+HP systems, earning up to 1.9% return in the U.S. and 2.7% in Canada, to provide for all of their electric and heating needs.

“Our results suggest northern homeowners have a clear and simple method to reduce their greenhouse gas emissions by making an investment that offers a higher internal rate of return than savings accounts, CDs and global investment certificates in both the U.S. and Canada,” Pearce said. “Residential PV and solar-powered heat pumps can be considered 25-year investments in financial security and environmental sustainability.”

This is a worthwhile study and it does bring up some points we all should be considering. Most folks will realize there are some holes in the arguments and grid engineers might be groaning at the complexity needed to accommodate hundreds or thousands of microgenerators connected to the grid. It could turn out like a Texas grid in a freezing rain event, or even worse with hundreds or thousands of generators coming on line unannounced. Worthwhile as it is, it isn’t anywhere near considered far enough.

Holes in arguments, complexity and grid events leave out an obvious contrast for the consumer looking at primarily heating as a use for power. A large photovoltaic system with or without batteries vs. a variety of stored heat systems is almost an unfair comparison.


2 Comments so far

  1. Matt Musson on March 17, 2021 6:51 AM

    I work in the Utility Industry. In Florida, we buy Power from customers with roof mounted solar panels. On average, they buy 3 times as much power as they sell to us. So, on average, Customers with solar panels only produce a quarter of what they actually consume.

    The recent bankruptcy of PG&E in California brought to light the secret contracts signed with Bill Gates and Warren Buffett who have huge solar farms there.

    PG&E was paying 7 times more for the Solar Power per KWH than the going wholesale price of electricity. I suspect whoever was doing this study was not allowed to see the actual price that utilities are paying and just made a low guess.

  2. Brian Westenhaus on March 17, 2021 9:08 AM

    Thanks Matt. Ratepayers and taxpayers are getting cleaned. Lots of the green effort is about moving wealth from the masses to the elites. Your knowledge makes one wonder if the home size solar gets the same payment rate as a full farm. BW

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