Tariffs Can Be Structured to Encourage Photovoltaic Energy

The solar power market is growing at a quickening pace, fueled by an array of national and local initiatives and policies aimed at improving the value proposition of customer-sited photovoltaic (PV) systems. Though these policies take many forms, they commonly include up-front capital cost rebates or ongoing production incentives, supplemented by net metering requirements to ensure that customer-sited PV systems offset the full retail rate of the customer-hosts. Somewhat less recognized is the role of retail rate design, beyond net metering, on the customer-economics of grid-connected PV. Over the life of a PV system, utility bill savings represent a substantial portion of the overall economic value received by the customer. At the same time, the design of retail electricity rates, particularly for commercial and industrial customers, can vary quite substantially. Understanding how specific differences in rate design affect the value of customer-sited PV is therefore essential to supporting the continued growth of this market.