On the Path to SunShot: Utility Regulatory and Business Model Reforms for Addressing the Financial Impacts of Distributed Solar on Utilities

Robert Margolis, Joyce McLaren, Benjamin Sigrin, John Miller, Karlynn Cory, Galen Barbose, Andrew Mills, Naim Darghouth, Joachim Seel, Andrew Satchwell, Emerson Reiter

Research output: NRELTechnical Report


Net-energy metering (NEM) has helped drive the rapid growth of distributed PV (DPV) but has raised concerns about electricity cost shifts, utility financial losses, and inefficient resource allocation. These concerns have motivated real and proposed reforms to utility regulatory and business models. This report explores the challenges and opportunities associated with such reforms in the context of the U.S. Department of Energy's SunShot Initiative. Most of the reforms to date address NEM concerns by reducing the benefits provided to DPV customers and thus constraining DPV deployment. Eliminating NEM nationwide, by compensating exports of PV electricity at wholesale rather than retail rates, could cut cumulative DPV deployment by 20% in 2050 compared with a continuation of current policies. This would slow the PV cost reductions that arise from larger scale and market certainty. It could also thwart achievement of the SunShot deployment goals even if the initiative's cost targets are achieved. This undesirable prospect is stimulating the development of alternative reform strategies that address concerns about distributed PV compensation without inordinately harming PV economics and growth. These alternatives fall into the categories of facilitating higher-value DPV deployment, broadening customer access to solar, and aligning utility profits and earnings with DPV. Specific strategies include utility ownership and financing of DPV, community solar, distribution network operators, services-driven utilities, performance-based incentives, enhanced utility system planning, pricing structures that incentivize high-value DPV configurations, and decoupling and other ratemaking reforms that reduce regulatory lag. These approaches represent near- and long-term solutions for preserving the legacy of the SunShot Initiative.
Original languageAmerican English
Number of pages96
StatePublished - 2016

Bibliographical note


NREL Publication Number

  • NREL/TP-6A20-65670


  • business model
  • community solar
  • decoupling
  • distributed
  • distribution network operators
  • DPV
  • NEM
  • net metering
  • net-energy metering
  • performance-based incentives
  • photovoltaic
  • PV
  • rate design
  • reform
  • regulation
  • regulatory
  • services-driven utilities
  • solar
  • SunShot
  • system planning
  • utilities
  • utility


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