Rooftop Solar Deployment, Potential Electricity Rate Impacts, and the Timing of Revisions to State Net Metering Policy

Most U.S. states require utilities to credit residential solar photovoltaic (PV) output at the retail electricity rate, a structure known as net metering. However, 12 states have replaced net metering with alternative rate structures that reduce PV adopter bill savings. The share of households living in states that require net metering fell from around 84% in 2014 to around 57% by the end of 2023. Proponents of net metering revisions have argued that net metering can affect the electricity rates of customers without PV. This report analyzes the relationships between state PV deployment levels, potential electricity rate impacts on PV nonadopters, and the timing of revisions to net metering policy. Prior research and our own estimates suggest the risk of rate impacts on PV nonadopters correlates with increasing residential PV deployment. We estimate, in all 30 states with a PV deployment rate below 3% of households, net metering is unlikely to be associated with an increase in rates of more than $1 per month per customer without PV. Among states with a PV deployment rate between 3% and 7% of households, we estimate that potential rate impacts are less than $1/month/customer in two-thirds of the states and $2-$6/month/customer in one-third of the states. Only two states - California and Hawaii - retained net metering above 7% PV deployment. In these states, we estimate potential rate impacts reached around $7/month/customer (Hawaii) to $19/month/customer (California), partly because of relatively high electricity rates and unique rate structure issues in these states. These estimates exclude the social and environmental impacts of rooftop PV, which do not directly affect electricity rates but could affect the perceived value of rooftop PV and of rate structures that enable its deployment. Our analysis suggests the timing of net metering revisions has not consistently correlated with residential PV deployment levels or potential rate impacts. Of the 12 states that revised net metering, 9 did so when residential deployment was 3% or less and the potential rate impacts of net metering were likely less than $1/month/customer. Many states have retained net metering at substantially higher PV deployment levels with increased risk of potential rate impacts. At deployment above 10% and rate impacts around $5-$20/month/customer, the sample size is small - only California and Hawaii have reached these levels with net metering policies in place, and both subsequently revised their policies. These findings do not suggest a clear, consistent link between the potential rate impacts of net metering and revisions to state net metering policy. The timing and nature of net metering revisions are ultimately policy decisions based on balancing state-level priorities and considerations and the potential costs and benefits of different rate structures.