7 ms·

Is net metering a subsidy?

sokoloff 3y ago
Absolutely. If a customer is permitted to buy as much electricity as they want at a fixed price while also being able to sell as much as they can at a different time at a fixed price, it seems like there's an obvious subsidy happening anytime they sell electricity at other than when the wholesale price is the highest or buy other than when the wholesale price is lowest. (In areas with an excess of solar generation capacity, these distortions become quite large.) (I'm still all for these subsidies on the balance of factors; we just shouldn't pretend that they're not subsidies.)
- PaulDavisThe1st 3y ago
  But until the relevant grid is saturated with solar generation, surely the surplus just needs to be moved around. And if the grid itself is saturated, that means it isn't big enough.
wongarsu 3y ago
If few people use net metering it's kind of fair. Your solar installation generates electricity, any excess gets delivered to your neighbors. The electricity is providing the infrastructure for that without making any money on that specific transaction (it gets deducted from your meter and added to your neighbors' meter), but that's easy enough to account for in base fees. The issues start if too many people do net metering. Imagine everyone has a solar roof and reaches net-zero electricity. You can still maintain the infrastructure with base fees, but the electricity company still has to run power plants in the morning and evening when demand outstrips solar supply, and for baseload in the night. And during the day there's now an oversupply of electricity that they somehow have to sell. In commercial electricity generation many countries have a kind of spot market for electricity, where prices are determined by demand (down to the minute) and available supply. Prices can go close to zero if lots of solar and wind capacity is available, or far above the price charged to consumer for capacity to cover the evening peak. If we changed consumer prices to more accurately reflected this "true" market price (plus markup for the grid operator), with prices changing by the minute, net metering would be pretty fair. But so far there's little desire to dump all that complexity on regular consumers.
- Jochim 3y ago
  > Prices can go close to zero if lots of solar and wind capacity is available Negative prices aren't uncommon during quiet periods in the summer.
- secabeen 3y ago
  > You can still maintain the infrastructure with base fees In theory yes, but the grid has not used properly scoped base fees to pay for infrastructure. Delivery costs of power are more than half the total cost; to get to a base+generation model, you'd probably see monthly connection fees for Electricity in the $100+ range for many Americans.
  - jrockway 3y ago
    I don't think there's any obligation for people's financial trickery to be sustainable. Like, a new power pole costs (say) $1000 regardless of how many watts are going through the wires attached to it. Someone has to pay the person that cut down the tree and hauled it to its final location money. That they loan you money on the infrastructure and you repay through using electricity isn't the actual cost model, it's just a pricing model people are OK with. When it stops working, the model will have to change. I always laughed about the pricing structure of the business ISP that I worked at. We charged $1000 to install your service, then $1000 per month (without a contract). This was a financial game; we would lose money if you cancelled after your first month. I always thought the pricing should be $15,000 to install, and then $5 per month. That's closer to what the actual costs are. But instead of you going to the bank to get a loan to pay the $15,000, we hid that for you. It made more people sign up, and we had a better source of funding than bank loans. But, at the end of the day, we would have been out of business if a bunch of people signed up and didn't pay. If that happened, I imagine the pricing would have changed to reflect actual costs.
    - gnicholas 3y ago
      Comcast quoted rates in this range for installations in areas near Palo Alto. IIRC my friend was quoted $20k for the installation. She might have gone for it if they'd charged $5/mo after that, but of course Comcast wouldn't be so kind. Last I heard, she was still on AT&T copper. Hopefully Starlink will be able to help people like this, who are just outside the reach of existing wired internet.

Absolutely. If a customer is permitted to buy as much electricity as they want at a fixed price while also being able to sell as much as they can at a different time at a fixed price, it seems like there's an obvious subsidy happening anytime they sell electricity at other than when the wholesale price is the highest or buy other than when the wholesale price is lowest. (In areas with an excess of solar generation capacity, these distortions become quite large.) (I'm still all for these subsidies on the balance of factors; we just shouldn't pretend that they're not subsidies.)

PaulDavisThe1st 3y ago
But until the relevant grid is saturated with solar generation, surely the surplus just needs to be moved around. And if the grid itself is saturated, that means it isn't big enough.

wongarsu 3y ago

If few people use net metering it's kind of fair. Your solar installation generates electricity, any excess gets delivered to your neighbors. The electricity is providing the infrastructure for that without making any money on that specific transaction (it gets deducted from your meter and added to your neighbors' meter), but that's easy enough to account for in base fees. The issues start if too many people do net metering. Imagine everyone has a solar roof and reaches net-zero electricity. You can still maintain the infrastructure with base fees, but the electricity company still has to run power plants in the morning and evening when demand outstrips solar supply, and for baseload in the night. And during the day there's now an oversupply of electricity that they somehow have to sell. In commercial electricity generation many countries have a kind of spot market for electricity, where prices are determined by demand (down to the minute) and available supply. Prices can go close to zero if lots of solar and wind capacity is available, or far above the price charged to consumer for capacity to cover the evening peak. If we changed consumer prices to more accurately reflected this "true" market price (plus markup for the grid operator), with prices changing by the minute, net metering would be pretty fair. But so far there's little desire to dump all that complexity on regular consumers.

Jochim 3y ago
> Prices can go close to zero if lots of solar and wind capacity is available Negative prices aren't uncommon during quiet periods in the summer.
secabeen 3y ago
> You can still maintain the infrastructure with base fees In theory yes, but the grid has not used properly scoped base fees to pay for infrastructure. Delivery costs of power are more than half the total cost; to get to a base+generation model, you'd probably see monthly connection fees for Electricity in the $100+ range for many Americans.
- jrockway 3y ago
  I don't think there's any obligation for people's financial trickery to be sustainable. Like, a new power pole costs (say) $1000 regardless of how many watts are going through the wires attached to it. Someone has to pay the person that cut down the tree and hauled it to its final location money. That they loan you money on the infrastructure and you repay through using electricity isn't the actual cost model, it's just a pricing model people are OK with. When it stops working, the model will have to change. I always laughed about the pricing structure of the business ISP that I worked at. We charged $1000 to install your service, then $1000 per month (without a contract). This was a financial game; we would lose money if you cancelled after your first month. I always thought the pricing should be $15,000 to install, and then $5 per month. That's closer to what the actual costs are. But instead of you going to the bank to get a loan to pay the $15,000, we hid that for you. It made more people sign up, and we had a better source of funding than bank loans. But, at the end of the day, we would have been out of business if a bunch of people signed up and didn't pay. If that happened, I imagine the pricing would have changed to reflect actual costs.
  - gnicholas 3y ago
    Comcast quoted rates in this range for installations in areas near Palo Alto. IIRC my friend was quoted $20k for the installation. She might have gone for it if they'd charged $5/mo after that, but of course Comcast wouldn't be so kind. Last I heard, she was still on AT&T copper. Hopefully Starlink will be able to help people like this, who are just outside the reach of existing wired internet.