Setting a price for solar net-metering in California

Net-metering programs are an effective policy tool for promoting investment in solar photovoltaics, yet little attention has been paid to the rate at which excess energy generation is credited until recently. Like most States, California customers who participate in net-metering receive a credit for excess generation at the current retail rate for electricity. This buy-back rate does not take into account the value of solar energy to the utility or the costs to the customer of purchasing and installing a photovoltaics system. An alternative pricing policy is needed to better reflect the value of solar energy in a net-metering program while encouraging continued growth of solar investments. I analyze three case studies (Germany, Denmark, and Austin, TX) and evaluate their methods of pricing solar energy in buy-back programs. I recommend that California implement a pricing policy similar to that of Austin’s new Value of Solar tariff, which provides a more accurate valuation and compensation rate excess solar energy generation.