Putting the Potential Rate Impacts of Distributed Solar into Context

The rapid growth of distributed solar in a number of states has raised questions about its potential effects on retail electricity prices, prompting concerns by some utilities and stakeholders about cost-shifting between solar and non-solar customers. These concerns have, in turn, led to a proliferation of proposals to reform retail rate structures and net metering rules for distributed solar customers, often extending to states that have yet to witness significant solar growth. These proposals have typically been met with a great deal of contention and often absorb substantial time and administrative resources, potentially at the expense of other issues that may ultimately have greater impact on utility ratepayers. Given these inevitable tradeoffs, state regulators might ask: How large could the effect of distributed solar on retail electricity prices conceivably be? And how does that compare to the many other factors that also influence electricity prices—and over which state regulators and utilities might also have some control?