Event Debrief: Reimagining Net Metering for More Equitable Solar Adoption

Key Takeaways

• Net metering, a program that allows owners of solar photovoltaic (PV) systems to sell excess clean electricity to the grid, has come under fire in recent years for failing to drive investment in solar power for low-income communities.
• To address this issue, Harvard Professor Dustin Tingley and Princeton co-author Alexander Gazmararian propose a program that would allow solar PV owners to donate a portion of their net-metering proceeds to build solar PV projects in underserved communities.
• A polycentric, bottoms-up approach could help complement existing top-down policies and incentives to drive greater deployment of solar PV in the United States and help meet national climate goals.

Net metering, a policy that offers owners of solar photovoltaic (PV) systems to sell excess power to the grid, has been a major driver of increased solar energy production in the United States over the last few decades. Coupled with generous tax credits, net metering has helped to double the share of households who have installed solar panels from 4% in 2016 to 8% in 2021, according to a 2022 Pew Research Center survey, with an additional 39% of homeowners saying they’ve seriously considered it. However, studies have shown that households installing solar panels are disproportionately wealthy and white. To address the inequity in solar PV adoption, Professor Dustin Tingley of the Government Department at Harvard University and his co-author Alexander Gazmararian from Princeton University published a paper in October outlining a polycentric governance model (i.e., many centers of decision-making as opposed to one) to re-think net metering practices.

Speaking to an audience at Harvard Kennedy School on November 6, Tingley outlined this new approach. Rather than pocketing the proceeds from selling excess power back to the grid, solar PV owners under the polycentric model would be given the choice to donate some of the money to build renewable energy projects for underserved communities. Relying on individual choice and altruism, this approach could help to accelerate clean energy development by creating a virtuous cycle of re-investing the profits from solar into further solar development, providing resources while fostering collaboration between communities and power companies. “We could try to design programs that recognize that people are actually altruistic, while not discounting the fact that people are also price-responsive and have substantial self-interest,” said Tingley.

About 1,431,601 megawatt hours (MWh) were sold back to the U.S. grid in 2021, according to data from the Energy Information Administration. Using average prevailing residential tariff rates, Tingley and Gazmararian estimated that this could be worth up to $223.2 million. If even a portion of these proceeds were donated, it could help drive deployment of community solar projects—and Tingley and Gazmararian’s research suggests that many homeowners would be willing to donate. In a nationally representative random survey of over 1,000 adults, respondents expressed they would be willing to donate on average between 22% and 37% of monthly net-metering income to such a program. Had the program been available in 2021, an estimated $49 million to $82.5 million could have been donated to building community solar in net-metering states.

The authors identified three potential barriers to adopting such a program: 1) loss aversion, or concern about having to pay for electricity bills if they donate too much; 2) “sludge,” or administrative complexity that prevents people from signing up; and 3) cost. To overcome these barriers, Tingley and Gazmararian considered several incentives within the design of the program that draw from behavioral science to encourage participation. For example, the authors suggest that to address loss aversion, donations should only be allowed if a sufficient “bank” of credits has been accumulated to protect against a donor’s losses. To avoid “sludge,” they suggest easy-to-use computer interfaces to enroll and manage accounts and simple default options with the ability to make easy adjustments to donation amount or timing according to a participant’s preferences. Tax incentives and matching donations can be used to decrease the cost of the program to the user and increase the impact of donations, similar to what is done by organizations like NPR. All of these factors were tested in a conjoint survey (in which people were presented with program options and asked to select which option they preferred) and scored favorably as something that is more likely to make respondents want to participate.

Willingness to participate is the main determinant of success for a polycentric, bottoms-up policy approach such as the one proposed by Tingley and Gazmararian. Through surveys, the authors found that the majority of Americans (60%) would be willing to participate in such a program, and that the polycentric design was itself attractive to participants. Involving multiple decision-makers, polycentricity increases the perceived effectiveness of the program more so than when the government or utility acts alone. They also found that it would improve the generally unfavorable public view of utilities, which may encourage utility companies to participate in such a program.

While the authors acknowledge the need for top-down approaches to policy and incentives that drive the energy transition, they offer a complementary “ground-up model that offers a path to more durable solutions that address energy insecurity and the climate crisis.” This new approach to net-metering programs could help empower individuals and organizations to contribute to the greater provision of clean energy to communities that have historically faced energy poverty, helping to accelerate a just energy transition.

“People ask, do you think this is the thing that’s gonna solve the climate crisis? And I’m like, what are you talking about? No!” said Tingley. “But can we reimagine things a little bit? This is on the tinkering side of things. But in a way that could, in principle, scale.”

Watch the recording of Tingley's talk below.