Georgia’s Solar Market: An Unfair Wealth Transfer Scheme

Published February 25, 2014

In Georgia and around the country, use of solar panels is on the rise. During his 2014 State of the Union address, President Barack Obama said, “Every four minutes, another American home or business goes solar.” Some credit net metering laws for solar’s robust growth, but that’s not the only factor.


The price of crystalline silicon panels, the primary building block of solar cells, has fallen 67 percent since 2010, according to Bloomberg, as solar has benefitted from mass production and increasing global competition. Solar is still far more expensive than conventional electricity sources, but solar panels have reached a price level where a few wealthier homeowners are starting to purchase them for their rooftops.


That’s the way renewable energy growth should happen: people purchasing it voluntarily with their own money. But that’s not what’s happening in Georgia. If someone purchases a rooftop solar panel in Georgia, their use of it can be heavily subsidized by other, less-wealthy ratepayers.


Georgia’s net metering law requires utilities to purchase any electricity solar power owners don’t use and sell it back to other ratepayers, as if those solar-homes were miniature power plants. Unlike conventional power plants, however, these largely wealthy homeowners don’t get paid the wholesale rate for electricity; they’re paid the retail rate, which in some states has been up to a 300 percent difference.


That’s because the retail rate for electricity reflects both the cost of the wholesale electricity and the cost of maintaining and improving the grid. Solar owners, compensated at the retail rate, don’t contribute to the grid costs. In addition, solar power produces an unreliable, intermittent electric current that can increase the grid’s improvement costs more than any other source.


Those costs end up being passed down to those who don’t own rooftop solar panels and have far less capacity to absorb added energy costs.


A California Public Utilities Commission study found customers who installed net metering systems since 1999 had an average median household income of $91,210, significantly higher than the state’s median income of $54,283 and the investor-owned utilities service territories’ median income of $67,821.


All of that makes net metering policies a transfer of wealth from low-income families to high-income families.


Although eight in 10 Georgia Power customers support the idea of renewable energy, seven in 10 oppose rate increases, according to a recent poll commissioned by the Sierra Club. Such results reaffirm the obvious solution: Net metering policy ought to be updated so power companies are allowed to pay rooftop solar owners the fairer wholesale rate for electricity instead of the retail rate.


Environmental groups oppose that fair reform, because they don’t want to see any incentive for additional solar power reduced. But buying solar panels is not a moneymaking scheme for most homeowners; certainly they’re happy to save money that way, but environmental consciousness is surely a big motivation for them. And less-wealthy customers should not have to pay for the wealthy to save money and feel good about their environmental footprint.


An updated net metering policy wouldn’t change any of that, so there’s little reason to believe a fairer pricing structure would prevent solar from shining on, and it would take the burden off lower-income customers.


Taylor Smith is a policy analyst for The Heartland Institute.