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Net Metering and Its Potential Impact on Low-Income Consumers

solar panelsPaul Krugman, in a recent New York Times Op-Ed titled The Big Green Test Conservatives and Climate Change, argued that “emissions taxes are the Economics 101 solution to pollution problems” and saluted former Republican Treasury secretary Henry Paulson for eschewing “climate denial” in his own party by agreeing that a broad tax on carbon emissions is both wise and necessary.

Despite the overall strength of Krugman’s position, he was misguided in stating that one of the “second-best things” to carbon taxes is “net metering,” which “mandates requiring that utilities buy back the electricity generated by homeowners’ solar panels.” The brilliant MIT professor and Nobel Prize-winning economist seems to have missed the disparate and troublesome impact of net metering. Indeed, while boosting sales of green technologies, net metering often does so on the backs of our nation’s poor, especially Black people.

Consumers, particularly African-Americans, are increasingly interested in safe, reliable, energy-efficient, self-sufficient and affordable options. This is because we value clean technologies, but it is also because average low-income consumers, among whom Black people are overrepresented, spend approximately 37 percent of their income on household energy bills. The late R&B singer Teddy Pendergrass may not have told us to “turn off the lights” to conserve energy, but his words strike a chord for those of us who know that doing so can help the environment and ease our financial struggles.

There’s growing interest among the general population in using rooftop solar panels and other small-scale power sources (Distributed Generation or DG), although most Black people can’t afford them, to lower bills and promote green technologies. Mechanisms such as net metering, solar and other renewable energy credits are all being deployed to promote and support DG.

Net metering, one of the most popular and controversial instruments, is a payment arrangement that was forged to jumpstart the purchase of rooftop solar panels. This plan lets those with solar panels pay small amounts or nothing at all to maintain the “grid” (a wired network of equipment and power stations) to ensure that they always have access to power. These overhead costs, under net metering, are “shifted” to non-solar customers. Indeed, as James A. Hughes, CEO of First Solar Inc., has argued, “customers who benefit from net energy metering as it is currently implemented are able to use the transmission and distribution grid as a giant virtual battery, “storing” the excess energy they generate during the day until they need it when they aren’t generating. However, the net-metered customer does not share equally in the overhead costs associated with the grid or other services provided by the utility, producing a very substantial “cross-subsidy” funded by all other utility customers who must pay proportionately more in rates.”

This is the problem. A disproportionate number of “all other utility customers” who are paying higher rates are struggling men and women, particularly Black people. Why should someone like my late grandmother, who labored as a widowed, Black, domestic worker, well into her 80s, help underwrite the grid use of a largely white, male, resourced demographic? While many Black people, and the working-poor of all backgrounds, are choosing between turning on the lights and eating, they shouldn’t help foot the energy bills of the well-to-do. What about those who don’t have the right size roof or live in an apartment building? In fact, net metering does more to line the pockets of Wall Street and Silicon Valley than it does to fight climate change. States such as California and South Carolina are realizing this and are taking steps to correct this one-time incentive that has morphed into a revenue generator under the guise of going green.

Many Black people champion clean energy and salute those who can and do invest in solar. Most simply believe that everyone should share the costs of accessing and maintaining the grid. So while Krugman makes a compelling argument for emission taxes, his back-up, net metering, as well-intentioned as it may have been, is inequitable and unfair. Black people, the poor, and other vulnerable communities must learn more about this issue and help lead the way in exploring equitable ways to increase the use of renewables for everyone. This is a social justice issue and we must be prepared to turn out the lights on all forms of inequality, including net metering.

Matthew C. Whitaker is ASU Foundation professor of history and founding director of the Center for the Study of Race and Democracy, in the School of Letters and Sciences, at Arizona State University. He is also the owner and CEO of The Whitaker Group, L.L.C., an equity and inclusion, cultural competency, and human relations consulting firm. He can be followed on Twitter at @Dr_Whitaker


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7 thoughts on “Net Metering and Its Potential Impact on Low-Income Consumers

  1. Karl Rabago says:

    There is no data to show a "substantial cross subsidy." In fact, exactly the opposite is likely – solar customers subsidize everyone else. In God we trust, but everyone else should bring data.

  2. Don Osborn says:

    Matt, you seem to have been taken in by the private utility corporate propaganda. You also, like many others, forget that the cost (and value) of electricity varies through out the day with it being, typically, most costly to supply during afternoon peak periods. The large majority of studies done on the value of distributed (rooftop) solar to the utility grid and the rest of the utility customers show that net metering does NOT shift costs to non-solar customers and often is a NET benefit to the rest of the customers. Don't swallow the utility big lie. Net metering and targeted programs like California's MASH are helping to bring solar to mid and low income folks. Do not think that the bug utilities have YOUR interests at heart.

  3. Jim Jenal says:

    This is more of an argument for diversifying the means by which low-income households can take advantage of solar than it is a justification for doing away with net metering. Options like PACE financing (where the cost of solar is paid for by an assessment on your property tax) or "Community Solar" (where a solar facility is built and individuals purchase shares of the system's output – thereby allowing everyone, including renters and people with solar-challenged homes, to participate) could make solar more "equitable" without dismantling the accounting method that best allocates the costs and benefits of distributed generation – net metering.

  4. Even the California utilities commission has said their is a cross-subsidy going on – $1.2 billion a year through the year 2020. I believe the report is called – "California Net Energy Metering (NEM): Draft Cost-Effectiveness Evaluation."

  5. Tom Campbell says:

    Race card aside, I just don't understand the net metering debate. Perhaps it is because here in Pennsylvania, the electric bill is broken into transmission and power components, in addition to a flat connection infrastructure fee.

    If I produce more power than I use and feed the grid, I am only reimbursed the energy portion, not the transmission portion – just like a gas-turbine plant would. How can one consider that a subsidized system? And I pay the flat fee for infrastructure regardless of whether I use or produce power, or simply do nothing at all.

    By producing power locally, I'm further reducing the need for expensive long-distance power transmission from far-away generators during peak summer heat loads. Producing power locally, effectively providing the power for my next door neighbor's ceiling fan, actually reduces the load on the infrastructure overall, which in turn reduces the amount utilities must spend on power generating equipment, high tension lines and substations. And this savings can be passed on to EVERYONE through lower rates.

  6. Kevin Rudiger says:

    It is helpful that you identify Dr. Whitaker as the Director of the Center for the Study of Race and Democracy. What is disappointing, in the context of this issue, is that you don't disclose that CSRD is funded in part by Arizona Public Service, one of the largest opponents of net-metering. It is hard to believe this is just a coincidence.

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