Devise a better net-metering agreement for residential solar

A question for my undergraduate environmental economics students:

Navigate to and read about the costs and benefits of installing PV, from a household's perspective and from Hawaiian Electric's. Play around with the interactive calculator. Dick Rosenblum, the CEO of Hawaiian Electric, often complains about net metering agreements because homeowners get retail prices instead of wholesale prices for the energy their panels generate. (Also see this article by energy economist Severin Borenstein.) 

As the UHERO blog post points out, a side effect from current net metering agreements is that households over-install solar. As a result, they often pay a zero marginal price for electricity, which discourages conservation. 

Devise a different model for net metering agreements that can address both Dick Rosenblum's complaints and restore incentives for households with solar to conserve energy.

Feel free to help my students out by suggesting answers in the comment section ;-)


  1. Interesting article, but a bit overwrought (you can chose the direction).
    1) In many parts of the world, solar energy production tends to occur during peak energy demand (i.e.; hot sunny days). For many PV producers (i.e.; residential installations) block pricing isn't available.
    a. So this energy is being bought at average residential rates, but is offsetting peaker power.
    b. Similar arguments are mentioned in the article about benefits of distributed generation (i.e.; smaller backbone and less transmission losses)
    2) Zucchinis and kwh have a slight differentiation: variation in intrinsic quality. Maybe kwh from PV installs are a bit dirtier, but just as likely they are cleaner (in terms of deviation from 60hz) – with PV inverters being all pretty new, versus who knows the age of the power companies technology.
    3) Perhaps the biggest oversight is that there is no recognition of the most important reasons for these subsidies: environmental externalities. Carbon being the biggest, but far from the only one.
    a. Of course one could argue that this is a nth (n<1) best approach, that a carbon tax (or cap/trade) would be a superior way of reflecting the full costs of any given electrical generating system.
    4) For grid engineers, PV is a new headache. Maintaining system wide voltage when passing clouds introduce unpredictable temporal & geographic variations (due to dispersed PV panels).

  2. Thanks Dan!

    Very cool that you did your own solar installation.

    Can you post your comments on UHERO's blog too?

    I hope to write a little about some of your points, with some Hawai'i-specific details very soon.

  3. Hi

    this is really very helpful article. I go through this site really very nice information.thank for sharing such a nice information.

  4. Your article is very nice and informative. I have written about net metering in my blog also. However, i would like to know, How much amount of power (minimum and max. limit) should i generate in order to have this facility in our home. As I am from India. I am getting confused with $ rate. Is there any minimum limit (eg. 1 kW solar power)
    Thanks for sharing such a valuable information.



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