The impact of rate design and net metering on the bill savings from distributed PV for residential customers in California

Net metering has become a widespread mechanism in the U.S. for supporting customer adoption of distributed photovoltaics (PV), but has faced challenges as PV installations grow to a larger share of generation in a number of states. This paper examines the value of the bill savings that customers receive under net metering, and the associated role of retail rate design, based on a sample of approximately two hundred residential customers of California's two largest electric utilities. We find that the bill savings per kWh of PV electricity generated varies by more than a factor of four across the customers in the sample, which is largely attributable to the inclining block structure of the utilities' residential retail rates. We also compare the bill savings under net metering to that received under three potential alternative compensation mechanisms, based on California's Market Price Referent (MPR). We find that net metering provides significantly greater bill savings than a full MPR-based feed-in tariff, but only modestly greater savings than alternative mechanisms under which hourly or monthly net excess generation is compensated at the MPR rate. ► We examine the value of bill savings under net metering to PV owners in California. ► Bill savings per kWh of PV generation varies by a factor of four with net metering. The variation is attributable to rate design, the unique inclining block structure. ► The median value of bill savings is reduced by 40–67% with MPR feed-in tariff. ► The median value of bill savings is reduced by 6–12% with hourly netting.