Solar Panels Make “Great Citizens”

February 11, 2021

“Value of Solar” is a critical buzzword in energy circles.
It means, what is the net value of solar energy, say on my rooftop, to the larger grid?

Do non-solar grid customers end up subsidizing the solar folks? Or is the “Value of Solar” – in terms of avoided costs to the utility, high enough to create value for the larger community?

New study by my friend Josh Pearce at Michigan Tech says, yes, that value is high.
Above see Josh’s take on subsidies to Renewables, vs Subsidies to fossil fuels, from my interview a year ago.


One of the most common arguments against supporting PV and other renewables through public incentives is that those power consumers that do not install a clean energy power generator are the most affected, as they have to bear the cost of the incentives without enjoying the benefits and financial advantages that the renewable energy systems can ensure. This argument has been used in the past, and often with success, by government, power utilities, and regulators to slow down or stop the advance of PV, especially among homeowners and small and medium-sized businesses.

A research group from Michigan Technological University has now sought to shed light on the true value of solar power generated by net-metered PV systems in the United States, and has found that non-PV consumers enjoy more benefits than commonly thought.

In the study A review of the value of solar methodology with a case study of the U.S. VOS, published in Renewable and Sustainable Energy Reviews, the scientists explained that their value estimations for grid-tied photovoltaic systems have proven that solar panels are beneficial not only for electric utilities but also for electricity consumers. “Anyone who puts up solar is being a great citizen for their neighbors and for their local utility,” research co-author Joshua Pearce said. “Customers with solar distributed generation are making it so utility companies don’t have to make as many infrastructure investments while, at the same time, solar shaves down peak demands when electricity is the most expensive.”

The academics explained that utility customers that own a rooftop solar array are under-compensated in most of the states as what they called the “value of solar” eclipses the net metering tariffs paid by the utilities. The U.S. group developed a model that takes into account realistic costs and liabilities utility companies can avoid with an increasing share of rooftop PV capacity.

The model considers the following variables: Avoided operation and maintenance costs; avoided fuel; avoided generation capacity; avoided reserve capacity; avoided grid capacity; and environmental and health liability costs due to fossil fuel power generation.

“It can be concluded that substantial future regulatory reform is needed to ensure that grid-tied solar PV owners are not unjustly subsidizing U.S. electric utilities,” Pearce affirmed. “This study provides greater clarity to decision makers so they see solar PV is truly an economic benefit in the best interest of all utility customers.”

Renewable and Sustainable Energy Reviews

  • Distributed generation solar photovoltaic (PV) economically competitive if net metered in U.S.•
  • Value of solar (VOS) is becoming preferred method for evaluating economics of grid-tied PV.•
  • Here review VOS calculations, inputs and sensitivity analysis on all core variables.•
  • Results: VOS eclipses the net metering rate as well as two-tiered rates in US.•
  • Regulatory reform needed: solar PV owners are unjustly subsidizing electric utilities.


Distributed generation with solar photovoltaic (PV) technology is economically competitive if net metered in the U.S. Yet there is evidence that net metering is misrepresenting the true value of distributed solar generation so that the value of solar (VOS) is becoming the preferred method for evaluating economics of grid-tied PV. VOS calculations are challenging and there is widespread disagreement in the literature on the methods and data needed. To overcome these limitations, this study reviews past VOS studies to develop a generalized model that considers realistic future avoided costs and liabilities. The approach used here is bottom-up modeling where the final VOS for a utility system is calculated. The avoided costs considered are: plant O&M fixed and variable; fuel; generation capacity, reserve capacity, transmission capacity, distribution capacity, and environmental and health liability. The VOS represents the sum of these avoided costs. Each sub-component of the VOS has a sensitivity analysis run on the core variables and these sensitivities are applied for the total VOS. The results show that grid-tied utility customers are being grossly under-compensated in most of the U.S. as the value of solar eclipses the net metering rate as well as two-tiered rates. It can be concluded that substantial future work is needed for regulatory reform to ensure that grid-tied solar PV owners are not unjustly subsidizing U.S. electric utilities.

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