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This page is intended to highlight some accessible work/challenges from economics that I have found interesting and/or view changing.

Rooftop Solar & Net Metering: Efficiency & Equality Implications -- 7/28/18

My second post highlights how a common billing practice ("net metering") interacts with rooftop solar installation to create a situation with concerning equality implications.

Rooftop solar panels can be a very nice addition to one's home. They provide carbon-free electricity and continue to provide power even if weather takes the local grid offline. Additionally, they are an excellent way to provide remote households with electricity -- whether in the United States or developing country contexts.

Rooftop solar definitely has a place in the renewable portfolio. However, I am concerned about its widespread adoption given the way that it exacerbates inequality while at the same time being more expensive (less efficient) per kWh than utility-scale solar.

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Net metering essentially means that for somebody who provides electricity to the grid during some hours and takes electricity off of the grid during others, they only pay for their "net" consumption. For example, if I produce 7.5 kW during the 8 daylight hours and 0 kW the other 16 hours, while using 2.5 kW at all times, my net consumption is (2.5*24 - 7.5*8 = ) 0 kWh. If I did this every day for an entire month, my total electric bill would be $0 (though I would, of course, have still spent money to erect the solar array).

The equality concern arises from the fact that the solar panel owners are no longer paying any of the fixed costs associated with providing electric grid infrastructure they are using (recall: in the toy example they pay $0). Instead, their share of the fixed costs is spread out among the remaining consumers who do not have solar panels. Because homeowners with rooftop solar are usually wealthier than other electricity customers, this means that less wealthy customers are subsidizing wealthier households.

In many markets, rooftop solar is sufficiently small that these equality concerns are not large. However, California generates just over 10% of their electricity from distributed solar panels and has recently mandated that solar panels be installed on new homes. Lucas Davis's back-of-the-envelope calculations suggest that people without solar panels essentially pay $65/year more for their electricity in order to subsidize Californians with solar panels. This $65/household/year subsidy will grow substantially as homes are constructed under the new mandate.

While mandating this technology will likely bring down installation costs, it is difficult to see how it would ever be cheaper to install small numbers of solar panels on each individual roof, instead of building large numbers of solar panels on flat desert ground simultaneously. A study by some of my former colleagues at The Brattle Group found that rooftop solar costs about twice as much as utility-scale solar. At the same time, because utility-scale solar is installed at the grid level, less-wealthy households are not subsidizing wealthier ones.

Fortunately, regulators in some states with high degree of distributed solar penetration are starting to respond. Hawaii, for example, has recently moved to a tariff structure that charges customers with solar cells $25/month for their use of the electric grid. It would be great to see California ease up on promoting distributed solar when a superior alternative like utility-scale solar is available.

The Duck Curve -- 9/3/17

My first post will highlight my favorite curve in economics: the Duck Curve.

The Duck Curve (or duck chart) highlights what will be one of the biggest challenges associated with solar energy as we (hopefully) transition to a low-carbon future.

In my next post I will discuss my major concern about distributed solar energy: Due to net metering, it has the potential to exacerbate inequality in the United States.

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Solar energy is one of the carbon-free energy sources that has the potential to transform energy consumption. There is enough solar energy to indefinitely power the United States. However, the sun only shines during the day. Electricity consumption, on the other hand, peaks after the sun has set. This mismatch creates serious engineering challenges.

The Duck Curve (see Figure 2 from the California Independent System Operator) highlights one of these challenges. The diagram depicts net load in California over the last several years and into the future. Net load is the difference between electricity consumption and expected generation from renewable sources -- it is essentially the amount of electricity that is generated using fossil fuels.

The first thing that jumps out in the diagram is that California has greatly decreased their net load (and need for fossil-fueled generation) during the sunny hours of the day. This is fantastic news -- they have made significant progress in reducing carbon emissions. You can see that each year has a lower mid-day net load than the previous year. Almost all of these decreases are due to solar power and almost all of them result in less generation from fossil fuels.

The resulting net load curve looks a lot like a duck. Note that the dip in the middle of the day is sort of like the belly of a duck. And arch resulting from the steep ramp from about 4pm-7pm, combined with the leveling off and decline later in the evening, looks like the neck of a duck.

Unfortunately, the very steep ramping period from 4pm-7pm presents challenges for the electricity grid. The nature of electricity means that generation must exactly match consumption at all times during the day. Too much generation and the electric grid will overload and become damaged. Too little generation and houses will lose power.

What does this mean for utilities? Currently, older and more expensive plants are held on standby and then activated during the ramping period. Many of these plants are single-turbine gas-fired power plants that are cleaner than coal, but emit more carbon than modern combined-cycle gas-fired plants. In the absence of change, this will be more expensive and dirtier than necessary.

What are the long-term solutions to the steep ramping period? Electricity storage and demand management are the two most likely ones. If utilities are able to move electricity consumption off of the ramp, that should help smooth consumption throughout the day.

One of our best hopes lies in improved electricity storage technologies. There are several possibilities -- batteries developed specifically for this purpose, using electric car batteries as a power source, pumped hydro-electric storage, etc. Ideally, one of these technologies will make it cost-effective to save some mid-day solar energy and then redeploy it during the ramping period.