5

Equity Considerations of Net Metering

INTRODUCTION

This chapter examines equity considerations related to net metering. Prior chapters have discussed net metering policies and their variants, trends in the costs of distributed generation, and economic considerations in the design of net metering and its variants. These economic considerations include a discussion of the different benefits and costs of behind-the-meter (BTM) distributed generation (DG) supported by net metering for customers who are able to take advantage of it and those who do not. Because low-income households, racial and ethnic minority populations, and renters are more likely to be non-participants, economic transfers and any differential net metering benefits and costs between participating and non-participating customers have equity implications.^1,2

This chapter addresses the equity issues associated with the distribution of benefits and impacts of DG, the role of net metering in shaping this distribution, and net metering design considerations to address these inequities. The chapter begins with a discussion of the concept of equity, highlights the diverse characteristics of electricity customers and existing inequities in the electricity system and how such inequities intersect with net metering policy, and examines the direct, indirect, and societal impacts of net metering. This discussion includes the impacts of net metering on participants and nonparticipants and on different subgroups.

The specific equity-related topics examined in this chapter include:

• An overview of the multiple dimensions and types of equity in the context of net metering and distributed generation
• The demographics of net metering participation
• Equity concerns associated with net metering non-participants
• Environmental, health, and societal equity effects from net metering policies

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¹Sunter, D.A., S. Castellanos, and D.M. Kammen. 2019. “Disparities in Rooftop Photovoltaics Deployment in the United States by Race and Ethnicity.” Nature Sustainability 2(1):71–76.

²Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory.

• Current state of equity requirements and range of equity solutions
• Findings and recommendations

Examination of equity considerations is part of a growing recognition that public investments in climate mitigation and adaptation, including support and incentives for renewable DG, have implications for improving, and avoiding worsening, outcomes related to a fair and just energy system. The 2021 National Academies Accelerating Decarbonization of the U.S. Energy System report emphasizes the opportunity to convert the U.S. fossil fuel economy into a green economy that is environmentally sustainable, economically secure, and socially just.³ Advocates of this opportunity describe the need to compensate for historically inequitable energy policies and programs and to prioritize program participation in historically burdened populations that have been exposed to significant pollution from power plants and other fossil fuel infrastructure, as well as households and small businesses that face high energy cost burdens.

Residential decarbonization efforts have historically deployed numerous programs and policies that have been inaccessible to disadvantaged populations and environmental justice communities.⁴ As a result, energy cost burdens remain persistently high for low-income households and people of color, households with children and elderly residents, and in the South and rural America, where housing is generally less energy-efficient.⁵ Like many other public and ratepayer-funded clean energy initiatives, these same sociodemographic subgroups, and the South,^6,7 have been under-represented in net metering programs.

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³National Academies of Sciences, Engineering, and Medicine (NASEM). 2021. Accelerating DecarbonizationoftheU.S. Energy System. Washington, DC: The National Academies Press. https://doi.org/10.17226/25932.

⁴ U.S. Environmental Protection Agency’s Climate and Economic Justice Screening Tool provides indexes and indicators that enable mapping of communities by the extent of their vulnerabilities and risks. The map uses publicly available, nationally consistent datasets. Learn more about the methodology and datasets that were used to identify disadvantaged communities in the current version of the map available at: Council on Environmental Quality. 2022. “Climate and Economic Justice Screening Tool.” https://screeningtool.geoplatform.gov/en/#3/33.47/-97.5. See also Dolšak, N., and A. Prakash. 2022. “Three Faces of Climate Justice.” Annual Review of Political Science 25:283–301.

⁵Brown, M.A., and M. Ahmadi. 2019. “Would a Green New Deal Add or Kill Jobs?” Scientific American. https://www.scientificamerican.com/article/would-a-green-new-deal-add-or-kill-jobs1; Brown, M.A., J. Hubbs, X.V. Gu, and M.-K. Cha. 2021. “Rooftop Solar for All: Closing the Gap Between the Technically Possible and the Achievable Potentials.” Energy Research and Social Science 80(October):102203; Drehobl, A., L. Ross, and R. Ayala. 2020. How High Are Household Energy Burdens? An Assessment of National and Metropolitan Energy Burden Across the United States. Washington, DC: American Council for an Energy-Efficient Economy.

⁶Smith, K.M., C. Koski, and S. Siddiki. 2021. “Regulating Net Metering in the United States: A Landscape Overview of States’ Net Metering Policies and Outcomes.” The Electricity Journal 34(2):106901.

⁷Sunter, D.A., S. Castellanos, and D.M. Kammen. 2019. “Disparities in Rooftop Photovoltaics Deployment in the United States by Race and Ethnicity.” Nature Sustainability 2(1):71–76.

Participants in net metering are more likely to be from affluent, well-educated, and/or White households.⁸ Low levels of solar rooftop adoption and participation in net metering tariffs have been documented in numerous disadvantaged communities^9,10 and disadvantaged populations across multiple U.S. cities in regions around the nation.¹¹ Studies¹² indicate that some of the benefits of net metering could bypass some of the most disadvantaged and overburdened populations, as well as environmental justice and “frontline” communities, unless programs are designed to break down barriers to participation and reach out to disadvantaged and non-traditional populations. In addition, to the extent that there is cost-shifting from net metering participants to net metering non-participants in particular states and utility systems, less affluent customers and disadvantaged communities risk bearing a disproportionate share of the cost as they are more likely to be non-participants. If the environmental, grid security, resilience, and health benefits of BTM DG supported by net metering are considered, they may offset (or more than offset) any cost shift to non-adopters. However, the body of evidence is not sufficient to draw definitive conclusions, and the evaluation of such cost shifts is inherently location dependent.

Although historic adoption of DG has been primarily among well-educated, wealthy, and White households, recent initiatives are focusing on modifying programs so that they provide more benefits to disadvantaged and environmental justice (EJ) communities and evidence has shown a broadening of rooftop solar participation across income groups.¹³ While in 2021, approximately 3 percent of solar adopters earned less than 120

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⁸Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory; Wolske, K.S., P.C. Stern, and T. Dietz. 2017. “Explaining Interest in Adopting Residential Solar Photovoltaic Systems in the United States: Toward an Integration of Behavioral Theories.” Energy Research & Social Science 25:134–151.

⁹Lukanov, B.R., and E.M. Krieger. 2019. “Distributed Solar and Environmental Justice: Exploring the Demographic and Socio-Economic Trends of Residential PV Adoption in California.”Energy Policy 134:110935.

¹⁰Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory.

¹¹Reames, T.G. 2020. “Distributional Disparities in Residential Rooftop Solar Potential and Penetration in Four Cities in the United States.” Energy Research & Social Science 69:101612.

¹² Referenced in footnotes 3, 4, 5, and 6.

¹³Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory.

percent of their area’s median income,¹⁴ solar adoption among low- and moderate-income households has been expanding in recent years. Enablers of this democratization of rooftop solar include:

• Declining solar costs
• Improved affordability enabled by new financing techniques
• Opportunities for virtual net metering and community solar
• Local policies to address barriers to adoption
• The inclusion of solar as an eligible measure in the Department of Energy’s (DOE’s) Weatherization Assistance Program¹⁵ as a result of the Energy Act of 2020
• The creation of a DOE Weatherization Readiness Fund¹⁶ in 2022 that can be used to repair roofs, readying them for solar panels
• Components of the 2022 Inflation Reduction Act, including solar tax credits

These enablers are likely to continue to expand rooftop solar adoption by a broader range of households.

DEFINITION AND DIMENSIONS OF EQUITY

Definition and Scope of Equity Concerns

Equity is a multi-dimensional concept including distributional, procedural, intergenerational, and structural equity.¹⁷ When applied to the net metering of DG, these concepts can be considered across various socio-demographic groups, timeframes, and geographic scales. From a systems approach, the equity impacts of net metering can be direct, indirect, or societal in nature.

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¹⁴ Ibid. See also DOE. 2021. “Solar Futures Study.” https://www.energy.gov/eere/solar/solar-futures-study, p. 82.

¹⁵ For more information about DOE’s Weatherization Assistance Program (WAP) see https://www.energy.gov/scep/wap/weatherization-assistance-program.

¹⁶ For more information about DOE’s Weatherization Readiness Fund see https://www.energy.gov/scep/wap/articles/weatherization-program-notice-22-6-weatherization-assistance-program.

¹⁷Brown, M.A., A. Soni, M.V. Lapsa, K.A. Southworth, and M. Cox. 2020b. “High Energy Burden and Low-Income Energy Affordability: Conclusions from a Literature Review.” Progress in Energy 2(4):1–35; Sovacool, B.K., and M.H. Dworkin. 2015. “Energy Justice: Conceptual Insights and Practical Applications.” Applied Energy 142:435–444.

Figure 5-1 illustrates how equity impacts can involve direct effects, such as impacts on electricity bills and rates and on the resilience of neighborhoods and the grid. They can also be indirect, as a function of job opportunities and impacts on the demand for various goods and services, which can lead to shifts in economic prosperity of neighborhoods and regions. Finally, there are societal equity effects, including public health, climate change, and community economic development, that can result in the decline or growth of communities and regions. The intricate web of linkages and effects will advantage some places over others in ways that can be difficult to foresee. As Dr. Martin Luther King, Jr., so eloquently summarized: “We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly, affects all indirectly.”¹⁸

Direct equity impacts of net metering include various first-order effects. Electricity rates and bills of participating customers would be directly impacted by net metering as their adoption of DG would be expected to reduce their electricity costs and provide bill

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¹⁸King, Jr., M.L. 1963. “Letter from Birmingham Jail.” April 1.

stability. The electricity rates and bills of non-participating customers may also be affected, depending on the penetration of DG, the compensation rates offered, and how the costs of net metering and its variants and alternatives are recovered (see Chapter 4). In addition, the expansion of DG may have resilience benefits or costs to net metering participants, neighboring customers, and other non-participants. These distributional impacts are the primary focus of this chapter.

Indirect equity impacts of net metering refer to various second-order effects. If net metering encourages DG adoption, it might result in demand for particular types of labor and particular supply chain requirements compared to other energy resources. Distributed energy resources (DER) tend to generate and maintain more local jobs and more economic activity compared to traditional utility scale investments in energy generation and transmission. This is true for both higher numbers of jobs and higher economic multipliers per MW of capacity, per MWh of energy delivered or saved, and per million dollars of expenditure on each technology option.¹⁹ In addition, the fact that 29.6 percent of the solar workforce is made up of women and 40 percent of the solar workforce are people of color²⁰ means that net metering policies hold the potential to shrink the racial employment gap relative to many other sectors of the energy workforce. However, the degree to which disadvantaged communities would share in these employment benefits without specific policy focus and program designs intended to ensure that result is not clear.²¹ As a result, several states, including Illinois with its Clean Energy and Jobs Act (CEJA), require that local economic development, job training, and local job offerings be included in solar policies.²²

At the same time, residents in disadvantaged communities are more vulnerable to losing their jobs if solar energy displaces fossil plant jobs in communities that have hosted

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¹⁹EPA (U.S. Environmental Protection Agency). 2018. “Part Two: Chapter Five: Estimating the Economic Benefits of Energy Efficiency and Renewable Energy.” In Quantifying the Multiple Benefits of Energy Efficiency and Renewable Energy—A Guide for State and Local Governments. https://www.epa.gov/statelocalenergy/quantifying-multiple-benefits-energy-efficiency-and-renewable-energy-guide-state.

²⁰IREC (Interstate Renewable Energy Council). 2022. “National Solar Jobs Census 2021.” https://irecusa.org/resources/national-solar-jobs-census-2021.

²¹ See p. 134 in Leon, W., C. Farley, N. Hausman, B. Herbert, N.H. Hammer, B. Paulos, T. Reames, R. Sanders, L. Schieb, D. Deane-Ryan, and R. Navarra. 2019. Solar with Justice: Strategies for Powering up Under-Resourced Communities and Growing an Inclusive Solar Market. Montpelier, VT: Clean Energy States Alliance.

²² More information about the Climate and Equitable Jobs Act, Public Act 102-0662 is available at: https://www2.illinois.gov/epa/topics/ceja/Pages/default.aspx.

coal plants.²³ Thus, there is evidence of additional distributional equity workforce issues, although they may not affect all regions equally.^24,25

Societal equity effects of net metering refer to the distribution of externalities, which are the unpriced benefits and costs associated with BTM DG supported by net metering. For example, by promoting renewable or clean DG, net metering generally leads to the displacement of fossil fuel generation and reduces air pollutant emissions (see discussion in Chapter 4). These clean air benefits advantage society but will vary by region, neighborhood, and individual, resulting in varying equity outcomes. Since disadvantaged communities tend to suffer more from air pollution, clean energy policies that reduce pollution like net metering have potential to reduce pollution in overburdened communities, but the level of benefit will depend on factors such as the location of solar adoption, the location of emission reductions, and how these benefits compare to other clean energy adoption policies.

Dimensions of Equity

Equity may be characterized along four dimensions (among others): distributional, procedural, intergenerational, and structural. The following describes these dimensions in the broad context of energy and the specific context of net metering.

Distributional equity is the dimension of equity that has received the greatest attention. It refers to fairness in the allocation of benefits, costs, rights, resources, and information. Energy programs and policies achieve distributional equity when they result in fair distributions of benefits and costs across all segments of a community (including participants and non-participants), prioritizing those with the greatest need. Based on

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²³Carley, S., and D.M. Konisky. 2020. “The Justice and Equity Implications of the Clean Energy Transition.” Nature Energy 5:569–577; Ross, E., M. Day, C. Ivanova, A. McLeod, and J. Lockshin. 2022. “Intersections of Disadvantaged Communities and Renewable Energy Potential: Data Set and Analysis to Inform Equitable Investment Prioritization in the United States.” Renewable Energy Focus 41:1–14.

²⁴ The lack of a diverse solar workforce is prompting innovative programs. The Just Opportunity Circle, an organized group of U.S. economic development leaders, is exploring strategic solutions for equitable economic opportunities with a focus on low-wealth and communities of color. For more information, see PSE (Partnership for Southern Equity). 2021. “6 Principles of Economic Inclusion.” https://psequity.org/justopportunity. Solutions include policy changes that remove barriers to employment and hiring and training strategies that emphasize employment equity. For more information, see Louie, E.P., and J.M. Pearce. 2016. “Retraining Investment for U.S. Transition from Coal to Solar Photovoltaic Employment.” Energy Economics 57:295–302.

²⁵Brown, M.A., and M. Ahmadi. 2019. “Would a Green New Deal Add or Kill Jobs?” Scientific American. https://www.scientificamerican.com/article/would-a-green-new-deal-add-or-kill-jobs1.

different aspects of the energy grid, distributional equity can be looked at from two lenses: accessibility and affordability.

Distributional equity requires assessing which customers experience the benefits and costs of energy programs and investments. Traditional benefit-cost analysis (BCA) used to evaluate policies and programs has not typically examined such issues. Rather, it has focused on aggregate or average benefits and costs and has overlooked the distribution of impacts.

Understanding the impact of net metering on low-income households and disadvantaged communities requires distributional equity analysis (DEA), sometimes also referred to as distribution analysis or an analysis of distributional impacts. DEA is explicitly designed to measure the differential impacts between target populations and other customers. Analyses of rates, bills, participation, and other aspects of energy equity are core to DEA.^26,27 They can provide information on how impacts are experienced by host customers compared to other customers, which can reveal equity issues.^28,29 Such analyses, however, rely on adequate data collection and data transparency, which is unavailable in many regions. Table 5-1 provides a comparison of BCA and DEA as applied to net metering.

Ideally, analysis of an energy policy or program such as net metering would consider its standalone impact on society and its distributional impact on resource-constrained, marginalized, and energy cost-burdened customers, as well as disadvantaged and environmentally overburdened communities. Then net metering’s impacts could be compared with the impact of other possible policies to support customer adoption of clean DG, considering their societal and distributional effects. This could enable policymakers and regulators to craft net metering variants and alternatives that, in addition to having a positive aggregate impact, may also have favorable distributional impacts. For example:

• If the principal policy goal is to minimize rate increases and household bills while achieving carbon reduction and other environmental goals, how does net metering fare with respect to distributional equity? Also, how does it compare to

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²⁶ Pacific Northwest National Laboratory. “Energy Equity; PNNL’s Vision Statement for Equity in the Power Grid.” https://www.pnnl.gov/projects/energy-equity.

²⁷University of Michigan School for Environment and Sustainability. 2022. “Energy Equity Project Report.” https://energyequityproject.com/wp-content/uploads/2022/08/220174_EEP_Report_8302022.pdf.

²⁸ They can also be expanded to include information about target populations and other energy equity metrics such as Gini coefficients and Lorenz curves. See Sitthiyot, T., and K. Holasut, K. 2020. “A Simple Method for Measuring Inequality.” Palgrave Communications 6(112):1–9.

²⁹Johnson, E., R. Beppler, C. Blackburn, B. Staver, M. Brown, and D. Matisoff. 2017. “Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs.”Energy Policy 106:436–444.

TABLE 5-1 Benefit-Cost Versus Distributional-Equity Analyses of Net Metering

SOURCE: Modified from NESP (National Energy Screening Project), 2022a, “Energy Equity and BCA,” https://www.nationalenergyscreeningproject.org/resources/energy-equity-and-bca.

• other clean energy policies in terms of their distributional effects? How can traditional net metering be modified to improve distributional equity?
• If the principal policy goal is to provide clean backup generation to vulnerable or disadvantaged populations, how does net metering compare to other policies in terms of their distributional impacts? Also, how does net metering compare to other programs that deliver equitable outcomes and services to disadvantaged communities, with respect to efficiency and cost- and rate-containment goals? In the communities that are served, does net metering or its policy alternatives further overburden non-participants through cost increases? How can it be revised to improve distributional equity?

Many additional concepts have been used to define and measure distributional equity aspects of the electricity grid, particularly the financial aspects of equity, important to the discussion of the equity of net metering policies. In the earlier stages of the electricity industry, equity was mainly measured in terms of accessibility to the grid. Now, considerations of distributional energy equity have been expanded and include the following concepts related to the affordability and cost of electricity:

• Energy cost burden (generally referred to as “energy burden”) refers to the share of a household’s income that is spent on energy utilities.³⁰
• Energy insecurity is the uncertainty that a household might face in being able to make utility payments and the risk of shutoffs due to an inability to pay bills.
• Energy poverty means living in a home that does not have access to enough energy to meet essential needs.³¹

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³⁰ Energy cost burden is typically measured as the ratio of the average household energy bill in a neighborhood, census tract, or customer class divided by the associated average household income. Energy cost burdens over 6 percent are typically considered unaffordably high. See Colton, R.D. 2011. “Home Energy Affordability in New York: The Affordability Gap (2008–2010).” Prepared for New York State Energy Research Development Authority. https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/EDPPP/LIFE/Resources/2008-2010-affordability-gap.pdf.

³¹ Ibid. Colton (2011) defines “home energy burden” as those spending more than 6 percent of their income on meeting energy costs. The premise for this benchmark is that a household should not spend more than 30 percent of its income on housing expenses, and the utility costs should not exceed 20 percent of these expenses. This threshold is often used for comparison purposes and to estimate the “affordability gap.” See Fisher, Sheehan & Colton. 2013. “The 2012 Home Energy Affordability Gap.” www.homeenergyaffordabilitygap.com. A range of thresholds has also been developed. In a study for the State of Colorado, Cook and Shah (2018) distinguished between “energy stressed” households with energy burdens of 4–7 percent, “energy burdened” households with 7–10 percent energy burdens, and “energy impoverished” households with energy burdens greater than 10 percent. See Cook, J.J., and M. Shah. 2018. Reducing Energy Burden with Solar: Colorado’s Strategy and Roadmap for States. NREL/TP-6A20-70965. Golden, CO: National Renewable Energy Laboratory.

Evaluating net metering policies requires comparing traditional net metering, its variants and policy alternatives in terms of both efficiency and equity. However, there is no consensus on how to design efficient and equitable rates, and net metering policies, in the context of increasing distributed generation.³² The complexity of designing for both efficiency and equity is compounded by the four dimensions of equity and by the need to consider other factors such as environmental externalities, jobs, health impacts, customer decisions to disconnect from the grid, and resilience.

Proceduralequity is fairness and transparency of the processes that allocate resources and resolve disputes. Neither BCA nor DEA reflect procedural equity.³³ However, both BCA and DEA can be enhanced by using fair and transparent processes to broadly engage constituents. Procedural equity focuses on who is represented, and who is engaged. An energy program or policy is procedurally equitable if it offers inclusive, accessible information (including information for customers and their advocates), as well as authentic engagement with and representation of all types of stakeholders and communities during the program’s development, implementation, and evaluation, particularly for those who have not traditionally participated in energy policy and ratemaking processes. Energy justice³⁴ frameworks can help policymakers and regulators who set rates to make more informed decisions by following the principles of procedural justice.³⁵ This means identifying the priorities of the constituents who are being represented, how to balance economic efficiency with equity concerns, how DG investment costs should be covered, and how the benefits should be distributed. Failures of procedural justice can result in discrimination and marginalization, while failures of economic efficiency can result in higher rates. Procedural equity also embraces the processes by which rates may evolve over time, also called “transitional equity.”³⁶ This report discusses procedural equity to the extent that it interacts with net metering policies.

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³²Rábago, K., and Valova, R. 2018. “Revisiting Bonbright’s Principles of Public Utility Rates in a DER World.” The Electricity Journal 31(8):9–13.

³³NESP. 2022a. “Energy Equity and BCA.” https://www.nationalenergyscreeningproject.org/resources/energy-equity-and-bca.

³⁴ Energy justice refers to the goal of achieving equity in both the social and economic participation in the energy system, while also remediating social, economic, and health burdens on those disproportionately harmed by the energy system. Energy justice explicitly centers the concerns of communities at the frontline of pollution and climate change (“frontline communities”), working class people, indigenous communities, and those historically disenfranchised by racial and social inequity. Energy justice aims to make energy accessible, affordable, clean, and democratically managed for all communities. For more information, see https://iejusa.org.

³⁵Sovacool, B.K., and M.H. Dworkin. 2015. “Energy Justice: Conceptual Insights and Practical Applications.” Applied Energy 142:435–444.

³⁶Burger, S., I. Schneider, A. Botterud, and I. Pérez-Arriaga. 2018. Fair, Equitable, and Efficient Tariffs in the Presence of Distributed Energy Resources. Cambridge, MA: MIT Center for Energy and Environmental Policy Research.

Intergenerational equity adds a time dimension to the equity discussion by considering society’s obligations to future generations. Discount rates are the analytic tool often used to enable the comparison of future and present benefits and costs,³⁷ a mechanism which can fold intergenerational equity into assessments of efficiency. Regulatory proceedings such as integrated resource planning quantify the value of benefits and costs to future generations when they specify discount rates to apply to their valuation. For example, applying low discount rates to assessments of clean energy benefits (i.e., discounting future benefits less) gives greater weight to the well-being of future generations. Actions that serve to increase rather than limit the options of future generations can be said to improve intergenerational equity.³⁸

For example, energy policies and programs that reduce carbon emissions and, as a result, help mitigate climate change, contribute positively to intergenerational equity as they can reduce future costs due to climate destabilization. It should be noted, however, that lower-income households, particularly those with outstanding needs such as unpaid utility bills, may value current benefits more highly than possible future benefits, which would suggest a higher discount rate or a program focus on affordability. In some cases, current benefits can also reap future benefits. For instance, affordable energy via net-metered solar systems would reduce costs for these customers and allow low-income households to invest more now in human capital development through education and training, which could improve their earning potential in the future and across generations.

Structural equity involves making decisions with the recognition of historical, cultural, and institutional dynamics including structural racism, gender bias, and other dimensions of long-standing discrimination. For instance, the health and heat island consequences of highway development and deforestation in cities have caused capital to flow to more affluent neighborhoods. Excess heat and humidity drive the need for cooling and make the population more dependent on electricity and thus more vulnerable to outages. In such areas, DG in the form of microgrids or solar + storage-powered community resilience hubs and cooling centers may be particularly valuable.³⁹ Net metering compensation for this DG may or may not adequately reflect its increased value for such under-resourced communities.

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³⁷ See Discount Rates section in Chapter 4.

³⁸Norton, B.G. 2005. Sustainability: A Philosophy of Adaptive Ecosystem Management. Chicago, IL: University of Chicago Press.

³⁹ “Community resilience hubs” provide support for communities year-round and are equipped with solar + storage to provide backup power in the face of grid outages, providing vulnerable communities with access to cool air in hot weather, cell phone charging, refrigeration for medicines, power for medical equipment, and other critical services. For more information, see https://www.usdn.org/resilience-hubs.htm.

Redlining and discriminatory bank lending are also examples of structural equity issues that have limited BTM DG adoption by Black households in American cities, due to lack of access to capital, which has led to lower home ownership and a lack of home repair.⁴⁰ Lower levels of home ownership have blocked many communities of color from building wealth, presenting barriers to financing BTM solar and other DER because of their high up-front costs, which traditional net metering cannot overcome.⁴¹ Compounding this effect, renters also face barriers due to limited control over decisions to install DG, limiting their ability to participate in net metering.

THE DEMOGRAPHICS OF NET METERING PARTICIPATION

Net metering can play a role in alleviating—or exacerbating—existing inequities associated with power supply and delivery across the United States. This section begins by describing the systemic inequities that have resulted in lower adoption rates of rooftop solar in low- and moderate-income communities, populations of color, and among renters.^42,43,44 The discussion also addresses adoption rates in communities with high housing burden, linguistic isolation, higher inequality, and lower educational attainment.⁴⁵ Net metering can interact with these systemic inequities to affect these populations, including impacts on income, affordability, and the ability to adopt BTM DG and participate in other programs. Attention then turns to access to solar and current net metering participation levels for renters, populations of color, and other subgroups, and barriers to participation for these communities. Finally, the discussion addresses strategies to alleviate these impacts and reduce historic barriers to BTM DG adoption through

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⁴⁰Sunter, D.A., S. Castellanos, and D.M. Kammen. 2019. “Disparities in Rooftop Photovoltaics Deployment in the United States by Race and Ethnicity.” Nature Sustainability 2(1):71–76.

⁴¹Wilson, B. 2020. “Urban Heat Management and the Legacy of Redlining.” Journal of the American Planning Association 86(4):443–457.

⁴²Sunter, D.A., S. Castellanos, and D.M. Kammen. 2019. “Disparities in Rooftop Photovoltaics Deployment in the United States by Race and Ethnicity.” Nature Sustainability 2(1):71–76.

⁴³Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory.

⁴⁴Gao, X., and S. Zhou. 2022. “Solar Adoption Inequality in the U.S.: Trend, Magnitude, and Solar Justice Policies.” Energy Policy 169(October):113–163.

⁴⁵Darghouth, N.R., E. O’Shaughnessy, S. Forrester, and G. Barbose. 2022. “Characterizing Local Rooftop Solar Adoption Inequity in the US.” Environmental Research Letters 17(3):034028; Lukanov, B.R., and E.M. Krieger. 2019. “Distributed Solar and Environmental Justice: Exploring the Demographic and Socio-Economic Trends of Residential PV Adoption in California.” Energy Policy 134:110935; Yu, J., Z. Wang, A. Majumdar, and R. Rajagopar. 2018. “DeepSolar: A Machine Learning Framework to Efficiently Construct a Solar Deployment Database in the United States.” Joule 2(12):2605–2617.

net metering policies. This context is critical for understanding how net metering may improve or exacerbate existing inequities.

Low-Income Households

Low-income households face significantly higher energy cost burdens than the population at large,⁴⁶ with low-income U.S. households measured as spending an average of 8.1 percent of their income on energy costs, compared with an average of 2.3 percent for those not considered low-income.⁴⁷ In some areas low-income households that use less electricity than average also pay higher de facto rates for electricity under rate designs with high fixed monthly charges. Low-income households may struggle to afford utility bills among other expenses and may therefore face pressure to reduce their energy use to thermally uncomfortable levels.⁴⁸ Electricity shutoffs that result from utility debt can exacerbate both physical and mental health,⁴⁹ and low incomes are linked to a higher likelihood of mortality during extreme heat events.⁵⁰

Lower incomes are also linked to living in inefficient buildings that are expensive to heat and cool.⁵¹ Barriers to clean energy adoption include lack of quality internet access, which lags in low-income and rural areas⁵² and is sometimes necessary to implement

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⁴⁶Kontokosta, C.E., V.J. Reina, and B. Bonczak. 2020. “Energy Cost Burdens for Low-Income and Minority Households.” Journal of the American Planning Association 86(1):89–105.

⁴⁷American Council for an Energy-Efficient Economy. 2020. “Report: Low-Income Households, Communities of Color Face High ‘Energy Burden’Entering Recession.” https://www.aceee.org/press-release/2020/09/report-low-income-households-communities-color-face-high-energy-burden.

⁴⁸Anderson, W., V. White, and A. Finney. 2012. “Coping with Low Incomes and Cold Homes.” Energy Policy 49:40–52; Hernández, D. 2016. “Understanding ‘Energy Insecurity’ and Why It Matters to Health.” Social Science & Medicine 167:1–10.

⁴⁹Hernández, D. 2016. “Understanding ‘Energy Insecurity’ and Why It Matters to Health.” Social Science & Medicine 167:1–10.

⁵⁰Harlan, S.L., J.H. Declet-Barreto, W.L. Stefanov, and D.B. Petitti. 2013. “Neighborhood Effects on Heat Deaths: Social and Environmental Predictors of Vulnerability in Maricopa County, Arizona.” Environmental Health Perspective 121(2):197–204; Sakka, A., M. Santamouris, I. Livada, F. Nicol, and M. Wilson. 2012. “On the Thermal Performance of Low Income Housing During Heat Waves.” Energy Build 49:69–77.

⁵¹Brown, M.A., A. Soni, M.V. Lapsa, and K.A. Southworth. 2020a. Low-Income Energy Affordability: Conclusions from a Literature Review. Oak Ridge, TN: Oak Ridge National Laboratory; Gillard, R., C. Snell, and M. Bevan. 2017. “Advancing an Energy Justice Perspective of Fuel Poverty: Household Vulnerability and Domestic Retrofit Policy in the United Kingdom.” Energy Research & Social Science 29:53–61; Hernández, D. 2016. “Understanding ‘Energy Insecurity’ and Why It Matters to Health.” Social Science & Medicine 167:1–10; Walker, G., and R. Day. 2016. “Necessary Energy Uses and a Minimum Standard of Living in the United Kingdom: Energy Justice or Escalating Expectations?” Energy Research & Social Science 18:129–138.

⁵²Martin, M. 2021. For the First Time, Census Bureau Data Show Impact of Geography, Income on Broadband InternetA ccess. Washington, DC: U.S. Census Bureau. https://www.census.gov/library/stories/2018/12/rural-and-lower-income-counties-lag-nation-internet-subscription.html.

rooftop solar. Income-constrained households also have limited access to smart appliances and thermostats to adjust their consumption, which may make solar and net metering less valuable to them. As mentioned, lack of home ownership and access to financing constitute other barriers, though it should be noted that these are not always multifamily buildings or rented, as approximately 54 percent of low-income households live in single-family homes, 69 percent of which are owner-occupied.⁵³ Those facing barriers to adopting DG inherently face barriers to participating in net metering and are thus less likely to benefit from it. Customers receiving service on discounted low-income utility rates may also be compensated under net metering tariffs at those discounted rates—that is, solar supplied back to the grid is compensated at discounted rather than retail rates—resulting in longer payback times for investments in DG.

For participants, BTM DG supported by net metering holds the potential both to reduce energy costs⁵⁴ and provide bill stability, which may have value for populations facing high energy cost burdens and energy insecurity. However, many barriers hinder the adoption of DG and exacerbate inequities for under-resourced groups.⁵⁵ As a result, programs aimed at boosting DG adoption in disadvantaged communities need to consider structural barriers beyond income to address race, language, education, historic investments, home ownership, access to capital and credit, and other factors.^56,57

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⁵³DOE (Department of Energy). n.d. “Clean Energy for Low Income Communities: Single Family Home Retrofits.” https://betterbuildingssolutioncenter.energy.gov/CELICA-Toolkit/single-family-home-retrofits.

⁵⁴Darghouth, N.R., G. Barbose, J. Zuboy, P.J. Gagnon, A.D. Mills, and L. Bird. 2020. “Demand Charge Savings from Solar PV and Energy Storage.” Energy Policy 146(November):111766.

⁵⁵Brown, M.A., J. Hubbs, X.V. Gu, and M.-K. Cha. 2021. “Rooftop Solar for All: Closing the Gap Between the Technically Possible and the Achievable Potentials.” Energy Research and Social Science 80(October):102203; Scavo, J., S. Korosec, E. Guerrero, B. Pennington, and P. Doughman. 2016. Low-Income Barriers Study, Part A: Overcoming Barriers to Energy Efficiency and Renewables for Low-Income Customers and Small Business Contracting Opportunities in Disadvantaged Communities. Publication Number: CEC-300-2016-009-CMF. Sacramento, CA: California Energy Commission; Sunter, D.A., S. Castellanos, and D.M. Kammen. 2019. “Disparities in Rooftop Photovoltaics Deployment in the United States by Race and Ethnicity.” Nature Sustainability 2(1):71–76.

⁵⁶Scavo, J., S. Korosec, E. Guerrero, B. Pennington, and P. Doughman. 2016. Low-Income Barriers Study, Part A: Overcoming Barriers to Energy Efficiency and Renewables for Low-Income Customers and Small Business Contracting Opportunities in Disadvantaged Communities. Publication Number: CEC-300-2016-009-CMF. Sacramento, CA: California Energy Commission.

⁵⁷Darghouth et al. (2022) found higher adoption rates among LMI communities with LMI-focused installers and installers providing leases. See Darghouth, N.R., E. O’Shaughnessy, S. Forrester, and G. Barbose. 2022. “Characterizing Local Rooftop Solar Adoption Inequity in the US.” Environmental Research Letters 17(3):034028. O’Shaughnessy et al. (2020) also found that LMI-focused incentives could help reduce solar adoption inequities, while standard incentives risked exacerbating these inequities. See O’Shaughnessy, E., G. Barbose, R. Wiser, S. Forrester, and N. Darghouth. 2020 “The Impact of Policies and Business Models on Income Equity in Rooftop Solar Adoption.” Nature Energy 6(1):84–91.

Virtual net metering and community solar can help to provide access to solar for these customer groups. Some utilities have proposed and offer community solar subscription programs to address the issue of affordability. The subscription programs would allow low-income households to purchase community solar at a discounted price, with the difference between the reduced price and the retail rate being covered by donations from other ratepayers, community organizations and businesses (see community solar discussion below and in Box 3-1). Low-income customers could also potentially participate in community-level projects and campaigns led by rooftop-solar advocates,⁵⁸ such as Solarize, which is a community-based program that aims to make solar panels more affordable for community members through grassroots-level organizing and group purchasing.⁵⁹ While combining net metering with low- and moderate-income (LMI)-focused programs, such as community solar, may help reduce some of these inequities and improve access for historically underserved populations,⁶⁰ these programs are not likely to fully address distributional equity concerns related to the possibility of costs shifting from net metering participants to non-participants.

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⁵⁸Weissman, G. 2017. “Rental Rooftops: A Missed Opportunity for Solar Energy.” https://frontiergroup.org/blogs/blog/fg/rental-rooftops-missed-opportunity-solar-energy.

⁵⁹ “Solarize facilitates solar-panel purchases by prescreening and selecting an installer to provide services to its residents, taking advantage of economies of scale from bulk purchasing. Each Solarize campaign typically involves: (1) group purchasing and a decreasing tiered pricing schedule for materials; (2) a competitive bidding process; (3) free evaluations with a financial analysis, preliminary site design, and energy-usage profile; (4) free workshops on the benefits of solar that allow participants to meet with contractors; and (5) a limited time window to encourage participants to enroll quickly and generate momentum for the campaign. To ensure that community members can afford rooftop installations, Solarize also partners with not-for-profit credit unions to provide loans specifically targeted toward clean energy. Community organizers may initiate a Solarize campaign by starting a petition among community members” (Brown et al. 2021, p. 3). Brown, M.A., J. Hubbs, X.V. Gu, and M.-K. Cha. 2021. “Rooftop Solar for All: Closing the Gap Between the Technically Possible and the Achievable Potentials.” Energy Research and Social Science 80(October):102203. For more information, see Solarize campaigns, Solar CrowdSource at https://www.solarcrowdsource.com.

⁶⁰ See, for example, Paulos et al. 2021. “An Assessment of Evaluation Practices of Low- and Moderate-Income Solar Programs.” Berkeley, CA: Lawrence Berkeley National Laboratory; Stanton, T. 2020. Solar Energy That Pays for Low-Income Customers and Communities. NRRI Insights Paper. Silver Spring, MD: National Regulatory Research Institute. https://pubs.naruc.org/pub/46965D7D-155D-0A36-315D-58319B591EB8; and Zinaman, O.R., T. Bowen, and A.Y. Aznar. 2020. An Overview of Behind-the-Meter Solar-Plus-Storage Regulatory Design: Approaches and Case Studies to Inform International Applications. Report No. NREL/TP-7A40-75283. Golden, CO: National Renewable Energy Laboratory.

Populations of Color

People of color face greater procedural injustices than other customers in the forms of (1) discrimination related to housing, employment, and credit; (2) lack of informed consent for energy projects; (3) lack of representation in decision-making processes; and (4) lack of access to information. People of color may also face greater health impacts tied to the inability to cool homes, and they have a higher likelihood of death from extreme heat events.^61,62,63

Historic underinvestment in infrastructure in communities of color and other disadvantaged communities can also contribute to ongoing energy inequities. For example, the distribution grid in California has been found to have a lower hosting capacity⁶⁴ for DER on circuits with higher proportions of Black households and disadvantaged communities.⁶⁵ Similarly, satellite imagery of Texas in February 2021 found that widespread outages caused by winter storms were four times more prevalent in minority communities than in predominantly White communities.⁶⁶ Households of color frequently face higher energy cost burdens⁶⁷ and greater energy insecurity⁶⁸ than White households, not only because of their lower average incomes but also because of a history of discriminatory

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⁶¹Pager, D., and H. Shepherd. 2008. “The Sociology of Discrimination: Racial Discrimination in Employment, Housing, Credit, and Consumer Markets.” Annual Review of Sociology 34:181–209.

⁶²Sovacool, B.K., and M.H. Dworkin. 2015. “Energy Justice: Conceptual Insights and Practical Applications.” Applied Energy 142:435–444.

⁶³Harlan, S.L., J.H. Declet-Barreto, W.L. Stefanov, and D.B. Petitti. 2013. “Neighborhood Effects on Heat Deaths: Social and Environmental Predictors of Vulnerability in Maricopa County, Arizona.” Environmental Health Perspective 121(2):197–204.

⁶⁴ While there is no formal technical definition for hosting capacity, this important concept can be understood as the amount of rooftop solar that can be safely installed at the distribution system level before requiring system upgrades such as additional supervisory control and data acquisition (SCADA), increasing capacity of lines, or addition of advanced voltage regulating devices.

⁶⁵Brockway, A.M., J. Conde, and D. Callaway. 2021. “Inequitable Access to Distributed Energy Resources Due to Grid Infrastructure Limits in California.” Nature Energy 6:892–903.

⁶⁶Carvallo, J.P., F.C. Hsu, Z. Shah, and J. Taneja. 2021. Frozen Out in Texas: Blackouts and Inequity. New York: The Rockefeller Foundation.

⁶⁷Kontokosta, C.E., V.J. Reina, and B. Bonczak. 2020. “Energy Cost Burdens for Low-Income and Minority Households.” Journal of the American Planning Association 86(1):89–105.

⁶⁸Graff, M., S. Carley, D.M. Konisky, and T. Memmott. 2021. “Which Households Are Energy Insecure? An Empirical Analysis of Race, Housing Conditions, and Energy Burdens in the United States.” Energy Research & Social Science 79:102144; Memmott, T., S. Carley, M. Graff, and D.M. Konisky. 2021. “Sociodemographic Disparities in Energy Insecurity Among Low-Income Households Before and During the COVID-19 Pandemic.” Nature Energy 6:186–193.

lending practices that have resulted in a lack of access to capital. These conditions can limit their ability to purchase rooftop solar systems and benefit from net metering.⁶⁹

Renters

Residents of multi-family and renter-occupied properties face additional barriers to BTM DG adoption and participation in net metering.⁷⁰ With both master metering and submetering,⁷¹ the landlord is often responsible for appliances and other energy infrastructure within the complex but does not pay the energy bill. Renters are typically not able to add solar infrastructure to homes or buildings they do not own. These groups also may move more often, which makes conventional PV systems ownership impractical. Renters could install “plug-and-play” PV systems that are generally PV modules with microinverters.⁷² Such “balcony solar” systems are widespread in Europe, and there is a potential market for them in the United States because of their ability to reduce renters’ electricity costs.

The resulting “split incentive” problem may present a barrier to the adoption of clean energy (including DG supported by net metering) for renter households and contributes to their higher energy bills;⁷³ however, environmentally committed tenants may have the option to act themselves through investments in community and other solar projects where virtual net metering (VNM) is available. Renters also tend to be lower-income, are

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⁶⁹ As documented by Sunter et al. (2019), which found significant racial and ethnic differences in rooftop solar adoption in the United States. See Sunter, D.A., S. Castellanos, and D.M. Kammen. 2019. “Disparities in Rooftop Photovoltaics Deployment in the United States by Race and Ethnicity.” Nature Sustainability 2(1):71–76.

⁷⁰Heeter, J., A. Sekar, E. Fekete, M. Shah, and J.J. Cook. 2021. Affordable and Accessible Solar for All: Barriers, Solutions, and On-Site Adoption Potential. Golden, CO: National Renewable Energy Laboratory. https://www.nrel.gov/docs/fy21osti/80532.pdf; Mateyka, P.J., and C.R. Mazur. 2021. Homeownership in the United States: 2005 to 2019. Washington, DC: U.S. Census Bureau. https://www.census.gov/content/dam/Census/library/publications/2021/acs/acsbr-010.pdf.

⁷¹ “Master metering” measures the electricity use for an entire rental property (with utility costs typically charged to renters as a fixed dollar amount, part of their rent) and “submetering” measures the electricity consumption for each rental unit individually.

⁷²Mundada, A.S., E.W. Prehoda, and J.M. Pearce. 2017. “U.S. Market for Solar Photovoltaic Plug-and-Play Systems.” Renewable Energy 103:255–264.

⁷³Melvin, J. 2018. “The Split Incentives Energy Efficiency Problem: Evidence of Underinvestment by Landlords.” Energy Policy 115:342–352.

more likely to be people of color, less likely to have access to energy-efficient appliances, and more likely to have higher energy cost burdens.⁷⁴

Vulnerable Populations

Vulnerable populations include the elderly, who require a narrow band of home temperatures;⁷⁵ individuals who rely on electricity to power medical devices; and households with young children. The energy requirements of these vulnerable populations typically result in higher energy bills and may cause energy insecurity.⁷⁶ Low-income families with young children experience heightened financial pressures associated with ensuring that their children are well fed and healthy,⁷⁷ and in addition, face greater competing childcare expenses, and hence more challenges to meet their energy needs.⁷⁸

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⁷⁴Drehobl, A., L. Ross, and R. Ayala. 2020. How High Are Household Energy Burdens? An Assessment of National and Metropolitan Energy Burden Across the United States. Washington, DC: American Council for an Energy-Efficient Economy; Lang, M., R. Lane, K. Zhao, S. Tham, K. Woolfe, and R. Raven. 2021. “Systematic Review: Landlords’ Willingness to Retrofit Energy Efficiency Improvements.” Journal of Cleaner Production 303:127041; Lukanov, B., A. Makhijani, K. Shetty, Y. Kinkhabwala, A. Smith, and E. Krieger. 2022. Pathways to Energy Affordability in Colorado. Oakland, CA: PSE Healthy Energy, and Takoma Park, MD: Institute for Energy and Environmental Research. https://www.psehealthyenergy.org/wp-content/uploads/2022/01/Colorado-Energy-Affordability-Study_Full-Report.pdf.

⁷⁵Basu, R. 2009. “High Ambient Temperature and Mortality: A Review of Epidemiologic Studies from 2001 to 2008.” Environmental Health 8:40; Day, R., G. Walker, and N. Simcock. 2016. “Conceptualising Energy Use and Energy Poverty Using a Capabilities Framework.” Energy Policy 93:255–264; Knowlton, K., M. Rotkin-Ellman, G. King, H.G. Margolis, D. Smith, G. Solomon, R. Trent, and P. English. 2009. “The 2006 California Heat Wave: Impacts on Hospitalizations and Emergency Department Visits.” Environmental Health Perspective 117(1):61–67; O’Shaughnessy, E., G. Barbose, R. Wiser, S. Forrester, and N. Darghouth. 2020. “The Impact of Policies and Business Models on Income Equity in Rooftop Solar Adoption.” Nature Energy 6(1):84–91; Ormandy, D., and Ezratty, V. 2012. “Health and Thermal Comfort: From WHO Guidance to Housing Strategies.” Energy Policy 49:116–121; Vandentorren, S., P. Bretin, A. Zeghnoun, L. Mandereau-Bruno, A. Croisier, C. Cochet, J. Ribéron, I. Siberan, B. Declercq, and M. Ledrans. 2006. “August 2003 Heat Wave in France: Risk Factors for Death of Elderly People Living at Home.” European Journal of Public Health 16:583–591.

⁷⁶Day, R., G. Walker, and N. Simcock. 2016. “Conceptualising Energy Use and Energy Poverty Using a Capabilities Framework.” Energy Policy 93:255–264; Memmott, T., S. Carley, M. Graff, and D.M. Konisky. 2021. “Sociodemographic Disparities in Energy Insecurity Among Low-Income Households Before and During the COVID-19 Pandemic.” Nature Energy 6:186–193; Middlemiss, L., and R. Gillard. 2015. “Fuel Poverty from the Bottom-Up: Characterising Household Energy Vulnerability Through the Lived Experience of the Fuel Poor.” Research & Social Science 6:146–154.

⁷⁷Hernández, D. 2016. “Understanding ‘Energy Insecurity’ and Why It Matters to Health.” Social Science & Medicine 167:1–10; Nord, M., and L.S. Kantor. 2006. “Seasonal Variation in Food Insecurity Is Associated with Heating and Cooling Costs Among Low-Income Elderly Americans.” Journal of Nutrition 136:2939–2944.

⁷⁸ Cook, J.T., P.H. Casey, R. Rose-Jacobs, M.M. Black, M. Chilton, S. Ettinger de Cuba, D. Appugliese, S. Coleman, T. Heeren, C. Berkowitz, and D.B. Cutts. 2008. “A Brief Indicator of Household Energy Security: Associations with Food Security, Child Health, and Child Development in US Infants and Toddlers.” Pediatrics 122(4):e867–e875.

Young children are also at higher risk of morbidity in extreme weather events.⁷⁹ After controlling for income, Black households with children were more likely than any other group to experience energy insecurity.⁸⁰

Net Metering, Rate Structures, and Demand Flexibility

Time-of-use (TOU) rates, which reflect the varying costs of electricity generation at different times of day, can be a rate design that better aligns prices with underlying costs (see Chapter 4). They have been applied to net metering customers (e.g., in California, net metering 2.0 used to requires all customers to adopt TOU rates⁸¹) to encourage the use of electricity when low-cost renewable sources are readily available (e.g., solar in the mid-afternoon as the peak period for PG&E is 4–9 pm on weekdays after solar production drops).⁸²

The literature indicates mixed results about the impact of TOU rates on low- and moderate-income (LMI) customers (e.g., because they cannot choose their appliances or afford smart ones or otherwise meaningfully modify their electricity usage patterns).⁸³ Some analyses show that LMI customers who have opted in to TOU rates respond similarly to non-LMI customers, and are as satisfied or more satisfied with their savings (on

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⁷⁹Basu, R. 2009. “High Ambient Temperature and Mortality: A Review of Epidemiologic Studies from 2001 to 2008.” Environmental Health 8:40.

⁸⁰ Hernández, D., Y. Aratani, and Y. Jiang. 2014. Energy Insecurity Among Families with Children. New York: National Center for Children in Poverty, Columbia University.

⁸¹ An issue unique to California is that qualifying lower income customers were paid less for exporting rooftop solar electricity than other residential NEM 2.0 participants. This is because qualifying lower income customers can take service on a 30–35 percent discounted electric rate, called CARE. As NEM 2.0 compensated customers based on the retail rate, it also compensated CARE customers 30–35 percent less than non-CARE customers. NEM 3.0 adjusts for this by providing an export adder for CARE customers; to further encourage installation of distributed generation in disadvantaged communities, the NEM 3.0 Decision recommended that approximately $600 million dollars from the state budget be used to subsidize rooftop solar and storage in disadvantaged communities. Time will tell whether these policy updates can adequately encourage adoption in disadvantaged communities in California.

⁸² For additional information on net metering 2.0 in California, see https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/net-energy-metering. In states with limited rooftop solar, the peak period with highest prices may be in the afternoon (e.g., 2–7 pm for Georgia on summer weekdays). For information about time-of-use rates for PG&E and Georgia Power, see https://www.pge.com/en_US/residential/rate-plans/rate-plan-options/time-of-use-base-plan/tou-b.page and https://www.georgiapower.com/residential/billing-and-rate-plans/pricing-and-rate-plans/nights-weekends.html.

⁸³White, L.V., and N.D. Sintov. 2020. “Health and Financial Impacts of Demand-Side Response Measures Differ across Sociodemographic Groups.” Nature Energy 5:50–60.

a percentage basis).⁸⁴ This suggests that there are ways to design TOU rates to avoid adverse impacts on vulnerable populations. One example may be shadow billing, which has been used for analysis of TOU rate impacts and could be considered to hold customers harmless from increases.⁸⁵ Customers without access to the internet may face a barrier to adopting DG and qualifying for net metering, which may also hinder their ability to take advantage of or benefit from TOU rate design. More study of the effect of TOU rates on low- and moderate-income customers and their ability to adopt BTM DG is needed.

EQUITY CONCERNS OF NET METERING NON-PARTICIPATION

Net metering participants may be over- or under-compensated for the value their BTM DG provides to the system, depending on factors such as the level of a utility’s retail rates and the magnitude of solar penetration in a utility’s service territory, as discussed in Chapter 4. This can have cost consequences for net metering non-participants.

• On the one hand, net metering participants may be over-compensated, and non-participants may see upward pressure on their rates and costs when (1) net metering rates are equal to retail prices, (2) retail prices exceed the value of net metering customers’ exports to the system, and (3) net metering participant payments to the utility do not cover the utility’s costs to provide service to them. In such circumstances, costs may shift to non-participating customers whose energy bills could rise. Net metering non-participants could thereby experience an additional cost burden that may or may not be greater than the value of the societal benefits enabled by net metering participants.
• On the other hand, net metering participants may be under-compensated and non-participants may see downward pressure on their rates and costs when (1) rates and levels of solar penetration are low, and (2) solar is coincident with system demand peaks. In such circumstances, solar adoption by net metering participants may help defer transmission, distribution, and capacity investments, thereby reducing these costs that would otherwise be included in rates. Depending on the source of grid power, net metering participants can even be heavily subsidizing non-participants because they are reducing the cost of pollution and high-cost operation of coal plants. In addition, customers who were encouraged

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⁸⁴Faruqui, A., N. Powers, and S. Sergici. 2020. Study by Brattle Economists Evaluates Time-of-Use (TOU) Pilots for Maryl and Utilities. Prepared for Maryland Joint Utilities. Brattle Group. https://www.brattle.com/insights-events/publications/study-by-brattle-economists-evaluates-time-of-use-tou-pilots-for-maryland-utilities.

⁸⁵Migden-Ostrander, J. 2017. “Utility ‘Shadow Billing’ Can Shed Light on Rate Options.” RAP, August 29. https://www.raponline.org/blog/utility-shadow-billing-can-shed-light-on-rate-options.

• by net metering to invest in BTM DG, such as solar, may help drive down cost curves for these technologies and enable a broader customer base to afford them.⁸⁶

Methods to achieve an equitable outcome may vary across electricity service territories, depending on rate design and the level of net metering participation, as well as attributes of the utility and its customers’ loads. Keeping this complex set of factors in mind, an equitable rate design could ensure that net metering customers with BTM resources pay the net costs to serve them (accounting for system benefits), and non-participants do not have to make up for any shortfalls. Because net metering customers tend to have higher incomes than other customers,⁸⁷ if costs are shifted to non-participants, on average lower-income households would be subsidizing wealthier customers. The equity implications of rate design, inclusive of any cost shifts, might be considered for all rate components, not just those that may be associated with net metering.

Net Metering Participation and Equity Impacts on Electricity Bills and Rates

Any increases in rates and bills are particularly harmful to low-income communities and energy-burdened customers.⁸⁸ Increasing BTM DG adoption, which reduces consumption of utility-provided electricity, can put upward pressure on retail electricity rates and bills, particularly where costs are largely recovered in volumetric charges that differ from social marginal costs (see Chapter 4).⁸⁹ The impact on rates and bills (and hence on equity) depends on the penetration of rooftop solar in the utility’s service territory.⁹⁰ For most states, the penetration of BTM DG and therefore the impact of net metering

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⁸⁶Speelman, L., and Y. Numata. 2022. “Harnessing the Power of S-Curves: How S-Curves Work and What We Can Do to Accelerate Them.” https://rmi.org/insight/harnessing-the-power-of-s-curves.

⁸⁷Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory.

⁸⁸Borenstein, S., M. Fowlie, and J. Sallee. 2021. Designing Electricity Rates for an Equitable Energy Transition. Berkeley, CA: Energy Institute at HAAS. https://haas.berkeley.edu/wp-content/uploads/WP314.pdf; Penn, I. 2022. “A Fight Over Rooftop Solar Threatens California’s Climate Goals.” The New York Times, January 24. https://www.nytimes.com/2022/01/24/business/energy-environment/california-rooftop-solar-utilities.html.

⁸⁹Murray, B. 2019. “The Paradox of Declining Renewable Costs and Rising Electricity Prices.” Forbes, June 17, https://www.forbes.com/sites/brianmurray1/2019/06/17/the-paradox-of-declining-renewable-costs-and-rising-electricity-prices.

⁹⁰Barbose, G., and N. Darghouth. 2019. Tracking the Sun: Pricing and Design Trends for Distributed Photovoltaic Systems in the United States. Berkeley, CA: Lawrence Berkeley National Laboratory. https://emp.lbl.gov/sites/default/files/tracking_the_sun_2019_report.pdf.

on average retail electricity prices is small.⁹¹ In states or utilities with high distributed solar penetration levels and traditional net metering, the impacts on non-participants’ electricity rates and bills may be significant but depend critically on underlying rate structures.⁹² At low participation levels (as currently exist and are projected to persist in the vast majority of places in the United States), even with a substantial mismatch between net metering compensation rates, the rate impacts are likely to be small.⁹³ See Figure 5-2.

Disconnection from the Grid

As discussed in Chapter 4, changes to net metering policy could inadvertently lead to customer decisions to disconnect or defect from the grid for those who can afford it. Equity issues can arise when customers disconnect from the grid, resulting in the remaining customers paying the full cost of grid maintenance and operation, which could cause

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⁹¹ See Chapter 3 for more information.

⁹² See p. 67 in NARUC (National Association of Regulatory Utility Commissioners). 2016. Distributed Energy Resources Rate Design and Compensation. Washington, DC: NARUC. https://pubs.naruc.org/pub.cfm?id=19FDF48B-AA57-5160-DBA1-BE2E9C2F7EA0. See also Barbose, G. 2017. Putting the Potential Rate Impacts of Distributed Solar into Context. Berkeley, CA: Lawrence Berkeley National Laboratory. https://emp.lbl.gov/publications/putting-potential-rate-impacts and Lawson, A.J. 2019. Net Metering: In Brief. CRS Report R46010. Washington, DC: Congressional Research Service.

⁹³Barbose, G. 2017. Putting the Potential Rate Impacts of Distributed Solar into Context. Berkeley, CA: Lawrence Berkeley National Laboratory. https://emp.lbl.gov/publications/putting-potential-rate-impacts.

their effective rates to increase. This is of particular concern because these remaining customers are likely to be disproportionately low income.^94,95

ENVIRONMENT, HEALTH, AND OTHER SOCIETAL EQUITY EFFECTS OF NET METERING

The total capacity, technology type, and spatial distribution of BTM DG adoption hold multiple implications for the environment, public health, and equity. On a system level, solar and other BTM DG can displace fossil fuel generation and reduce associated greenhouse gas (GHG) and health-damaging air pollutant emissions, although these benefits may impact some regions and neighborhoods more than others. On an individual household level, an increase in household energy security and resilience for rooftop solar adopters can also have public health benefits. As discussed in Chapter 4, net metering tariffs can be designed to reflect some of these benefits, but these are often evaluated in aggregate. Here, we also look at equity dimensions related to the distribution of these benefits.

System Level Air Pollutant Emissions Impacts on Equity

As described in Chapter 4, fossil fuel combustion releases both GHGs and health-damaging air pollutants (fine particulates, sulfur dioxide, and nitrogen oxides). While the impact of GHGs is global (the location of the source is irrelevant), the public health impacts of air pollutants depend on when and where they are emitted. Where DG is adopted will also affect the location of the marginal power plant emissions displaced, and therefore where public health benefits may be realized. This holds implications for how externalities may be incorporated into the value of solar calculations and net metering compensation rates. For example, siting rooftop solar within a transmission-constrained load pocket,

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⁹⁴ The committee observes that some people sometimes draw analogies between disconnection from the grid and the implications of community choice aggregation (CCA), even though joining a CCA and participating in net metering are not related. In states that allow it (e.g., Massachusetts and California), CCAs may form in communities and provide electricity supply to the members of that community even though the supply is still delivered by the local distribution utility. Joining a CCA can give rise to situations where the participating customers do not pay all the costs the utility incurred on their behalf prior to their joining the CCA. Such situations can lead to cost shifts from participating customers to the customers that remain with the utility for bundled service even though they have nothing to do with net metering tariffs and any cost shifts related to them.

⁹⁵Castanda, M., M. Jimenez, S. Zapata, C.J. Franco, and I. Dyner. 2017. “Myths and Facts of the Utility Death Spiral.” Energy Policy 110:105–116.

found in many urban areas, is more likely to displace demand for fossil fuel generation, and associated air pollutants, located within that load pocket (e.g., inefficient peaker plants with high emissions rates that meet local demand when electricity cannot be delivered from the grid at large). While solar that offsets marginal generation from a power plant far away may have GHG reduction benefits, it would not reduce local air pollution.

Another consideration is the impact of DG on the operations of and emissions from specific power plants. While distributed solar that displaces fossil generation reduces GHG and air pollutant emissions overall, widespread adoption of variable technologies, such as solar, may increase the need in certain locations for rapid ramping of power plants when the sun sets or is covered by clouds, causing an increase in emissions than would otherwise occur with steady-state operation.^96,97,98 The distribution of public health impacts of power plant emissions (and the benefit of a reduction in emissions) therefore depends on the location of the power plant, other generation on that system, the magnitude of emitted pollutants, and the characteristics of the populations living near and downwind from the plant. Vulnerable populations such as children, the elderly, those with underlying health conditions, and those with high cumulative socioeconomic and environmental health burdens, are likely to experience more adverse health outcomes when exposed to pollution.⁹⁹ Moreover, certain populations, such as populations of color, are disproportionately exposed to air pollution in the United States.¹⁰⁰ Ensuring that procedural equity is prioritized can help all affected communities to have a voice in deciding how to value the tradeoffs among emission types and locations.

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⁹⁶Katzenstein, W., and J. Apt. 2009. “Air Emissions Due to Wind and Solar Power.” Environmental Science & Technology 43(2):253–258.

⁹⁷ Precise impacts for particular systems require analysis of unit commitment and economic dispatch functions. Mills, A., R. Wiser, M. Milligan, and M. O’Malley. 2009. “Comment on ‘Air Emissions Due to Wind and Solar Power.’” Environmental Science & Technology 43(15):6106–6107.

⁹⁸ Accurate estimates of the distributional emissions impacts of DG adoption—and the value of DG—require grid modeling to capture the operation of peaker power plants, energy storage, and other grid resources. Dispersion modeling would be needed to assess exposure to air pollution for populations. It should be noted that while the health impacts of air pollutant emissions tend to be highest (per capita) near the emission source the cumulative health impacts of stack emissions may extend over broad regions and across state boundaries. NRC (National Research Council). 2010. Global Sources of Local Pollution: An Assessment of Long-Range Transport of Key Air Pollutants to and from the United States. Washington, DC: The National Academies Press. https://doi.org/10.17226/12743.

⁹⁹Casey, J.A., J.G. Su, L.R. Henneman, C. Zigler, A.M. Neophytou, R. Catalano, R. Gondalia, Y-T Chen, L. Kaye, S.S. Moyer, V. Combs, G. Simrall, T. Smith, J. Sublett, and M.A. Barrett. 2020. “Coal-Fired Power Plant Closures and Retrofits Reduce Asthma Morbidity in the Local Population.” Nature Energy 5(5):365–366.

¹⁰⁰Tessum, C.W., D.A. Paolella, S.E. Chambliss, J.S. Apt, J.D. Hill, and J.D. Marshall. 2021. “PM2.5 Polluters Disproportionately and Systemically Affect People of Color in the United States.” Science Advances 7(18):eabf4491.

The assignment of value to GHG reductions has equity dimensions as well. The climate impacts of any change in GHGs do not depend on where these changes occur, but their value does depend on how future generations are weighted, relating to intergenerational equity. As described in Chapter 4, the Social Cost of Carbon is used in many cases to calculate the value of emission reductions, but these future impacts are typically discounted; the higher the discount rate, the less the impact on future generations is valued. Furthermore, the assignment of a monetary value to future climate impacts, including damage to the environment and public health, necessarily requires some measure of agreement on the monetary value of non-monetized items such as human life, raising ethical and procedural justice questions regarding the values used and who gets to determine these values.

Household-Level Health Benefits from Clean DG Adoption

The adoption of BTM solar, storage, and other clean DG, supported by net metering, rarely reduces on-site air pollutant emissions, except in the case of solar + storage systems being used to displace a diesel generator used for off-grid electricity or backup power.¹⁰¹ However, BTM solar may provide indirect human health benefits and/or facilitate cost-effective home electrification, although these may be hard to quantify. Depending on the net metering policy in place, the installation of BTM solar can provide lower and more consistent energy bills for adopters and limit the risk of shutoffs.¹⁰² In addition, the adoption of solar + storage resources can provide resilience in the case of emergencies, further ensuring access to power during critical periods and for elderly, disabled, medical device-dependent, and other vulnerable customers. See Box 5-1 for further information on net metering and resilience. Because these populations frequently face barriers to adoption of clean energy (e.g., access to capital), net metering may require modification or need to be coupled with additional policies to ensure that these additional benefits accrue to those who may most benefit.

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¹⁰¹Katalenich S.M., and M.Z. Jacobson. 2021. “Renewable Energy and Energy Storage to Offset Diesel Generators at Expeditionary Contingency Bases.” The Journal of Defense Modeling and Simulation online, https://doi.org/10.1177/15485129211051377; Shakya, S.R., I. Bajracharya, R.A. Vaidya, P. Bhave, A. Sharma, M. Rupakheti, and T.R. Bajracharya. 2022. “Estimation of Air Pollutant Emissions from Captive Diesel Generators and Its Mitigation Potential Through Microgrid and Solar Energy.” Energy Reports 8:3251–3262.

¹⁰²Hernández, D. 2016. “Understanding ‘Energy Insecurity’ and Why It Matters to Health.” Social Science & Medicine 167:1–10; Zanocco, C., J. Flora, R. Rajagopal, and H. Boudet. 2021. “When the Lights Go Out: Californians’ Experience with Wildfire-Related Public Safety Power Shutoffs Increases Intention to Adopt Solar and Storage.” Energy Research & Social Science 79:102183.

CURRENT STATE OF EQUITY REQUIREMENTS AND RANGE OF EQUITY SOLUTIONS

The following conclusions from preceding sections set the stage for assessing opportunities for net metering to enhance distributional, procedural, intergenerational, and structural equity with respect to BTM investments:

• Customers who currently adopt BTM technologies and participate in net metering tend to be higher-educated, wealthy, white, and homeowners, and they are clustered in particular states and regions of the country.^103,104
• Barriers exist for various constituencies to access BTM technologies and therefore associated net metering support, such as limited disposable income, savings, access to financing for low-income households, landlord-tenant problems for renters, and lack of access to smart meters and broadband internet.
• More costs are shifted to non-participants from net metering participants when there are high levels of BTM DG. When societal impacts such as resilience, health, and various environmental benefits of BTM DG are not considered, the benefits may outweigh the added costs.
• When societal impacts are considered (such as resilience, reliability, clean air, carbon mitigation, and health), there may be no net cost shift between net metering participants and non-participants, although there may still be rate impacts on non-participants.

Thus, there are many significant equity implications for the design of net metering, the role of net metering variants (which relate to rates), net metering alternatives (which are external to rates), and other public policies (including taxpayer-funded programs) to address access and investment in BTM technologies and net metering.

Opportunities to Enhance Distributional Equity

No single approach provides a perfect solution to enhancing the distributional equity of net metering, and each approach poses new and unique challenges. Improving distributional equity requires strategies to ensure previously underserved and structurally disadvantaged populations receive benefits from net metering while simultaneously mitigating any net metering impacts, such as possible cost shifts, to non-participants.

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¹⁰³Forrester, S., G. Barbose, E. O’Shaughnessy, N. Darghouth, and C.C. Montañés. 2022. Residential Solar-Adopter Income and Demographic Trends: November 2022 Update. Berkeley, CA: Lawrence Berkeley National Laboratory.

¹⁰⁴O’Shaughnessy, E., G. Barbose, R. Wiser, S. Forrester, and N. Darghouth. 2020. “The Impact of Policies and Business Models on Income Equity in Rooftop Solar Adoption.” Nature Energy 6(1):84–91.

An optimal approach may include several elements. For instance, net metering could be structured as buy-all and sell-all agreements, where clear communication of the utility’s commitment to more efficient rate design could encourage complementary investments that create new sources of value and customer savings.¹⁰⁵

Further research and pilot rate implementation are required to understand the tradeoffs between different net metering and rate design approaches in terms of equity and efficiency. For example,

• LMI customers and households in historically underserved or vulnerable communities could remain eligible for traditional net metering while all other households are shifted onto net billing or other alternative rates. Such an approach would have the added benefit of ensuring that LMI households receive the same financial benefits from PV adoption as early high-income adopters received.
• Buy-all and sell-all agreements could be structured with higher sell-all rates for LMI customers, or such that customers receiving bill assistance are compensated for solar generation at retail rates rather than discounted bill assistance rates. For example, in Mississippi’s version of net billing, LMI customers receive a 2.5 cent/kWh adder over avoided cost for excess generation compensation, plus an additional 2.0 cents/kWh for households with annual incomes up to 225 percent of the federal poverty level.¹⁰⁶
• LMI net metering customers could be exempt from fixed charges, minimum bills, or demand charges. For example, Virginia has a minimum bill for community solar participants, but low-income customers are exempt from it.¹⁰⁷

Programs and incentives could also be offered outside of net metering to support rooftop solar adoption by LMI customers.¹⁰⁸

• California’s Single Family Affordable Solar Homes program bought down the upfront costs of solar for income-qualified customers,¹⁰⁹ and its multifamily counterpart the Solar on Multifamily Affordable Housing (SOMAH) program

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¹⁰⁵Burger, S., I. Schneider, A. Botterud, and I. Pérez-Arriaga. 2018. Fair, Equitable, and Efficient Tariffs in the Presence of Distributed Energy Resources. Cambridge, MA: MIT Center for Energy and Environmental Policy Research.

¹⁰⁶ For further information on Mississippi’s net metering program, see https://programs.dsireusa.org/system/program/detail/5841.

¹⁰⁷ Virginia Electric Utility Regulation Act, Title 5, § 56-594.3. Shared Solar Programs.

¹⁰⁸DOE. 2021. “Solar Futures Study.” https://www.energy.gov/eere/solar/solar-futures-study.

¹⁰⁹CPUC. 2022b. “CSI Single-Family Affordable Solar Homes (SASH) Program.” https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/california-solar-initiative/csi-single-family-affordable-solar-homes-program.

• offers bill credits to affordable housing tenants who have solar installed on their building.¹¹⁰
• California’s Self Generation Incentive Program (SGIP) offers incentives to LMI and medical baseline customers (those who rely on electricity to power medical equipment) who install energy storage in their homes. Higher incentives are given to vulnerable customers who are in regions with high risk of wildfires and power shut-offs to help ensure these households and communities can remain resilient during outages.¹¹¹
• Low-income households could be exempted from paying interconnection or application fees for distributed solar.¹¹²
• Virtual net metering and community solar projects can provide carve-outs for LMI customers.

Net metering alternatives that rely on non-ratepayer funds (e.g., tax revenues) could be used to support solar adoption for target populations. As noted by Mathew Freedman in a presentation to the committee, tax revenues are more progressive in their collection and can be used to offset the need for subsidy sources for retail rates.¹¹³ For example, revenues could provide low- or no-interest financing or upfront incentives for customers in LMI and disadvantaged communities. Incentives provided from sources other than utility costs, such as tax revenues, have a less regressive impact and should be considered to address equity.¹¹⁴ Efforts to identify revenues that are progressive in their collection should be used whenever possible to avoid disproportionate rate increases for low-income non-participants.

Addressing Equity in Regulatory Frameworks

As of the time of writing, 36 jurisdictions have recently been charged with the responsibility to consider several new transformational values that are relevant to the design of

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¹¹⁰CPUC. 2021e. “The Solar on Multifamily Affordable Housing (SOMAH) Program.” https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/somah.

¹¹¹CPUC. 2021d. “Self-Generation Incentive Program (SGIP).” https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/self-generation-incentive-program.

¹¹²Brown, M.A. 2022. “Testimony Before the Georgia Public Service Commission on Georgia Power’s 2022 Rate Case.” Document Filing 192146. Georgia Public Service Commission. https://psc.ga.gov/search/facts-document/?documentId=192146.

¹¹³ Presentation to the committee on “The Role of Net Metering in the Evolving Electricity Systems.” National Academies of Sciences, Engineering, and Medicine on August 9, 2022.

¹¹⁴ Ibid.

equitable net metering tariffs and other energy regulations, policies, and programs.¹¹⁵ Many of these new authorities pertain to environmental benefits and costs and equity goals that can now be considered when designing and adjudicating net metering (and other policies). For example:

• Fifteen states have begun mapping locations of particular focus for equity and environmental justice.
• Many states will be addressing conditions in “disadvantaged,”“disproportionately impacted,” “environmental justice,” “environmental justice populations,” “native tribes,” or “frontline” communities (including California, Colorado, Illinois, Maine, Maryland, New Jersey, New Mexico, New York, and Washington).
• Seventeen states have specified addressing equity values using terms such as diversity, equity, inclusion, environmental equity, and environmental justice (Alabama, California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Washington, and Wisconsin).
• Several states have new authorities to specify distributional goals, that are generally consistent with Justice40 goals including a minimum of 35 percent of benefits from clean energy and energy efficiency programs accruing to

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¹¹⁵ Sources: All web pages retrieved by Tom Stanton in May 2022. See CESA. n.d. “Table of 100% Clean Energy States.” https://www.cesa.org/projects/100-clean-energy-collaborative/guide/table-of-100-clean-energy-states; Climate Xchange. 2022. “State Climate Policy Tracker.” https://climate-xchange.org/network/map; Climate Xchange. 2022. “State Climate Policy Tracker (Spreadsheet), Version 1.3.” https://docs.google.com/spreadsheets/d/1t912_uR-x8DeMTDNCm6y9nb6QLiiLDAdWNciteu1rOU/edit#gid=951166054; Colorado State University, Center for the New Energy Economy, and The Nature Conservancy. “Methodology Behind the State Policy Opportunity Tracker (SPOT) for Clean Energy.” https://spotforcleanenergy.org/about; E9 Insight. 2021. “Pathways to Changing the PUC Mandate: A Regulatory Review.”Prepared on behalf of the Institute for Market Transformation. https://drive.google.com/file/d/1c244_ryG4C15vnG1tuGu_1m8wgn9DwnK/view; E9 Insight. 2021. “PUC Mandate Database—Final.” Prepared on behalf of the Institute for Market Transformation. https://docs.google.com/spreadsheets/d/1acwblw_Q67d_bpdKxFQzJbsvP19WGj59/edit#gid=286574870; Klee, R.J., and S. Baldinger. 2021. “Review of State Public Utility Commission Statutory Mandates.” Report for the Institute for Market Transformation PUC Mandate Project. New Haven, CT: Center for Business and the Environment at Yale. https://drive.google.com/file/d/1bvQTifqgxGS5i7_CU1uj0HLPBQW5kjYV/view; NRRI. 2022b. “State Clean Energy Policy Tracker.” https://www.naruc.org/nrri/nrri-activities/clean-energy-tracker; Zitelman, K., and J. McAdams. 2021. The Role of State Utility Regulators in a Just and Reasonable Energy Transition—Examining Regulatory Approaches to the Economic Impacts of Coal Retirements. Washington, DC: National Association of Regulatory Utility Commissioners. https://pubs.naruc.org/pub/952CF0F2-1866-DAAC-99FB-0C6352BF7CB0.

• disadvantaged communities (New York),¹¹⁶ and creating a Justice40 Oversight Committee (Delaware).^117,118

Improved modeling based on new data for equity mapping can make it possible to better evaluate the equity of net metering ratemaking variants and alternative outside rates. Vulnerable communities and individuals are hidden in aggregated metrics; most studies do not have sufficient levels of resolution. As experience with equity mapping grows, alternative net metering design features may result. For instance, it may be possible to design geographically based rates for exported generation that are tagged to the time-dependent capacity available on specific circuits. These efforts will only be feasible, however, if data collection is sufficient and transparently shared with stakeholders.

Opportunities to Enhance Net Metering Procedural Equity

Planning for net metering and other tariff designs needs to engage the views of a broader spectrum of stakeholders just as integrated resource planning and distribution system planning processes have begun to do. Currently, community participation in planning is often limited and biased toward well-resourced groups that can retain legal counsel and have the capacity to work with the complexities of rate-case litigation. While some agencies provide utility-funded intervenor compensation, which can enable under-resourced groups to participate in proceedings, such engagement can still be prohibitively complicated.

One way to address procedural equity is to create opportunities for dialogue with broad representation. Development of alternative net metering design features in

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¹¹⁶NYSERDA (New York State Energy Research and Development Authority). 2022a. “New York State Releases Draft Disadvantaged Communities Criteria to Advance Climate Justice.” March 9, 2022. https://www.nyserda.ny.gov/About/Newsroom/2022-Announcements/2022-03-09-New-York-State-Releases-Draft-Disadvantaged-Communities-Criteria.

¹¹⁷Reta, M. 2023. “How States Can Help Implement the Justice40 Initiative.” NRDC Expert Blog, January 27. https://www.nrdc.org/experts/mikyla-reta/how-states-can-help-implement-justice40-initiative.

¹¹⁸ The Biden-Harris administration created the Justice40 Initiative to confront and address decades of underinvestment in disadvantaged communities. The initiative will bring resources to communities most impacted by climate change, pollution, and environmental hazards. For more information see https://www.transportation.gov/equity-Justice40.

collaboration, consistent with current best practices for community engagement,¹¹⁹ can be used to integrate the diverse perspectives from engineers and scientists, local communities, and business and management practitioners,¹²⁰ engaging and empowering individuals and communities who have been marginalized.¹²¹ Such approaches lead to more accurate and useful research results, better usability of data, and increased buy-in

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¹¹⁹ An excellent example of this is the work of the Texas State Department of Transportation’s planning of alternative transportation modalities. Lisska et al. 2021. “Equitable Transit Oriented Development.” Transportation Research Board Committee Meeting. June 8, 2022. https://www.nationalacademies.org/event/06-08-2022/data-metrics-and-analytic-methods-for-assessing-equity-impacts-of-surface-transportation-funding-programs-meeting-6.

¹²⁰Campbell, H., and D. Vanderhoven. 2016. Knowledge That Matters: Realising the Potential of Co-Production. Manchester, UK: N8 Research Partnership; Sanchez Rodriguez, R., D. Ürge-Vorsatz, and A.S. Barau. 2018. “Sustainable Development Goals and Climate Change Adaptation in Cities.” Nature Climate Change 8:181–183.

¹²¹Bixler, P., J.A. Belaire, K.M. Faust, M. Scoggins, and A. González. 2022. “Exploring the Connection Between Transdisciplinary Co-Production and Urban Sustainability Solutions: A Case Study at an Urban Stream Management Symposium.” Urban Ecosystems 25:1207–1216; Cook, E.M., M. Berbés-Blázquez, L.M. Mannetti, N.B. Grimm, D.M. Iwaniec, and T.A. Muñoz-Erickson. 2021. “Setting the Stage for Co-Production.” Pp. 99–111 in Resilient Urban Futures, The Urban Book Series. Cham: Springer; Norström, A.V., C. Cvitanovic, and M.F. Löf. 2020. “Principles for Knowledge Co-Production in Sustainability Research.” Nature Sustainability 3:182–190.

to policy solutions that are people-centered and user-led.¹²² Some of the typical steps in knowledge co-production processes are shown in Figure 5-3.

Opportunities to Address Intergenerational and Structural Equity

Low-income and other distributional inequities associated with BTM DG and net metering are rooted in historical structural inequities, such as underinvestment in infrastructure, redlined mortgage financing, and low levels of home ownership. Broad initiatives to address these inequities may help enable more equitable adoption of DG and participation in net metering.¹²³ Programs can provide incentives for LMI households living in single- or multi-family homes to install solar. For example, the Solar Massachusetts Renewable Target (SMART) Program gives special preferences to low-income customers.¹²⁴ Certain non-ratepayer incentives for solar adoption are not always supportive of LMI participation. Incentives such as point-of-sale rebates, or financing for those with low or no credit, can better enable additional LMI customers to adopt BTM DG and participate in net metering than tax rebates that tend to benefit wealthier customers who have the tax liability to use them. The new Inflation Reduction Act (IRA) has included $27 billion in funding to inject into state, local, tribal, and non-profit entities to provide financing assistance for a variety of GHG reduction projects, with a significant portion of that funding required to benefit low-income and disadvantaged communities.¹²⁵ This federal funding will no doubt include projects aimed at helping LMI households install or otherwise have access to solar system resources.

Historic disinvestment in infrastructure needed to support DG adoption in many LMI communities and communities of color can lead to lower grid hosting capacity. Customers may also need to upgrade roofs and other infrastructure before installing solar. Even lack of access to energy efficiency measures may increase energy bills for these

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¹²²Audia, C., F. Berkhout, G. Owusu, Z. Quayyum, and S. Agyei-Mensah. 2021. “Loops and Building Blocks: A Knowledge Co-Production Framework for Equitable Urban Health.” Journal of Urban Health 98:394–403.

¹²³ EPA Administrator Michael S. Regan, has committed the U.S. Environmental Protection Agency to create a national Office of Environmental Justice and External Civil Rights to consider how communities have been impacted over time, considering how counties that are poor in income, health, and political power, and are mostly minorities, have been targeted for environmentally toxic storage tanks, coal plants and their combustion residues, and other environmental injustices. The Biden administration has called on all federal agencies to ensure disadvantaged communities receive 40 percent of the benefits from federal investment in a range of areas including renewable energy.

¹²⁴Lane, C. 2023. “Massachusetts SMART Program Explained.” Solar Reviews, January 11. https://www.solarreviews.com/blog/massachusetts-smart-program-replaces-srecs.

¹²⁵ For additional information see EPA. 2023. “Greenhouse Gas Reduction Fund,” https://www.epa.gov/inflation-reduction-act/greenhouse-gas-reduction-fund.

households, which will then require larger solar systems and more capital. Investments, such as those enabled through the IRA, in expanding energy efficiency, fixing rooftops, and upgrading electric grids, could help reduce the barriers for households in historically underinvested communities to adopt DG and participate in net metering.¹²⁶

FINDINGS

All electricity rates, including net metering tariffs, can raise significant equity issues. These equity concerns exist across a variety of dimensions: distributional equity, including who receives net metering benefits and what impacts net metering has on energy burdens, energy insecurity, and energy poverty considerations; proceduralequity, related to whether diverse voices are included in the process of setting rates; structural equity, reflecting issues such as barriers to net metering introduced by historic disinvestment in infrastructure; and intergenerational equity, involving considerations that arise when considering long-term impact of decisions, such as those regarding climate change.

To produce more equitable outcomes, policymakers need to build equity considerations into the design of net metering, its variants, and alternatives, inclusive of companion policies such as legislative and taxpayer-funded programs. The committee suggests that all four dimensions of equity (distributional, procedural, structural, and intergenerational) serve as guideposts for all utility rate and program designs, including net metering. The committee’s specific findings and recommendations address the distribution of net metering benefits among customers; potential adverse impacts of net metering, such as cost shifts; and additional direct and indirect societal considerations associated with net metering.

Finding 5-1: Any rate and bill impacts resulting from net-metered BTM DG may accrue disproportionately to low-income and other disadvantaged households that have faced barriers to solar adoption. Low-income and energy-burdened households may be less able than other customers to bear any bill increases if there are cost shifts.

Finding 5-2: BTM DG, which can be enabled by net metering, holds the potential to both reduce costs and provide bill stability, which has particular value for populations

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¹²⁶ Advocacy groups have also launched community-based solar programs to enable low-income households to enjoy the benefits of distributed rooftop generation, such as buying shares of community solar systems. Brown, M.A., A. Soni, M.V. Lapsa, K.A. Southworth, and M. Cox. 2020b. “High Energy Burden and Low-Income Energy Affordability: Conclusions from a Literature Review.” Progress in Energy 2(4):1–35; Weissman, G. 2017. “Rental Rooftops: A Missed Opportunity for Solar Energy.” https://frontiergroup.org/blogs/blog/fg/rental-rooftops-missed-opportunity-solar-energy.

facing high energy cost burdens and energy insecurity, such as low-income households, renters, populations of color, the elderly, and those dependent on electric power for operating home medical care devices.

Finding 5-3: Barriers, such as lack of access to financing, hinder BTM DG adoption and net metering participation for certain populations (low-income households, renters, and communities of color). As a result, they have not benefited from net metering or from other BTM policies to the same degree as their wealthier, White, and home-owning counterparts.

Finding 5-4: The trends show that both inclusive financing techniques and community solar are helping to enable lower-income households to access the benefits of renewable energy and electricity bill savings in more meaningful numbers.

Finding 5-5: Community solar programs provide an opportunity for renters, homeowners with a shaded or poorly maintained roof, and households without access to capital to receive some of the benefits of distributed solar.

Finding 5-6: Net metering tariffs or complementary incentives can be designed to reflect locationally specific benefits of DG, such as grid resilience in vulnerable communities, the deferral of grid investments, and to support pollution reduction goals in environmentally overburdened areas.

Finding 5-7: Net metering can be used to support the installation of solar + storage to achieve resilience goals, including household resilience, community resilience, and grid resilience. All of these may be of particular benefit for certain vulnerable populations such as the elderly and medical baseline customers. However, net metering tariffs often limit the ability to adopt potentially cost-effective resilient BTM project designs, such as over-sizing solar systems or linking multiple rooftops. Recognizing that oversizing or linking of systems could introduce more direct federal involvement over the pricing of exports from such BTM systems, as discussed in Chapter 7, net metering tariffs might be designed to enable such outcomes or be developed in parallel with companion policies, particularly for disadvantaged customers.

Finding 5-8: Customers seeking to determine whether to adopt BTM DG and participate in net metering need access to basic information about system costs and utility

bill impacts in a form that they can understand and use. Such information will help to equip customers with information to make decisions, thus enhancing procedural equity.

Finding 5-9: Experienced regulatory practitioners and intervenors in rate cases need to have access to much more information, to determine whether rates under net metering policy reflect cost-of-service for different customer classes, the cost of displaced electricity, the value of deferring the construction of new distribution, transmission, and generation (particularly fossil fuel plants).

RECOMMENDATIONS

Recommendation 5-1: Rates should be designed consistent with updated ratemaking principles, with particular attention to the equity impacts for customers least able to afford them. To help accomplish this, utilities and policymakers should ensure that information about utility rates is easily available to all customers (e.g., not just through postings on websites), and that all customers have a voice and can participate in the design of rates.

Recommendation 5-2: Decision makers on electricity rates should consider both the impacts of the distribution of benefits and costs, as well as total benefits and costs when designing net metering policies, and ensure that adequate data are collected and made publicly available to do so. These benefits and costs should include and balance, among other things: public health impacts, job impacts, land use impacts, and the future options that will be enabled or precluded.

Recommendation 5-3: Fair ratemaking should allow for affected consumers to have a meaningful voice in the process (so as to ensure procedural equity) and take into consideration (among other things) the potential impacts of rates on various customer segments (from an economic efficiency and equity point of view), and on customers’ decisions about adopting BTM technologies or load or grid defection in the context of technology trends. Regulators and decision makers of publicly owned utilities should ensure that such information is provided to the public and is easily understandable and accessible.

Recommendation 5-4: Investments to reverse historic structural inequities, such as grid upgrades in historically disinvested communities to increase hosting capacity,

should be considered to enable broader adoption of BTM DG and participation in net metering.

Recommendation 5-5: Policymakers should consider expanding community and government-funded programs, such as low- or no-interest financing, to expand access to BTM DG by low- and medium-income customers and their participation in net metering. In addition, incentives that focus on income-qualified customers and renters can help reduce inequities due to lack of access.