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Myths that Solar Owners Tell Themselves

Reaching into the e-mailbag to address some unhappy blog readers.

There is a serious energy and climate policy debate about the appropriate role of behind-the-meter generation, particularly rooftop solar, in a decarbonizing electricity system. The serious discussion includes topics like 

  • the relative cost of electricity from rooftop solar versus grid scale solar,
  • the potential distribution cost savings from generating near the point of consumption,
  • the potential strain on the distribution system from distributed solar due to backflows, 
  • the environmental damage averted when rooftop solar is added,
  • the environmental damage averted from grid scale solar generation,
  • the environmental damage caused by building and operating a solar or wind farm, 
  • the degree to which solar customers shift system fixed costs to non-solar customers,
  • how to equitably incorporate behind-the-meter generation into the system

and other important facets of the debate.  My EI colleagues and I have been known to weigh in on some of these discussions from time to time.


When we do, we often hear from solar owners with their own arguments about the righteousness of their panels.  It’s tempting for an energy geek, like me, to focus on the serious policy discussion and simply ignore some less thoughtful arguments that show up in my email inbox.

But solar owners are adamant, sometimes angry, mostly concerned about the environment, and numerous.  And they vote, both literally and also figuratively, with their wallets.  So today, I’m going to reach into the e-mailbag and respond to a few of the arguments I have received from rooftop solar owners that (mostly for good reason) seldom make it into the policy discussion. 

[These are based on actual emails, though I have edited and condensed the arguments.]

Argument #1: “You claim that I get paid the retail price for electricity that my panels send into the grid, but I just looked at my bill and I actually get paid less than 4 cents per kWh for exports.”  You get paid that lower compensation only for excess kWhs your system injects into the grid beyond the quantity that offsets all of the kWh you take from the grid over the year. For instance, if over the course of the year you consume 1300 kWh from the grid and you inject 1325 kWh into the grid, you will indeed get paid some lower amount like $0.04/kWh for the extra 25 kWh.  But, you will first get the 1300 kWh you consumed from the grid offset by the first 1300 kWh you injected into the grid. In other words, rather than having to pay the retail price for those 1300 kWh, you will have to pay nothing because they will be netted out against the first 1300 kWh you injected into the grid. So you will have saved the full retail price on those 1300 kWh. The great majority of solar homes don’t produce excess over the course of a year, so most solar homes get credited the retail price for all of their exports. (If you got your solar system in most of California after 2016 and are under “NEM 2.0”, you don’t get the complete retail credit. You still need to pay a “non-bypassable charge” of about 2 cents per kWh, out of a full retail price of about 25-30 cents.)



Argument #2: “When I inject electricity into the grid, my utility sells it to my neighbor for the retail price, so if they pay me the retail price, it’s a wash.” Alas, no. The utility would still sell the electricity to your neighbor, even if you did not have rooftop solar, only it could have bought the power for your neighbor at the wholesale price, which in California averages less than one-third of the retail price. As many of us here at the EI blog have written about, that difference goes to pay for all sorts of fixed costs, from expensive renewable power contracts signed years ago to jumpstart the industry, to wildfire mitigation and compensation for past victims, to energy efficiency programs, support for low income customers, subsidies for rooftop solar, and many other expenses.  When the utility pays you the retail price for injections, they end up with less revenue towards those fixed costs, which means the regulator then allows them to raise the retail price further, so they can still cover them.  Even most rooftop solar advocates in California now recognize that there is such a cost shift, though they argue there are many other cost shifts in the system as well.




Argument #3: “Rooftop solar is disrupting the electricity industry and utilities are just fighting against their inevitable extinction. The solution is to let them go under, like Kodak and Blockbuster, rather than continuing to subsidize their outdated business model.”  This comes from a misunderstanding about what electric utilities do these days. For the most part, they are not in the electricity generation business anymore. They buy electricity from independent generators, just as non-profit Community Choice Aggregators (CCAs) do, and sell it at cost to customers. Utilities make their money building and maintaining transmission and distribution lines, on which they are allowed to earn a rate of return on their capital investment. Electric utilities may go extinct someday, but that will be when we no longer need transmission or distribution lines because every customer is generating all of their own power – 24 hours a day, 365 days a year. That’s unlikely to happen in my lifetime, and probably not in yours if you are reading this blog post.

Argument #3A: “Utilities invested in a bad technology – grid infrastructure – that is now unprofitable. That should be their problem and utility shareholders should eat the losses just like in any other market.”  Utilities could easily still recover all of their costs if they were treated like firms in any other market and allowed to set their own prices.  They are not allowed to do that, because they are regulated monopolies, and part of that regulatory framework is that they are allowed to charge prices that collect enough revenue to cover their costs unless they are shown to have been imprudent or fraudulent. Costs that fit into those categories should be thrown out, but everything else is on us, the ratepayers. Both legally and in practice, the savings that go to rooftop solar owners are going to be paid by other customers.




Argument #3B: “It’s time to take away the utility’s monopoly and allow others to compete to sell power, including customers.”  Yes, fine. In California, with CCAs and behind-the-meter generation, that’s already happening on the energy component. But we still need the transmission and distribution lines, and no one serious is suggesting those should be operated as anything but a regulated or publicly-owned monopoly. (Some people argue that monopoly should be a nonprofit run by a government agency, as with municipal utilities. Those who believe this is a panacea apparently have never been to the DMV, and many are the same people who ridicule the dysfunctional California Public Utilities Commission, a government agency.)

Argument #4: “There aren’t barriers to poor people going solar anymore. Companies will put the panels on a homeowner’s roof for free and sell them the power.”   There are companies that offer such long-term power purchase agreements (PPAs) to homeowners with good credit, along with what is effectively a lien on the house, and at a higher cost per kWh than buying or leasing the panels.  Of course, low-income households are much less likely to be homeowners and less likely to have good credit. So, in the real world, there are still very large barriers to poor people going solar. That’s why, as of 2019, 4.6% of the 1.3 million PG&E households with annual income below $50,000 per year have solar, while 15.4% of the 0.7 million households with income above $200,000 have solar, according to research we will be releasing in July.  

Argument #5: “With electricity rates above 25 cents per kWh, rooftop solar is the only thing that makes it cost-effective to electrify my space heating, water heating, or vehicle.”  There is certainly truth to that, but let’s be clear on how solar customers are affording electrification: by having other customers subsidize them through even higher electricity prices.  The cost shift when one house puts in solar makes electrification even less affordable for everyone else.  The problem of skyrocketing electricity prices can’t be solved by shifting costs from those with solar to those without.

Media discussions of energy and climate change are riddled with myths from all political directions, whether it is that we could solve our problems easily with massive investments in nuclear power, carbon capture, or a system that is predominantly distributed generation. We need to continue the serious debate over the role of all electricity generation sources, but we also need to address the popular myths that will otherwise sidetrack the serious discussion. And we all need to be open to changing our minds as a result of changing technology and new data.  That’s how we will get to a clean and equitable energy transition.

Find me @BorensteinS most days tweeting energy news/research/blogs.

Keep up with Energy Institute blog posts, research, and events on Twitter @energyathaas.

Suggested citation: Borenstein, Severin,  “Myths that Solar Owners Tell Themselves”,  Energy Institute Blog, UC Berkeley, June 6, 2022,

Severin Borenstein View All

Severin Borenstein is Professor of the Graduate School in the Economic Analysis and Policy Group at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He received his A.B. from U.C. Berkeley and Ph.D. in Economics from M.I.T. His research focuses on the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General's Gasoline Price Task Force. In 2012-13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017. From 2015-2020, he served on the Advisory Council of the Bay Area Air Quality Management District. Since 2019, he has been a member of the Governing Board of the California Independent System Operator.

51 thoughts on “Myths that Solar Owners Tell Themselves Leave a comment

  1. Wisconsin has a fixed daily connect fee to pay for grid related expenses. About 75 cents for each gas and electric or a total of $1.50 per day. We get 3 cents per KW and some areas 2 cents per KW for electricity sold to the grid. The most we sold back was 400 KW or $12.00 which reduced our electrical bill to $10.00. March, April, May and September are non air conditioning months and we often have 100 to 200 KW to sell. Now we bought an electric car to use the extra electricity.

  2. Argument #4. This is where you really shine a light on the myopic, outdated thinking of the utilities that continue to think of the utility as Thomas Edison did a hundred years ago. Let us go on the assumption that climate change is an existential threat, that the resources available to us are finite, that there will be a very serious problem if the population continues to grow, etc. It’s long past time to think out of the box.

    Instead of looking at ratepayers as cows to be milked, look at them as partners for a future. Why won’t the utilities offer programs similar to the “free” rooftop solar companies? It’s time that the utilities get back to their mandate of serving the people. What’s the problem with that? They’re guaranteed a profit!

    • This statement is so confusing I can’t figure out what the logical argument is or even how it relates to Severin’s Argument No. 4.

      Perhaps he can clarify his statement?

      • The utilities are preventing a truly free market for energy. One case in point is that, in San Diego, one is not allowed to buy energy between midnight and 5am (9¢/kWhr) storing it in batteries, then selling it back between 4PM and 9PM (53¢/kWhr). At 50% battery efficiency, a $20k storage system would pay for itself in less than 4 years.

        With more and more solar coming online, the daytime price of energy will approach zero or even negative (Already California has had to give Nevada energy) This is when Adam Smith’s invisible hand comes in and slows down investment into solar.

        A partnership would be that the utilities would give incentives for homes to put in storage to mitigate or even eliminate, the duck curve. These distributed energy sources, like rooftop solar, would make the grid more reliable. (Distributed systems are inherently more reliable than point sources.) It would also obviate the need for more transmission lines.

        In this scenario, though, the utilities would not have the expenses they now have for construction (labor, material, maintenance, interest, depreciation, administrative), thus it would lose all the profit they make from those expenses. But, if they shared in the construction of the storage, they would have a new source of construction expenses from which they would profit. Just that the absolute dollar amount would be less.

        The discussion about the poor not being able to participate is just highlighting the inequalities promulgated by capitalism as it is currently practiced. That argument can be used for any investment not just rooftop solar. With the proposals currently before the PUC, the cost of installing rooftop solar would be prohibitively expensive for everyone. I guess that’s some sort of perverse equality. Follow the money: who profits from no rooftop solar?

        The entertainment industry suffered greatly when the streaming technology became dominate. The utilities need more creative minds to manage the transition from point source energy to distributed source energy.

  3. Argument #3 “… electric utilities do these days. For the most part, they are not in the electricity generation business anymore …” This is too true. They are in the construction business. The more they build, the more money they make, thus the impetus to build more. The mandate for these public monopolies, and the reason that the are allowed to be monopolies and guaranteed a profit, is that they are to serve the public good. Serving the public good would be to encourage solar, particularly on the already wasted space of rooftops.

    You write of “… shown to have been imprudent or fraudulent …” Imprudent: having a program to buy alternate energy sources only to dismantle them. (It happened. I was there.) Fraudulent: “Rooftop solar is detrimental to the grid.” No, it increases reliability of the grid and is detrimental the to bottom line of the utility. (see my comment on Argument #2)

  4. Regarding argument #5. The inefficient retail pricing of electricity (collecting fixed costs via energy charges per kWh) is not corrected by the installation of rooftop solar. As my mother taught me, two wrongs don’t make a right; in this case inefficient prices that shift fixed costs to others, even though the solar household benefits from the fixed costs, and unnecessarily expensive solar capacity. Rooftop solar appears cost-effective from the perspective of an individual household, but is not cost-effective from a societal perspective in most cases. We should be investing in cost-effective renewables to help address carbon emissions and climate change, not helping higher income households avoid paying for the grid.

  5. Argument #2: It can be mathematically and logically proven that energy from rooftop solar goes to the nearest consumer. ( The utilities charge for the grid usage as a function of energy consumption. Therein lies the problem. The grid is built as a function of maximum power. That is, the size of the panel. Therefore, each entity that connects to the grid should pay for the grid in an amount that is relative to its panel size, not its energy consumption. A napkin calculation for a 200A panel (voltage is fixed so power is proportional to current) in San Diego County puts that connection fee $16-$20/mo. SDG&E does not report its expenses for grid, so this number is hard to pin down. Then energy costs would be wholesale plus the 10% guaranteed profit.

    The utilities and even in this blog, “electricity”, and “power” are conflated with “energy”. That is the same as conflating “transportation”, “hauling” and “cargo”. In this august blog, I implore you to use these terms properly.

    • Your concept is spot-on. However, I’m not sure the monthly connection charge is right. It seems too low.

      I assume you are only allocating the a portion of the low-voltage distribution system to the solar customer. However, solar customers use the entire distribution system and the transmission system at various times. They should also pay a fair share of those related fixed costs.

      Where the energy goes that the solar customer exports to the grid is immaterial. In addition, it is not all consumer locally. Some of the energy flows throughout the network based on the impedance of all the paths connecting each load.

      • I agree that the connection charge may not be right. I commissioned a financial analyst to determine the expenses for the grid from the SDG&E SEC filings. After six hours of review, he was unable determine that number. The desired number would have included the SDG&E’s share of the cost of the transmission lines. My number comes from an older SEC filing when SDG&E did break out those numbers.

        When you write, “solar customers use the entire distribution system” you are employing one of the myths that the utilities tell themselves. The proof shows that the energy goes to the nearest consumer. If a consumer on the same distribution transformer consumes all the energy from the rooftop producer, no energy goes beyond the transformer. If all the energy is not consumed at the transformer, then it goes to the nearest consuming transformer (the sum of the energy consumed by customers connected to the transformer) on the distribution circuit. If there is excess energy on the circuit, the energy goes to the nearest consuming circuit on the distribution station.

        If there is an excess of energy at the distribution station, then it goes to the nearest consuming distribution station on the transmission line. If this is the case, the consumers at the other end of the transmission line who should be paying for the transmission line. But this case will not happen until there is a lot more rooftop solar.

        The point being is that, today, the rooftop solar customer is only using the grid when consuming. In other words, just like the non-rooftop solar. The rooftop solar customer is just using less energy. The utilities currently use energy as its basis to pay for the grid. This is the source of the inequity. It should be using power (panel size) as the basis, for that is how the grid is sized.

        Where the energy goes is significant when one wants to be fair in how the grid is supported.

        Actually, it is not strictly true that rooftop solar does not use the grid. In order to transmit the energy it generates it needs to be in sync with the grid. That is, it uses the shape of the waveform of AC Voltage and current. This use is dictated by the utilities and physics.

      • If consumers are required to pay a fixed charge, they also should be allowed to trade that capacity among themselves based on their relative demands. Robert, you should know this as a market-solutions advocate. Those types of transactions devolve down to per hour charges, which is exactly what we have today. In fact, the scarcity pricing that you advocate for short run marginal costs are based on not only generation costs but also transmission capacity scarcity. How can you reconcile using hourly (or 5 minute) pricing for transmission for wholesale power but then fixed charges for retail pricing? So fixed charges are not justified from the perspective of economic efficiency under the orthodox construction.

        Yes, the fact that most if not all power from rooftop solar flows within a circuit and certainly stays below the substation is relevant to grid utilization responsibility. As pointed out above, the transmission system should be priced on a per kWh basis consistent with bulk power market pricing.

        • M. McCann confuses himself.

          A substation has a “panel” rating when facing the transmission grid. The substation’s portion of the fixed cost of the transmission is proportional to the sum of all substations’ panels. This cost would then be passed onto all of the circuits of the substation. That is each circuit has a panel rating when facing the substation and its portion of the fixed cost … and so on down to the panel of each meter on the circuit.

          “[consumers] also should be allowed to trade that capacity”. This phrase would only make sense if “consumers” meant “owners of the meter at a panel” and “capacity” meant “futures contracts”. If this is what M. McCann meant, I whole heartedly agree.

          “… power from rooftop solar … stays below the substation” “power” should be “energy” Distinctly different words. The infrastructure is designed for peak “power”. “Energy” is the consumable. An analogy: You order pizza delivered, the pizza is energy. One would have it delivered by vehicle, the infrastructure. A cheap Corolla would keep your delivery costs down, not a Mack truck, which would deliver cheese to the pizza parlor.

      • “…it [home solar generation] is not all consumed locally. Some of the energy flows throughout the network based on the impedance of all the paths connecting each load.”

        Robert, and your clarification is spot-on. It is certainly possible for electrical energy to flow “backwards” from a distribution grid when, for example, an abundance of homes in an area have solar arrays and it’s a sunny day. Your neighbor might be getting some benefit from your solar panels – but if hers are generating more than yours, or she’s on vacation and her home is consuming very little electricity, she’s getting none/very little benefit from your solar panels.

        Because conditions change, because both consumption and generation are constantly in a state of flux, because binding grid constraints limit the flow of electricity on a regional basis throughout the grid – quantifying the benefit every non-solar customer receives from every solar customer would be impossible.

        That doesn’t mean crediting home solar producers at retail rates is justifiable. They offer no additional benefit to the grid than any commercial farm; arguably, their output is more intermittent and unpredictable. Yet commercial producers are rewarded at rates that are a fraction of those available to home solar owners.

      • The point of the comment is how to fairly pay for the grid. What isn’t fair about my suggestion? Do you have a logical way of paying for the grid in fair manner? The kWh method is clearly not equitable.

        I’m looking for solutions here.

  6. If we’re discussing myths, perhaps the EI can comment on the most obvious one – that anything being done by the current electric utilities will ever lower electricity prices in California. For years we’ve been told that grid-scale solar and renewables would drive down consumer prices – it has yet to happen. On the contrary, every new installation is an opportunity for utilities to soak consumers for even more fees to ‘upgrade’ the grid and pad investor portfolios.

    The EI blog would be much more interesting if rather than taking the current system as gospel, it would provide a credible explanation as to how we will arrive at a better one. And by a better one, I don’t mean one where rooftop solar owners pay significantly more than non-solar customers do today, due to hook up charge, $8/kW generation charge + NBCs. Customers of California IOUs pay the highest electricity rates in this part of the nation. How are we going to fix that?

    In the meantime, the most hopeful news by far is that V2L/V2H are finally going to become practical in the near future. With that, rooftop solar plus a small home battery, a bidirectional charger, and an EV should be sufficient to move all solar consumption behind the meter. The EV will essentially store daily production, and dole it back out as necessary. And if the CPUC decides to go ahead with punitive fees for rooftop solar hookups, people can simply disconnect their solar installations from the grid entirely.

    • If you go back and reread Severin’s Argument 2 you will discover that much of the costs utilities are required to recover from their customers have nothing to do with the actual cost of providing electricity to those customers. Take your complaint to the State legislators and the CPUC.

      • Then perhaps much more focus should be on the implications of recovering those costs through rates instead of other means, both taxes and shareholders, rather than on a narrow focus on customers only.

      • Your argument would be more convincing if all utilities in the state were charging comparably ridiculous rates. They’re not. You only have to look at the vast difference between what e.g. SMUD charges and PG&E (to say nothing of Santa Clara municipal power). The excess costs are a direct result of mismanagement and criminal negligence and other misbehavior on the part of PG&E and other IOUs.

        I certainly don’t disagree that California as a whole has issues, and the CPUC (and legislators) bear a good part of the blame, but the IOUs really are in a class of their own.

    • I’m sorry but but the concept you describe in your third paragraph is really a pipe dream for the vast majority of customers. The reason for this is the seasonality of solar production. Today (early June), with no AC and no heat, we are producing several times our daily usage. But in mid-winter, for us to cover our daily usage (especially since we replaced our propane furnace with a high efficiency heat pump), we would probably have to increase our system size by at least 50% to 100%. Then where would all of the spring / early summer production go?

  7. re: #3(s). Like CCAs coming along and taking away generation from IOUs, is there any reason why the transmission/generation function could also be taken away and served by a public entity? Muni’s like SMUD can do all those functions I believe within their areas. The problem with the IOUs making their money off of transmission/distribution, especially the former, is that there would be a tendency to value longer distance sources of electricity over local sources as long distance transmission would be more remunerative. And while IOUs are regulated they still have to make profits for their shareholders; so the tendency would be to build rather than not, especially since there is a guaranteed return. While what they build is regulated there’s the tendency for agency “capture” to favor what the IOU prefers. A public agency that is not driven by the corporate requirement of placing shareholders’ earnings first, could place values like safety par to profit. It wouldn’t be driven to overbuild.

    • You make some good points. However, the fundamental question is whether non-profit entities can attract the talent needed to competently manage the network assets.

      • You need to offer competitive pay. There are many who would rather work in public service than in a corporate environment.

      • “attract talent”? Now that is a good one. Let’s add it to the list of “myths utilities tell themselves”.

    • We’ll always have junk projects like the Moss Landing Batteries or the Sunrise Powerlink. The high complexity (cost-allocation, assembling land, NIMBY backlash, etc) of long-haul transmission provides a barrier to these sorts of projects. Intra-state solar/wind and flexible EV load will naturally lead to lower utilization rates of our long-haul lines and this will tend to make building transmission harder still.

      Love the post but how did Severin miss Myth 6? “People can simply disconnect.”

    • Except that municipal utilities like LADWP tend to suffer from many of the same problems as PG&E and Southern California Edison. SMUD gets to take advantage of legacy Federal hydropower allocations. SMUD one foray into nuclear power was a disaster compared to PG&E successful tenure at Diablo Canyon.

      • SMUD and most of the other municipal utilities in California actually illustrate how well public power can do when governed correctly. LADWP suffers from being a cash cow for the city government. On the other hand, Burbank, Glendale, Pasadena and Anaheim are considered to be well-run, low cost operations without substantial public power. SMUD came back from the brink of being used as PG&E’s nuclear financing subsidiary with the closure of Rancho Seco–SMUD rates actually exceeded PG&E’s in 1989, but are now substantially below.

        • “On the other hand, Burbank, Glendale, Pasadena and Anaheim are considered to be well-run, low cost operations without substantial public power.”

          Richard, not sure how you’re defining ‘public power’, but as a resident of Burbank I can assure you that 100% of residents’ grid electricity is provided by Burbank Water & Power (BWP), a division of the City of Burbank. The City is a 100% public entity.

          Burbank has erected impressive solar arrays in various locations, mostly on the roofs of public schools, and BWP manages an array of electric car charging stations. We are also fortunate to have our own state-of-the-art gas plant, with two combined-cycle gas turbines and one simple-cycle gas peaker. Though our grid mix changes from year to year, it’s roughly 33% gas-fired electricity, 7% nuclear, imported from Palo Verde in Arizona, and 26% renewables, from local solar arrays and imported hydro/wind.

          A full third of Burbank’s electricity is imported from Intermountain, a coal plant in Utah. In conversations with officials at BWP in charge of procurement, I was told the reason was cost – that importing more renewables would require resorting to our gas plant more for baseload electricity, and imported coal was cheaper.

          Burbank might be regarded as typical of a large, distributed source of energy. As such sources decrease in size, to mini- and microgrids, statistics show that clean electricity is correlated to wealth (in California, Palo Alto is #1 in both categories). It follows that emissions disparity will be the twin of wealth disparity – that more and more, clean electricity will be the province of California’s rich. Over longer periods of time, an increase in per capita emissions is the only possible result.

  8. FYI I am charging my Tesla with my own 2 kW solar panels and trying to serve load behind the meter electronically without sending any power back to the grid because the meter does not record when my solar exceeds my load. I’m learning how to cycle my AC, run a pool pump, and charge the EV sequentially so there is always a 2 kW load for the solar power. Its working but needs better automation.

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