From The Bangor Daily News
Renewable forms of energy, especially solar, have shown strong growth in recent years in the U.S., and that is certainly a positive development. As policymakers across the country continue to encourage this growth, it is important that they take a close look at the policies in place that provide favorable incentives to the solar industry. Currently, Maine has an opportunity to be among a select group of leaders on this front, as the state’s regulators work toward refining policies around solar energy.
Specifically, the proposal put forth by the Maine Public Utility Commission to reform net energy billing and ultimately transition to a more market-based approach for pricing solar energy production is a great example of how we should be thinking about these policies. Here’s what our key consideration should be: What is the most effective and efficient way to grow renewable energy production?
One of the main answers here is that while distributed solar energy can benefit homeowners and communities, it is not nearly the most technically or economically efficient way to achieve the goal of reducing greenhouse gas emissions. Ultimately, large scale solar is much more effective, and it will do more to help keep Maine’s electricity rates among the lowest in the region.
I’ve looked deeply into this topic, and I led a team from the Massachusetts Institute of Technology in a study of solar energy policies that was published last year. In this report, we propose a number of policy changes that would make solar power more affordable and better able to reach its long-run potential. We showed that, as a result of policies currently in place, Americans are paying much more for solar energy than is necessary.
Why is this? The main issue is that residential solar systems are significantly more expensive than utility scale systems per unit of capacity — by about 70 percent on a levelized-cost basis. And that’s not the whole story, because when there is a great deal of residential solar penetration, major investments usually are needed to reinforce the affected distribution systems to allow for reverse power flows.
Read the full article at The Bangor Daily News
Richard Schmalensee is the Howard W. Johnson Professor of Management Emeritus and Professor of Economics Emeritus.