How your behind-the-meter solar system can lower electricity bills for your whole neighborhood

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It’s well known that the behind-the-meter (BTM) solar on your rooftop can reduce the demand for grid-scale electricity: every megawatt-hour (MWh) produced from BTM solar is one fewer MWh that needs to come from the grid (often from a dirty coal or natural gas power plant). Lesser known, however, is the “price effect” of BTM solar. When BTM solar lowers the amount of electricity that expensive power plants need to produce, it also reduces the price that all utilities pay for that electricity. This means that BTM solar can both avoid the creation of dirty electricity, and lower the price that everyone in a region ultimately pays for electricity.  As a result, when you install BTM solar, it benefits you and your neighbors.

Just how much does your solar panel system benefit your neighbors? Between 2014 and 2019, BTM solar produced more than 8.6 million MWh of electricity in the six New England states. Using hourly BTM solar data published by ISO New England, the nonprofit regional electric grid operator, Synapse Energy Economics estimated what demand and prices for electricity would have been without this resource. Between 2014 and 2019, BTM solar reduced wholesale energy market costs in New England by $1.1 billion (see Figure 1 below).

Calculating the benefits

Figure 1. Energy benefits from BTM solar.

Notes: 2018, a year with numerous heat waves and especially high summertime energy prices, has a particularly large amount of savings. Benefits described in this figure only include impacts related to the wholesale energy market. Other benefits (e.g., public health, climate, capacity, transmission and distribution, reliability, or retail margins) are not included.

To calculate solar savings, we need to know (a) how much electricity was produced from BTM solar in each hour and (b) how the electricity market’s hourly prices and loads would have changed if not for this BTM solar. This methodology involves analyzing over 52,500 hourly data points, but we can break it down into four simple steps:

  1. First, we assembled hourly, electricity price and demand data for 2014 through 2019. We created over 300 predictive equations which approximate the relationship between prices and electricity demand during each week of the analysis period. For each hour, we multiplied prices by demand to calculate total hourly energy costs.
  2. Second, we assembled hourly BTM solar data from ISO New England and added it to each hourly electricity demand data point. This “but-for” hypothetical describes what demand would have been, if not for BTM solar.
  3. Third, we used the predictive equations to estimate what hourly prices would have been in this “but-for” case. As in the first step, we then multiplied the newly calculated prices by the “but-for” demand to calculate hourly energy costs.
  4. Finally, we subtracted the total costs calculated in step one from the “but for” costs calculated in step three to estimate the energy benefits resulting from BTM solar.

Figure 2 below shows the theory behind these steps, along with one example predictive equation.

Figure 2. Predictive equation theory (A) and example (B).

Price effects dominate over load effects

The calculated energy benefits can be split into “load effects” and “price effects.” Load effects refer to the benefits associated with the reduction in the amount of electricity purchased. “Price effects” are due to the impact of reduced demand on the market-clearing price of electricity. Over the six years analyzed, we find that load effects provide about $317 million in benefits (30 percent of the total) while price effects provide about $743 million in benefits (70 percent of the total). Price effects—a category of solar benefits often ignored in solar cost-benefit analysis—make up the majority of benefits.

It’s important to note that these benefits are not evenly distributed across New England. Some states have greater electricity demand than others. Other states have more BTM solar than the rest. For example, in 2019, 1.1 million MWh of electricity was produced from BTM solar in Massachusetts, while BTM solar installations in Rhode Island produced 51 thousand MWh of electricity (note that in all six states, some electricity is also produced from other kinds of solar). Figure 3 below shows how benefits are allocated across the six states—states with larger quantities of BTM solar and larger amounts of electricity demand accrue more benefits.

Figure 3. Total energy savings from BTM solar accrued in each state, 2014 through 2019.

What does this all mean?

Our analysis suggests that traditional approaches to analyzing BTM solar may substantially undercount the price benefits of this resource. Although we focused on the 2014–2019 period in New England, price benefits can be analyzed for any period of time and in any region, as long as data is available. These are real-world benefits that lead to reduced electricity bills for consumers, regardless of whether they personally own a BTM solar system or not.

BTM solar provides other benefits as well. More BTM solar means fewer harmful emissions of sulfur dioxide, nitrogen dioxide, and particulate matter, which can lead to adverse health impacts such as asthma, heart attacks, and early death. More BTM solar also avoids climate-damaging emissions of carbon dioxide. Over the six years in our analysis, we estimate that BTM solar avoided 4.6 million metric tons of carbon dioxide in New England, equal to the emissions from 1 million cars driving for a year.

The upshot is if you want to know how your rooftop solar benefits you and neighbors (and everyone in your state, for that matter) you’ll want to examine much more than the amount of energy your system produces.

Guest author: Pat Knight

This article was written by Pat Knight with Synapse Energy Economics, Inc. The views, thoughts, and opinions expressed in this article belong solely to the author, and not to EnergySage.

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