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The economics of rooftop solar are becoming more challenging as states change how homeowners are compensated for sending excess electricity back to the grid, The New York Times reports.
While the end of the federal residential solar tax credit created another obstacle, the larger trend has been the shift away from traditional net metering.
Under net metering, homeowners receive credits for extra solar energy sent to the grid at rates close to what utilities charge for electricity. Newer net billing programs often pay much less for that excess energy, reducing the financial savings of installing solar panels.
Over the past decade, more than one-third of U.S. states have changed their solar policies. Utilities argue these changes are necessary because they maintain the power grid that solar customers continue to rely on and that grid costs can be shifted to customers without solar. Solar advocates argue that rooftop solar can reduce strain on the grid, especially during periods of high summer demand, while increasing clean energy supply.
Louisiana is among the states that have moved away from net metering in recent years. Because electricity prices in Louisiana are relatively low, solar already provides a smaller financial incentive compared to states with higher electricity costs. Ending net metering further reduces the value homeowners receive for excess electricity they send to the grid.
The effects of these changes vary by state. California sharply reduced solar credits in 2023, while Illinois created a longer transition period to make the change more gradual. How states structure these policies can influence how quickly the solar industry adapts.
Battery storage is becoming an increasingly important part of the solar market. Instead of selling excess daytime solar power back to utilities at lower rates, homeowners can store it and use it later when electricity demand is higher. However, batteries remain expensive, and the loss of federal incentives for residential battery systems has made the investment more difficult.
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