That’s Not Fair: Tariff Structures for Electric Utilities with Rooftop Solar

Abstract

Problem definition: Utility regulators are grappling to devise compensation schemes for customers who sell rooftop solar generation back to the grid, balancing environmental interests and the financial interests of utilities, solar system installers, and retail customers. This is difficult: Regulatory changes made in Nevada in 2015 to protect Nevada’s utility induced SolarCity, the market leader in solar systems, to suspend local operations. We show that the choice of utility tariff structure is crucial to achieving socially desirable objectives. Academic/practical relevance: It is important for regulators to understand how tariff structure interacts with social objectives. This has implications for consumers, regulators, and industry. Methodology: We use a sequential game to analyze the regulator’s social welfare maximization problem in a market with a regulated utility; an unregulated, price-setting, profit-maximizing solar system installer; and customers who endogenously determine whether to adopt solar or not, based on utility tariffs, solar prices, and their heterogeneous usage profiles and generation potentials. Results: We illustrate that the effectiveness of tariff structures is not governed simply by the number of free tariff parameters, but by the functions these parameters serve. In particular, an effective tariff must discriminate among customer usage tiers and between customers with and without rooftop solar to achieve socially desirable outcomes. We present a tariff structure with these two characteristics and show how it can be implemented as a simple buy-all, sell-all tariff while retaining its favorable properties. We illustrate our findings numerically using data from Nevada and New Mexico, two states grappling with this issue. Managerial implications: Many utilities in the United States operate tariff structures that are missing at least one of the two identified features. Regulators must overhaul these tariff structures to adequately safeguard all stakeholders.

Do all brand CSR initiatives make consumers happy? The role of CSR-brand (mis)fit and sense of relatedness

“…Gilal et al (2021) define satisfaction with relatedness needs as the desire to interact with and be accepted by others. Consumers will have a stronger need to connect with a brand that genuinely cares about them, gives them a sense of closeness and encourages them to be self-sufficient (Gilal et al , 2021; Singh, 2022; Unilever, 2018). For example, if telecom brands help consumers stay in touch with their loved ones on World Cancer Day by providing free airtime both within and outside their own country, the relatedness needs fulfillment would be high.…”

“…High CSR-brand fit activities have a greater impact on consumer behavioral responses than CSR-brand misfit activities (Yang et al , 2020). Glow & Lovely’s scholarship programs for young women in India and Malaysia to pursue their dreams and General Motors’ traffic safety campaign in the USA are excellent examples of high CSR-brand fit (Meyer, 2017; Singh, 2022; Unilever, 2018). CSR efforts may be regarded as misfits if a brand’s image and/or a social cause that the brand supports are inconsistent.…”

Integrating Distributed Energy Resources: Optimal Prosumer Decisions and Impacts of Net Metering Tariffs

“…The work in [22] shows that higher connection charges yield higher long-run welfare, as connection charges reduce the utility burden of fixed cost recovery. The environmental benefits of solar are also ignored in [49], under which the authors examine the effect of tariff structures on social welfare, defined as the sum of surpluses of the utility, the solar companies, and the price-inelastic customers. They find that socially optimal NEM 1.0 tariff models must include both volumetric discrimination, and customer technology discrimination, where prosumers and consumers face different tariff structures.…”

“…This has pushed some PUCs to consider policies that mandate TOU rates [14] or even levy discriminatory charges on adopters [7]. Moreover, although a few papers claim that treating DER adopters as a separate customer class (retail rate differentiation) is needed to attain societal and rate efficiency objectives [49], many state commissions have rejected proposals differentiating adopters and non-adopters [21].…”

“…The author finds that reducing the sell-rate by 5% for larger-scale residential PV leads to a 29% reduction of newly installed PV capacities. Also, in [49], a FiT design that results in a stable, socially optimal adoption, and with no cross-subsidies, but at the cost of discriminating consumers and prosumers is proposed. However, using a non-discriminatory tariff, the work in [44] finds that a FiT policy with an export rate equivalent to the avoided cost rate can maximize the social welfare and promote the DER adoption, provided that a uniform twopart tariff is implemented as an adoption pace-controlling tool.…”