Posted by: JaredFurtado on Dec 9, 2011

Rooftop solar power is unfairly subsidized yet draws excessive opposition from utility companies because of the way the grid allocates costs for power distribution, according to a new study released by the Massachusetts Institute for Technology.

By: Matthew L. Wald

The study also includes more conventional findings, suggesting, for example, that the North American power grid is adequate for meeting current needs but will have more and more trouble integrating intermittent sources of power like the wind and sun unless a single entity is given more authority to marshal resources across state lines.

“We have a grid in the United States which is old but hardly archaic,” said a co-chairman of the study, John G. Kassakian, a professor of electrical engineering at the institute. But the regulatory system dates from the 1930s and most of the decisions are made on a state-by-state basis, which will not be practical if the country plans to tap wind and sun resources that may be several states away from the big load centers, he said.

“No single agency, no single entity, is charged with looking at the broad national interest,” he added. “This is just a mismatch between the need to think in wide-area terms, for reliability and to tap into renewables, and the regulatory structure.”

That problem has been obvious for a while but so far has not been amenable to large-scale planning. An ambitious effort three years ago by grid management organizations to design a sort of superhighway system to overlay existing power lines and transport bulk amounts of power from the windy Plains to the East Coast drew opposition from grid operators in New England and New York. The operators recruited governors to urge Congress to block any rule changes that would allow such a system.

The study broke new ground in criticizing how the costs of maintaining the electricity distribution system are shared. At the moment, those costs are part of the price of a kilowatt-hour, so bigger users pay more and smaller users pay less. But the study noted that when homeowners installed solar panels on their roofs and cut their kilowatt-hour consumption from the utility, they no longer paid for the energy or the cost of local distribution equipment.

The utility’s savings in this case come only from the energy not used. As a result, the study said, solar producers are effectively getting a subsidy and utilities have a greater incentive to make it as difficult as possible for homeowners to add solar cells.

That pricing structure may not be “in the best interest of the grid,” Dr. Kassakian said. Fixed charges for the distribution system would be better, the study said.

The other co-chairman, Richard Schmalensee, a professor of economics and management, contrasted the utilities with other industries “that were once pervasively regulated,’’ like railroads, airlines and telecommunications companies. All of those have been deregulated, he said, “but not electricity, which has taken baby steps.”

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