Published on August 26th, 2014 | by Daryl Elliott17
Retail vs Wholesale Energy Pricing: 1 Reason It’s Easy For Rooftop Solar To Be Cost Effective
Utility-Scale Solar Energy Pricing
In the media, when solar energy pricing is discussed as being cost effective or not, they are typically talking about utility-scale solar projects and how they compare on cost to wholesale prices from coal or natural gas power plants. Wholesale energy prices are of course lower than retail prices, so it’s not as easy for utility-scale solar projects to be cost effective in this case. (Though, solar projects have been underbidding fossil fuels in some locations, such as Texas and Minnesota in the US, and especially in many developing countries.)
Residential Rooftop Solar Energy Pricing
When residential folks are putting solar on rooftops, we only have to beat the price that we pay on our energy bills, which is the retail price. Consumers of course pay the higher retail rate, not the lower wholesale rate, which makes it easier for rooftop solar to beat the price paid to the utility company. This is one big reason why so many of us are putting solar panels on our roofs.
Net Metering Pricing
Net metering is when the utility company pays the energy producer for excess energy that flows into the grid and reverses the electric meter, thus reducing the electric bill and in some cases making the electric bill positive, causing the utility to pay the resident. In locations where net metering is legal (most of the United States), the utility company has to pay for the electricity that they receive.
Usefulness of Retail vs Wholesale Energy Pricing Distinctions
These pricing distinctions may be useful when making a decision to get rooftop solar. This info might reduce the possibility of confusion along the way.
Editor’s Note: This is pretty basic stuff that regular CleanTechnica readers should know, but it’s true that the matter is widely misunderstood and confusingly discussed in the media. Comparing the cost of rooftop solar power with wholesale electricity prices almost never makes sense, yet people do it over and over again, which of course turns other people (even less informed) off. And as Daryl noted in an email to me: “I’ve seen this info mentioned briefly in [CleanTechnica] articles on occasion, but I haven’t seen a short, straightforward article address this topic thoroughly.” So, help out educating the masses about this important matter by sharing this piece!