A new MIT study posits that while retail electric rates are higher in states that have renewable portfolio standards, the standards are not to blame. Instead, utility-scale wind and solar generation show a weak correlation with lower prices, the authors say.
More likely drivers of rate increases include cost-recovery mechanisms for rooftop solar embedded in certain tariffs, grid-hardening necessitated by climate change and the proliferation of data centers.
The MIT Sloan School of Management announced “Renewables and Electricity Affordability: Untangling Correlation from Causation” on March 9.
The correlation between renewable energy policies and electricity prices is relatively straightforward, but correlation famously does not imply causation, and as the title suggests, much of the study is devoted to separating and explaining the factors and causes at play.
Professor Christopher Knittel, MIT Sloan’s associate dean for climate and sustainability, and Fischer Argosino, a graduate researcher at the MIT Center for Energy and Environmental Policy Research, analyzed U.S. electricity and utility spending data from 1998 to 2023, including residential prices, power generation mixes, utility spending and state renewable portfolio standards (RPS).
They said the opposite rate impacts they found for utility-scale and distributed renewables are due partly to the fundamental differences in their design.
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“Energy generated by large-scale solar plants, for example, comes with lower transmission, distribution and maintenance costs for utilities, and these efficiencies can be passed on to the consumer,” Knittel said in the news release.
But rooftop solar creates a two-way system out of distribution networks that were designed for a one-way flow from central generation plants to consumers, the authors said. They found this bi-directional flow was strongly correlated with higher operations and maintenance costs, as utilities managed the complex harmonization of thousands of decentralized generators across an aging grid.
“Our antiquated distribution networks are struggling to manage these flows,” Argosino said. “When we defer essential grid upgrades while simultaneously incentivizing rooftop exports, we create an operational strain that inevitably shows up as higher costs on everyone’s utility bills.”
But not uniformly higher. State financial incentives for rooftop solar can shift some of the costs of maintaining the grid onto ratepayers who do not have solar panels, even though solar owners derive full benefit of the grid to power their homes and export their solar panels’ output.
This exacerbates existing inequities, the authors said — those who put solar panels on the roofs of their homes are likely to be wealthier than those who do not.
Knittel and Argosino say decarbonization need not be at odds with electric rate affordability, if policies can be updated to match the changes in technology.
They suggest prioritizing utility-scale wind and solar to maximize economy of scale, modernizing distribution networks and adjusting fee structures so that all who benefit from grid infrastructure contribute to the cost of its maintenance.
The research is built on data from the U.S. Energy Information Administration, FERC and the Lawrence Berkeley National Laboratory. The years studied span a period before, during and after the widespread adoption of state RPS.
