One of the biggest factors determining your return on investment for going solar is how much your utility company has to compensate you for the surplus energy your system produces.
That's because solar panels only generate an appreciable amount of energy between 11 am and 4 pm on fairly sunny days.
Fortunately, efficiency has improved so much that your solar panels will likely generate a lot more energy than you need during those peak hours. So much more, that typical homeowners are now able to meet all their annual energy needs with a simple rooftop system.
But, of course, there’s a catch.
All that surplus energy your system produces during peak sun hours won't do you any good without some way of storing it.
And that's where compensation rates come in.
Net metering
Suppose your utility has to pay the very same rate for the energy you send them as they charge when you need to draw power.
That would mean you've effectively got a way of banking the surplus solar energy your system produces during the sunniest hours for use at other times.
Actual compensation rates are fixed at the state level and vary accordingly. But it turns out that, Pennsylvania's net-metering policies currently rank among the most favorable in the nation.
For one thing, Pennsylvania homeowners and businesses who transition to solar under the current policy are grandfathered against any future changes. A very good thing, indeed, since the big utility companies have been working overtime lobbying states to drastically lower compensation rates as well as impose fees.
Unfavorable policies in other states
South Dakota is one state where the big power companies don’t even need to do any lobbying. It’s the only state that doesn't require utility companies to accept surplus energy from rooftop solar installations at all. Should a utility company decide to do so, South Dakota allows them to set the compensation rate as low as they like.
Georgia, Kansas, Alabama, and eight other states also allow utility companies to compensate rooftop solar installations at a small fraction of what the utilities charge.
Kentucky used to have a consumer-friendly policy until 2021, when utility lobbyists succeeded in gutting it. While existing installations are grandfathered, Kentucky solar projects that go online after 2020 are paid at a substantially lower rate than they’re charged.
That same year in Utah, Rocky Mountain Power successfully lobbied the state to cut compensation rates by one-third.
Thanks to similar lobbying efforts, in many states rooftop solar installations are only compensated at the rate their utility charges for electricity itself, excluding all the surcharges which make their actual overall rate higher.
Many other states now allow utilities to only pay so-called “avoided costs.” That means they're allowed to compensate rooftop solar installations at the rate it supposedly costs them to generate electricity. Which, of course, is substantially lower than what they charge when those same consumers need to draw power.
Fixed monthly fees for the privilege of being able to sell your surplus solar energy are also a reality in many states. And they’re likely to become real in many more since that’s something the big utility company lobbyists seem particularly keen on.
Caps on the amount of energy you can sell back to your utility are another feature that makes many states’ compensation policies inadequate.
Pennsylvania’s current consumer-friendly approach
Pennsylvania, on the other hand, is one of the 16 states requiring all utility companies to pay full retail net metering and prohibiting them from imposing any fees.
PA residents whose solar systems go online under the current rules get paid the full retail price for their surplus solar energy in the form of a credit on their next month’s bill.
Pennsylvania also requires “virtual net-metering.” That means residents who own more than one property can use any unused credits they earn from one property to pay their bill at another.
And unlike some states, you won’t lose any credits left over at the end of the year. When the fiscal year closes, Pennsylvania residents get a cash payment for any unused solar energy credits.
As things stand, it’s hard to find a better state for solar energy compensation than Pennsylvania.
Though, given the amount of effort the big utility companies are putting into slashing compensation rates and imposing fees, who knows how much longer that will last?