Optimal Solar Investment and Operation under Asymmetric Net Metering

2026-02-02

AI Summary

This study investigates how prosumers jointly optimize photovoltaic (PV) investment and electricity consumption decisions under asymmetric net metering policies. By endogenizing PV capacity, the authors develop an integrated model of optimal investment and operational behavior and introduce the concept of the “PV effect,” which captures the mechanism through which a price change in one time period influences optimal PV investment, thereby intertemporally altering net demand and consumption patterns in other periods. Combining microeconomic modeling, marginal value analysis, and empirical simulations calibrated with real-world data, both theoretical results and empirical evidence from Massachusetts demonstrate that the PV effect substantially attenuates the effectiveness of raising retail electricity prices in increasing prosumer payments. These findings provide critical insights for reforming net metering policies.

Technology Category

• Computer Vision: Learning & Optimization for CV
• Search and Optimization: Learning to Search
• Multiagent Systems: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• User Modeling, Personalization and Recommendation: Metrics for user behavior and evaluating success
• Responsible Web: Human-perceived consequences of algorithmic deployment on the web

Abstract

We examine the joint investment and operational decisions of a prosumer, a customer who both consumes and generates electricity, under net energy metering (NEM) tariffs. Traditional NEM schemes provide temporally flat compensation at the retail price for net energy exports over a billing period. However, ongoing reforms in several U.S. states are introducing time-varying prices and asymmetric import/export compensation to better align incentives with grid costs. While prior studies treat PV capacity as exogenous and focus primarily on consumption behavior, this work endogenizes PV investment and derives the marginal value of solar capacity for a flexible prosumer under asymmetric NEM tariffs. We characterize optimal investment and show how optimal investment changes with prices and PV costs. Through this analysis, we identify a PV effect: changes in NEM pricing in one period can influence net demand and consumption in generating periods with unchanged prices through adjustments in optimal PV investment. The PV effect weakens the ability of higher import prices to increase prosumer payments, with direct implications for NEM reform. We validate our theoretical results in a case study using simulated household and tariff data derived from historical conditions in Massachusetts.

Problem

• net energy metering
• asymmetric pricing
• prosumer
• solar investment
• PV effect

Innovation

• asymmetric net metering
• prosumer
• PV investment
• marginal value of solar
• PV effect