A new economic analysis suggests that the growth of rooftop solar increases electricity costs for households without it, while the adoption of electric vehicles (EVs) tends to lower bills for everyone. The working paper from University of Maryland economists quantifies a cost shift where utilities, facing reduced revenue from solar-equipped homes, raise overall rates. This change disproportionately impacts low-income customers. In contrast, increased electricity sales from EV charging were found to reduce rates across the board. The study’s short-term focus, however, has drawn criticism from clean energy advocates.
According to the research, the proliferation of residential solar panels has led to a 2.35 percent decrease in revenue for electric utilities. To offset this loss, companies have increased customer rates by an average of 1.48 percent. The analysis indicates that this creates a financial imbalance, with high-income households benefiting from solar savings while low-income households without solar panels bear a larger share of the grid’s fixed costs. The study notes that these findings represent a short-term snapshot covering a period of two to three years.
Conversely, the paper found that the rising popularity of EVs benefits all ratepayers. The increased electricity demand from vehicle charging contributed to a 0.44 percent rise in utility revenue, which in turn allowed for a 0.23 percent decrease in overall customer costs. Joshua Linn, an economist at the University of Maryland and one of the study’s authors, stated that the goal is to provide policymakers with a clear understanding of these financial dynamics as they craft energy policy, emphasizing that the research received no corporate funding.
The study’s methodology and conclusions have been challenged by some renewable energy proponents. John Farrell, a co-director of the Institute for Local Self-Reliance, argued that the paper’s focus on short-term effects is a significant limitation. He contended that over the long term, distributed energy sources like rooftop solar provide substantial savings by allowing utilities to defer costly infrastructure upgrades, a benefit not captured in a two-to-three-year analysis.
While the cost transfers identified in the paper are currently small compared to larger rate increases driven by grid modernization and rising demand from data centers, the authors suggest the impact will grow as more households adopt solar panels and EVs. The findings add a new layer of data to the ongoing debate over how to fairly manage the costs and benefits of the transition to cleaner energy.