By reducing the power utilities need to meet demand, they save managers from having to turn to the most expensive and inefficient stations that go on only at times of extreme need.
To incentivize solar, Massachusetts issues credits to homeowners that they can sell on a marketplace to utilities that are required to generate a percentage of their power from renewables. Kaufmann finds that the cost of this program—which all ratepayers have to pay—is about equal to the benefit of solar in reducing overall electricity prices (about $300 per megawatt). In effect, he says, it costs nothing to subsidize solar because the subsidy is being paid off from its own savings.
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