Solar systems  installed at a customer’s location allow the customer to generate  electricity for their own use and send excess electricity to the grid that  electricity suppliers can use to meet other customers’ electricity  needs. Distributed storage systems—such as  batteries located at homes—allow customers to store electricity from  the grid or from a distributed generation system for use at a later time. Some states  have adopted policies that make it possible for third-party providers to  install solar systems, which the providers own and operate, on  residential customers’ private homes—thereby allowing solar systems  to be deployed on the homes of customers who could not otherwise  pay the up-front costs of installing the systems. Incentives. For example, as of October 2016, 14 states  provided personal tax credits for installing solar systems, according to  the Database of State Incentives for Renewables and Efficiency. Specifically, the total number of residential electricity  customers with solar systems increased sevenfold over this period,  according to EIA data. Despite this significant increase, our analysis of  EIA data found that only about 0.7 percent of all residential customers  nationwide had installed solar systems in 2015. At the state level, every state experienced increases in the number of  residential customers with solar systems from 2010 through 2015, but  certain states accounted for most of the growth, according to EIA data. In addition to identifying the aforementioned federal and state policies to  encourage the deployment of residential solar systems, we identified  through our review of reports and discussions with stakeholders that other  factors—such as increased efficiency, declining system costs, and high  electricity prices—also contributed to the deployment of residential solar  systems in some states. Policymakers have implemented or are considering measures to  maximize the potential benefits and mitigate the potential challenges  associated with the increasing deployment of these technologies. Solar Systems, Advanced Meters, and Other Technologies Could Increase the Efficiency of Grid Operations and Provide Other Benefits

Solar systems, advanced meters, and electricity storage and  management technologies have the potential to lead to more efficient grid  operations by enabling individual customers to generate, store, and  manage their consumption of electricity in response to conditions on the  grid, as we found in our analysis of reports and stakeholder interviews. For example, the supply of electricity must constantly be balanced with  demand for electricity, and customers can use these technologies to  decrease individual consumption of electricity from the grid when demand  is high and increase consumption when demand is low. by reducing consumption during these periods of high demand). For example, a customer  could program a smart thermostat to reduce electricity consumption  when demand for electricity is high. Increasing Deployment of Residential Solar Systems Has Begun To Pose Grid Management and Other Challenges In Some Areas

Several grid operators we interviewed told us they have begun to  experience grid management and other challenges in some areas as  deployment of residential solar systems increases, but they said these  challenges generally have been manageable because overall deployment  of these systems has been low. In addition, net metering policies under which electricity  suppliers credit customers for the electricity these customers send to  the grid can reduce electricity supplier revenues. Policymakers Have Implemented or Are Considering Measures to Maximize the Benefits of Deploying Residential Technologies, While Mitigating the Challenges

Policymakers in some states and the federal government are considering  measures designed to maximize the potential benefits of advanced  meters, solar systems, and residential electricity storage and  management technologies, while mitigating the potential challenges,  based on our analysis of reports and the views of stakeholders we  interviewed. Several state regulators  recently have allowed electricity suppliers to adopt voluntary time- based prices, and regulators in other states are considering this  approach. In  particular, state regulators in California and New York have developed  policies requiring regulated electricity suppliers in their states to  analyze the grid and identify areas where customer deployment of  solar systems and electricity storage and management technologies  could provide the greatest benefit, given local grid conditions. Our  objectives were to describe (1) key federal and state policies used to  encourage the deployment of these technologies, (2) the extent to which  these technologies are being deployed, and (3) the benefits and  challenges of deploying these technologies. In addition, we interviewed officials and representatives from 46  government agencies and stakeholder groups. We selected a  non-generalizable sample of five states that have been actively  addressing issues related to these technologies: Arizona, California,  Hawaii, Minnesota, and New York. Some technologies, such as battery  storage and smart devices, did not have readily available, comprehensive  data on deployment.
Why GAO Did This Study

Traditionally, electricity has moved in one direction—from electricity suppliers to customers. Today, solar systems allow electricity to be generated at a customer's home and sent to the grid for electricity suppliers to use to meet other customers' electricity needs. Storage systems allow residential customers to store electricity from the grid or their own solar system for use at a later time. Furthermore, customers can use smart devices, such as thermostats, to manage their electricity consumption.
GAO was asked to provide information on the deployment and use of technologies that give customers the ability to generate, store, and manage electricity. This report describes (1) key federal and state policies used to encourage the deployment of these technologies, (2) the extent to which these technologies are being deployed, and (3) the benefits and challenges of deploying these technologies. GAO analyzed available data on technology deployment from EIA and reviewed relevant reports and regulatory documents. GAO interviewed a non-generalizable sample of 46 government agencies and stakeholder organizations. This sample included state regulators and at least one electricity supplier from each of five states: Arizona, California, Hawaii, Minnesota, and New York, which were selected based on state policies and having high levels of technology deployment.
GAO is not making recommendations in this report.

What GAO Found

Federal and state policymakers have used a range of policies to encourage the deployment of solar systems and other technologies that allow residential customers to generate, store, and manage their electricity consumption. For example, federal tax incentives—such as the investment tax credit—have reduced customers' up-front costs of installing solar systems. In addition, a Department of Energy funded database of renewable energy incentives identifies 41 states with net metering policies that require electricity suppliers to credit customers for electricity sent from their solar systems to the grid, providing an additional incentive. Moreover, in 14 states, customers can also receive state tax credits for installing solar systems, according to the database, which further reduces the up-front costs.
According to GAO's analysis of Energy Information Administration (EIA) data, deployment of solar systems has increased significantly in some states, with the total number of residential customers with solar systems increasing sevenfold from 2010 to 2015. However, customers with solar systems represent a very small portion of overall electricity customers—about 0.7 percent of U.S. residential customers in 2015, according to EIA data. Every state experienced growth in the number of customers with residential solar systems, although certain states, such as California and Hawaii, accounted for most of the growth and have had more widespread deployment. For example, about 14 percent of residences in Hawaii have installed a solar system, according to EIA data. Although comprehensive data on the deployment of electricity storage systems and smart devices are not available, the data and information provided by stakeholders GAO interviewed suggest their deployment is limited.
The increasing residential deployment of solar systems and other technologies poses potential benefits and challenges, and some policymakers have implemented or are considering measures to address these, as GAO found in its analysis of reports and stakeholder interviews. Specifically, these technologies can provide potential benefits through more efficient grid operation, for example, if customers use these technologies to reduce their consumption of electricity from the grid during periods of high demand. Nonetheless, grid operators GAO interviewed said they have begun to confront grid management and other challenges in some areas as solar deployment increases. For example, in some areas of Hawaii, solar systems have generated more electricity than the grid was built to handle, which resulted in the need for infrastructure upgrades in these areas. However, grid operators reported that challenges generally have been manageable because overall residential solar deployment has been low. Policymakers in some states have implemented or are considering measures to maximize potential benefits and mitigate potential challenges associated with the increasing deployment of these technologies. For example, two states' regulators have required electricity suppliers to identify areas of the grid where solar and other technologies would be most beneficial to grid operation. In addition, several state regulators recently have allowed electricity suppliers to adopt voluntary time-based electricity prices that increase when demand for electricity is high, providing customers with an incentive to reduce consumption at these times, potentially by using solar, storage, and other technologies.