Utility rate structure is one of the most influential – and often misunderstood – factors in determining how much you can save with solar. Think of your electric bill like a menu at a restaurant. You’re not just paying for the food (electricity) – you’re also paying based on how fast it’s delivered, when you order, and who’s cooking it. Depending on your location, these variables can work for or against your solar investment.
If you’re in a state with demand charges, time-of-use pricing, or net metering, each of these structures plays a major role in shaping how much solar can offset – or even eliminate – your bill.
What Are Common Utility Rate Structures?
| Rate Feature | What It Means | Solar Impact |
| Demand Charges | A charge based on your peak energy use, usually in kW | Solar can help reduce peak load – especially during sunny business hours |
| Time-of-Use (TOU) Rates | Higher prices during high-demand hours (e.g., afternoon), lower at night | Solar aligns well with peak pricing; batteries can shift usage |
| Net Metering | Credits for sending excess solar energy back to the grid | Strong net metering = better long-term ROI on solar |
| Fixed Charges | Monthly infrastructure fees that don’t change with usage | Solar doesn’t reduce these, but they’re typically a small portion of the bill |
| Supply vs. Delivery Charges | Separate charges for electricity itself vs. transporting it to you | Solar reduces supply charges, and potentially part of delivery too |
Navigating Deregulated Energy Markets
If you’re in a deregulated energy state (like Ohio), there’s an added layer of choice – and opportunity. While your utility company still owns and maintains the power lines and meters (known as delivery), you’re free to choose your own electricity supplier. That means you can shop for better rates or opt to purchase renewable energy directly from third-party providers.
So even if you’re receiving a bill from a major utility like Duke Energy, the energy itself could be sourced from solar or wind farms – allowing you to clean up your power mix, even before you install solar on-site. This gives organizations another tool in their sustainability toolbox while they plan or wait for their solar installation.
Tip: Check your state’s energy policy to see if you can select your own energy supplier. Use resources like the U.S. Energy Information Administration or DSIRE to find deregulated states.
The Bottom Line: Rates Shape Your Returns
The way your utility charges you – and credits you – has a direct impact on your solar ROI. That’s why Melink Solar carefully analyzes your utility bill before designing a system. We model how solar will interact with your current rate structure, and where additional opportunities (like battery storage or load shifting) may offer even greater savings.
Want to understand the underlying concepts of usage (kWh) and demand (kW) charges? Refer back to Section 2.2: What’s the Difference Between kW and kWh?, and Section 2.6.1: Reading Your Electric Bill
Curious how these rate structures impact the overall value proposition calculated by LCOE? See Section 4.4: What Is Levelized Cost of Energy (LCOE), and Why Does It Matter?