The Utility vs Solar Fight — Why? What’s At Stake?
Originally published on Climate Progress.
By Mari Hernandez
The solar industry is booming across the U.S. and the numbers are staggering. Residential solar installations in 2012 reached 488 megawatts — a 62 percent increase over 2011 installations. And according to GTM Research, a solar photovoltaic (PV) system is now installed every four minutes in the U.S.
As rooftop solar and other distributed energy resources have begun to take off across the country, utility companies are becoming increasingly concerned about this “existential threat to their business.”
The threat, often referred to as the “utility death spiral,” goes like this: as customers choose to install solar panels or adopt energy efficiency measures, a utility will sell fewer units of energy and has to increase what it charges for electricity to ensure that it can still cover its fixed costs, such as grid maintenance and labor. As energy prices go up, more customers will look to energy efficiency and distributed energy resources to reduce their energy bills, which will continue to push electricity prices up and drive customers toward other energy sources and services.
Although the death spiral isn’t likely to happen for several years (rooftop solar makes up less than a quarter of 1 percent of the electricity produced in the U.S.), it’s hard not to notice the solar industry’s rapid growth over the last few years — thanks in large part to customer incentives and falling solar panel and installation costs.
Investor-owned utilities got a wake-up call in January when the Edison Electric Institute put out a report on the upcoming changes the sector will face, labeling distributed energy resources as “disruptive challenges.” In response to these new challenges, the report encouraged utilities to alter their economic incentives for solar to “mitigate (or eliminate) cross subsidies and provide proper customer price signals” in the near term.
Many utilities have already begun to revise some of those tariff structures. Net energy metering policies, which allow solar energy system owners to get credit for any excess energy they feed back to the electric grid, are getting the most scrutiny and pushback at the utility level — pitting some utilities against solar advocates. Utilities argue that customers who generate their own solar power are not paying their fair share of fixed costs, which are then passed on to generally less wealthy, non-solar customers.
Solar companies and advocates say that utilities aren’t adequately accounting for the benefits that solar brings to the grid, including an energy source that decreases demand during peak use (when electricity is most expensive), reduces transmission and distribution costs, increases consumer choice, lowers greenhouse gas emissions and contributes to cleaner air. In April, a group of solar companies and physicians in California formed the CAUSE (Californians Against Utilities Stopping Solar Energy) coalition to fight back against the attempts to roll back or end net metering.
Currently, 43 states and the District of Columbia have net metering policies in place. California and Arizona, the two largest solar markets in the country, are at the center of the most contentious and closely watched debates over solar energy payments. Utilities in California are seeking to reduce the solar credits and limit the amount of customers who can receive them. A report by the California Public Utilities Commission is due out this fall on the costs and benefits of rooftop solar that may help determine the direction regulators and lawmakers take on net metering programs in the state.
In Arizona, investor-owned utility Arizona Public Service (APS) has proposed reducing its net metering credits through two different options. The first option would add a grid use charge that could reduce its net metering benefits by up to 63 percent. In the second option, APS would buy all of the electricity produced by solar customers, issue a credit for the solar-generated power based on an amount set by regulators, and then sell electricity back to the customer at retail rates. This option could lower the net metering benefits by about 50 percent.
Though net metering fights have already spread to utilities in other states, such as Colorado and Idaho, some utilities are embracing rooftop solar through new programs and utility services. In North Carolina, Duke Energy installs, owns and maintains solar panels on homes, schools and businesses through its solar distributed generation program, which pays annual rental fees to property owners for the use of their roofs or land.
Mari Hernandez is a Research Associate on the Energy team at the Center for American Progress.
Image: rooftop solar installation via Shutterstock
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Utilities still will provide a valuable service to solar consumers in providing reliability. There should be a solution that allows them to be compensated that does not prevent consumers from exercising their choice to install their own generation.
All their attempts to tax the solar benefits will back-fire. People will just start upgrading to off-grid systems that don’t need the grid to store excess at all. NOW you are truly talking about a death-spiral. Are they going to charge you for using less energy? How do you charge someone who doesn’t even subscribe?
I think that’s the big long-term question. Will they really push themselves that far? Or will they work to find ways to profit from the inevitable solar boom?
Nothing except the huge cost stops anyone from doing this. Payback is never given current technology.
I think many people are already way too polarized on this issue of paying for use of the grid by individual solar system owners for storing their energy. You might want to price out the real cost of a battery system with enough capacity for those occasional weeks of dark overcast weather, and/or a gasoline powered generator and a fuel tank. Oh, and which room will you use to house the battery array and/or generator?
Perhaps 50% of the value of the excess energy is excessive for grid use, but negotiating in good faith with a level head is more likely to lead to a solution that is workable for everyone.
Just providing three days of storage is likely to cost most of $100 per month for normal electricity users.
I’m basing that on my experience using lead-acid batteries off the grid. I have my electricity use a lot lower than most and I calculate my storage costs at about $40/month.
Past three days I’m cranking up the generator. In extended cloudy weather I can use a gallon of gas per day. My annual gas bill likely exceeds what a reasonable grid connection fee would be.
Then there’s the realization as you head to bed that you failed to run the gen. And you remember you failed to fill the tank. So, on with the snowshoes for a trek out to the storage shed for a can of gas, fill the tank, crank the gen, sit up for another hour or two while you store enough electricity for the night….
Bob,
Great information!
This petition will ask the California Regulators and Law makers to allocate Renewable Portfolio Standards to Ca. home owners, the RPS is the allocation method that is used to set aside a certain percentage of electrical generation for Renewable Energy in the the State.
The State of California has mandated that 33% of its Energy come from Renewable Energy by 2020.
The state currently produces about 71% of the electricity it consumes, while it imports 8% from the Pacific Northwest and 21% from the Southwest.
This is how we generate our electricity in 2011, natural gas was burned to make 45.3% of electrical power generated in-state . Nuclear power from Diablo Canyon in San Luis Obispo County accounted for 9.15%, large hydropower 18.3%, Renewable 16.6% and coal 1.6%.
There is 9% missing from San Onofre and with the current South Western drought, how long before the 18.3% hydro will be effected ?
Another generator of power that jumps out is natural gas, 45.3%, that is a lot of Fracked Wells poisoning our ground water, 3 to 6 million gallons of water are used per well. If Fracking is safe why did Vice Pres Cheney lobby and win Executive, Congressional, and Judicial exemptions from:
Clean Water Act
Safe Drinking Water
Act Clean Air Act
Resource Conservation and Recovery Act
Emergency Planning Community Right to Know Act
National Environmental Policy Act
“Americans should not have to accept unsafe drinking water just because natural gas is cheaper than Coal. the Industry has used its political power to escape accountability, leaving the American people unprotected, and no Industry can claim to be part of the solution if it supports exemptions from the basic Laws designed to ensure that we have Clean Water and Clean Air” Natural Resources Defense Council
We have to change how we generate our electricity, with are current drought conditions and using our pure water for Fracking, there has to be a better way to generate electricity, and there is, a proven stimulating policy.
The Feed in Tariff is a policy mechanism designed to accelerate investment in Renewable Energy, the California FiT allows eligible customers generators to enter into 10- 15- 20- year contracts with their utility company to sell the electricity produced by renewable energy, and guarantees that anyone who generates electricity from R E source, whether Homeowner, small business, or large utility, is able to sell that electricity. It is mandated by the State to produce 33% R E by 2020.
FIT policies can be implemented to support all renewable technologies including:
Wind
Photovoltaics (PV)
Solar thermal
Geothermal
Biogas
Biomass
Fuel cells
Tidal and wave power.
There is currently 3 utilities using a Commercial Feed in Tariff in 3 Counties in California, Los Angeles, Palo Alto, and Sacramento, are paying their businesses 17 cents per kilowatt hour for the Renewable Energy they produce, under the Feed in Tariff. We can get our Law makers and Regulators to implement a Residential Feed in Tariff, to help us weather Global Warming, protect our communities from grid failures, and generate a fair revenue stream for the Homeowner, but we have to over come some obstacles.
The State has mandated that we get 33% of our electricity from Renewable Energy (RPS), seems like we should be sharing this 33% pie, utilities, third party leasing companies, and the large energy companies who mostly build out in the fragile desert eco-systems, all fight over that 33% pie, and what about the Law abiding, Tax paying, Homeowning, Voting Citizens, why are they left out of the Renewable pie sharing ?
Here are some of the reasons and a look as to why it is better to own your own Renewable Energy System.
Third party leasing is fine on the surface and is making a contribution in reducing our fossil fuel consumption, but third party leasers, the Big Boy solar companies that build in the Fragile Desert Eco-Systems, and the Utilities all fight over Renewable Portfolio Standards Pie allowance.
All Three leagues have a piece of the pie, but there is 4 to 8 teams in each league that want a piece of that carve out money pie, causing huge infighting, and as of right now the homeowner is left out of the ballgame, with no chance of eating the all american pie, why? because we are not represented at the Renewable Portfolio Standard dining hall, with a chair at the pie sharing table.
“The benefits of owning a renewable energy system far outweigh the benefits of a lease or a power purchase agreement (PPA). Under the American Recovery and Reinvestment Act of 2009, homeowners are eligible for a federal personal income tax credit up to 30% of the purchase cost of their renewable energy system, without a maximum limit.** Homeowners can utilize the incentive money in any way they choose. But homeowners that choose to lease their systems turn over their rebates and incentives to the third party lease or PPA companies associated with the solar systems installed on their homes.”
“The owner of a renewable energy system is also sheltered from rising electricity costs, which have historically increased on average of 3-5% each year. This presents homeowners with opportunities to save money each month on energy and also reduces their reliance on third-party utility companies. By purchasing a renewable energy system with cash or through a loan, a homeowner can completely pay off his or her system and then independently produce clean energy.
By choosing a lease or a PPA option homeowners are essentially substituting their utility companies with third-party leasing companies. Additionally, homeowners will likely be required to purchase their systems, renew their leases, or have the systems removed from their roof and revert to paying utility rates once their leases have ended.” Charlie Angione.
“There’s absolutely no such thing as a $0 down solar lease or PPA and here’s why. A requirement of both of these financing programs is that you agree upfront to give the leasing or PPA company your 30% federal tax credit which is worth thousands of dollars as well as any other financial incentives.
At $5.57 per Watt. a 6 kW solar system would yield a federal tax credit of $10,026!
With a $0 down loan instead of a lease, you’ll get to keep the 30% federal tax credit as well as all other applicable financial incentives for yourself and you’ll own your solar system instead of renting it, for a much greater return on investment.
And if you do decide to lease instead of own, good luck ever selling your home with a lease attached to it. What homebuyer will want to purchase your home and assume your remaining lease payments on a used solar system on your roof, when they can buy and own a brand new system for thousands less.” Ray Boggs
We also need to change a current law, California law does not allow Homeowners to oversize their Renewable Energy systems.
Allowing homeowners to oversize their Renewable Energy systems, is a true capitalistic tool, that will give us the potential to democratize our energy generation and transform millions of homes and small business into energy generators, during Sandy, Solar homes where not utilized to their full potential, because there was no disconnect and or transfer switch, to turn off incoming grid and start in home Solar power. how comforting it would be, to have mandatory transfer switches on all residential and small business renewable energy installations.
We need a National Feed in Tariff, for Renewable Energy, with laws that level the playing field, this petition starts with homeowners in California.
Japan, Germany, and our state of Hawaii, will pay residents between 13 – 37 cents per kilowatt hour, here in California they will pay a commercial FiT in a few counties at 17 cents per kilowatt hour, No Residential FiT and they wont let us oversize our Residential Renewable Energy systems.
Campaign to allow Californian residents to sell electricity obtained by renewable energy for a fair pro-business market price. Will you read, sign, and share this petition?
http://signon.org/sign/let-california-home-owners
The current fight is about how much the utility should be forced to pay for the solar electric power. In some states it is 3-4x the rate the utility sells it for.