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Published on December 12th, 2014 | by Glenn Meyers

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Arizona’s Largest Utility Plans Tax On Solar Leases

December 12th, 2014 by  


This headline on solar leases from an investment site caught my eye: “Solar Leases Set To Become Toxic in Arizona.”

Drawing free renewable energy from the sun sounds like a grand idea to many – but not if you happen to be a utility company operating with a business model based on the selling energy.

Solar, which once had giant utilities standing tall as a champions of renewable energy, now no longer looks so good in the executive offices of the Salt River Project Agricultural Improvement and Power District, Arizona’s largest utility, known in short form as SRP.

It is widely anticipated the utility will adopt changes on self-generated electricity, taxing solar lease providers and consumers.

shutterstock_92676394

Large solar companies such as SolarCity and Vivint Solar, among others, will feel the negative effects. Add solar leasing consumers to the list, as they will be paying more for the renewable energy they use, when a new proposed rate sheet for customers takes effect from the April 2015 billing cycle.

Bad News for Residential Self-Generated Energy

According to SRP, a noticeable increase in distributed customer generation in the form of residential rooftop solar units and alternative on-site generation such as fuel cells “presents challenges for integrating these unconventional and sometimes intermittent generating resources into the electric grid.” Here’s some more context for what it is challenged with:

Electric utilities face two types of costs: fixed and variable. Fixed costs are costs that are incurred irrespective of customer energy usage (kilowatt-hour usage) and which are necessary to make a safe and reliable grid possible. Examples of fixed costs are generating unit capacity, transmission lines, certain distribution system components and costs associated with providing customer service, metering, billing and payment processing. Variable costs are associated with the actual electricity that is supplied to customers, which is measured by the customer’s meter. Examples of variable costs are fuel and purchased power charges.

Historically, SRP, like all other electric utilities, recovers a large portion of their fixed costs through the variable (per kilowatt-hour) portion of their price plans. The growing emphasis on energy efficiency and energy conservation and the increasing installations of distributed generation (primarily rooftop solar) reduces energy sales without a commensurate reduction in SRP’s fixed costs currently being paid by other customers who do not have distributed generation. During this price process, SRP plans to address this issue by introducing a price plan for residential customers who generate a portion of their energy. Details on this proposed price plan can be found in other sections of this document.

The problem is, this is only part of the equation. Solar power and energy efficiency also provide great societal and grid benefits. Solar energy and energy efficiency are not “problems” and should not be punished. The pricing system may need to change, and the business structure of these utilities certainly needs to, but taxing exactly the cleantech solutions we need right now is not helpful for society as a whole.

News of the rate increase has some crying foul, of course. The list includes Court Rich, an attorney for the Alliance for Solar Choice. Quoted on Daily Kos, he said.

“SRP might as well simply outlaw solar within its service territory if it is going to hit people with a $50 to $100 charge for their right to use the sun.”

“This proposal means that as of December 8, there will be no more solar industry in SRP’s service territory, and they make this decision without public input and without a board vote,” he said. “Do the members of the SRP board really want to be known for taxing solar out of existence in the sunniest state in the country?”

Photo: Business document being signed from Shutterstock






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About the Author

is a writer, producer, and director. Meyers was editor and site director of Green Building Elements, a contributing writer for CleanTechnica, and is founder of Green Streets MediaTrain, a communications connection and eLearning hub. As an independent producer, he's been involved in the development, production and distribution of television and distance learning programs for both the education industry and corporate sector. He also is an avid gardener and loves sustainable innovation.



  • Christopher R. Ellis

    They have a right to use solar power. However, they don’t have a right sell it back to the grid network. In NY and MA National Grid charges $8/mo for net metering and that barely covers operating costs.

    When enough people join and disrupt the standard power flow upgrades are required on a local substation. Those upgrades can cost between a couple hundred thousand and several million dollars. Expecting the utility company to roll over and eat those costs so that you can save a few dollars here and there isn’t logical.

  • Greg

    If the utilities want to be fair, they should pay for all the costs of pollution etc, that they inflict on everyone. The Harvard Medical School says that the deliterious costs of burning coal are 300 to 500 Billion Dollars (just in the USA) Thats at least $1000 per person per year. If the utilities would charge their ratepayers for that, I’d be happy to pay for the priviledge of hooking my solar to the grid.

    • S Newman

      Excellent point.
      The false assumption is that a kw of solar energy has the same value as a kw of coal-produced energy.
      If negative externalities are factored in, the solar energy is worth quite a bit more.

  • NRG4All

    Makes me wonder why they don’t fess up to the savings portion that customer solar generation provides, e.g. the generators don’t work as hard and saves wear and tear, the transmission lines would get less wear and tear. It seems to me that a “super peak” rate would be a better answer. Let all rate payers pay a different rate for the electricity that is needed for the period when solar starts to wane and before the night time drop off in usage occurs. Thus, people would have more incentive to use programmable thermostats and increased insulation. Then we would see some other ploy being used to maintain the status quo of the utilities. The utilities need to redefine their role instead up proping up an outmoded business paradigm.

    • Larmion

      – High voltage transmission is relieved, but low and medium voltage lines are put under extra stress by having to become bidirectional. The net effect on the grid is small.

      – Generators like to work hard. They’re at their most reliable and profitable when they can work near full capacity all the time. Compare it to your car: it wears less quickly while driving on a highway at full blast than it does driving stop-and-go urban traffic.

      – Better insulation would only relieve peaks in electrical demand if most houses were heated electrically. That’s not the case – gas heating is more common. And as for AC: that peaks together with PV anyway.

      Demand management has potential, especially for white goods and certain industrial processes. But none of that alters the fundamental fact that a PV owner is an electricity producer who uses and stresses the grid same as every other producer – especially in countries where generous FiT’s have encouraged arrays that are larger than what’s needed to maximize self-consumption.

      Rooftop PV is a mature product. A contribution towards grid operation will simply put in on an equal footing with other forms of electricity generation – it won’t kill PV, the industry is too strong for that.

      • NRG4All

        I’m skeptical about putting stress on low voltage (relatively) lines being under stress. Where I live the code only allows for a PV system to be no more than 20% of the main breaker into the house. Thus, carrying current to the grid is variable and will not be 20% of the main panel capacity all of the time and all of the time the power is consumed at the house before any is sent to the grid.

        • Larmion

          You’re right if an array is designed to be small enough so that (nearly) complete self-consumption is guaranteed 24/7.

          In jurisdictions with net-metering, let alone FiT’s, there’s often a tendency to build larger arrays than that- at best, designed to cover full peak demand, at worst far bigger than that.

          In that case, rooftop PV is very much a power producer with the same effect on the grid as any large power plant.

          • NRG4All

            We are one of those with “overkill” on our PV system. We generate about 15 mWh/yr. and use only about 5. However, the maximum that our system can put out is 6,730 watts. Given our 200 amp service (48,000 watts), that only amounts to about 14% of our rated service and that assumes that the house is using no electricity at all during those peak periods. By the time you subtract parasitic losses, the Refrigerator, the heat pumps, the lighting, the LEAF, etc. I still believe that amount to the grid is of little or no significance regarding wear and tear on our lines. I don’t think residential “backfeed” is really an issue.

      • Mint

        It is indeed enough to kill PV, or at least marginalize it to those who are willing to lose money.

        Residential PV thrives on net metering, i.e. being credited 15-30c/kWh generated in the form of reduced bills. If that drops to 4-6c/kWh, with the rest of the bill being grid charges, then residential PV is in serious trouble. It’s unreasonable to think it can deal with a 60-80% reduction in revenue.

        Of course, it’s not going to happen like that all at once across the board, but ~5% net metered customers is the most utilities will tolerate, IMO, before price restructuring. SRP is doing this at around 2%.

  • plainview2

    As the cost to the customer increases the compensation to the passive investor and paid staff should decrease. There is no gross income without a customer and the customer does not have to support the high return and salaries of those who perform the same amount of work each day.
    By the way, APS’s 2013 purchase of the four corner coal generation shows that Az utilities commitment to business as usual and the reluctance to offer cheaper solar to it’s customers.
    The consumer will pay higher costs for the benefit to investors. When will the average residential customer realize less out of pocket for necessities so the rich and connected can continue their passive income lifestyles.
    Where is the little guys choice in allocating his meager income dollar.

    • Larmion

      Where’s your choice? Everywhere.

      Getting market-beating returns from small investments has never been easier. Some investment in and around the house (ever tried to calculate the ROI of installing an LED?), a bit of stockmarket investment (with clever sector picking, you can get excellent returns without being an expert), perhaps some investment in self-improvement (education) and so on.

      It’s a golden age for those who have a good pair of brains. Opportunities for personal and financial advancement have, despite stagnating real wages, never been more abundant. Sure, it takes time and effort. But then again, what doesn’t?

    • Mint

      FYI, it’s upper class homes that have been the biggest beneficiary of net metering. Those are the customers that utillities are losing first, and they had big electric bills prior to solar.

      Net metering with low or zero fixed charges let those houses keep their high consumption lifestyle, draw lots of evening power from the grid to cool their big homes, and still have near-zero bills.

  • Michael G

    On behalf of battery cos. everywhere I want to extend the warmest thanks to SRP for ending the year on a high note. Do I hear the seasonal sound of silver bells going ka-ching, ka-ching this holiday season? Truly, “A Wonderful Life” for battery cos., and their loved ones (and their local Tesla dealer, and yacht dealer, …) and “Oh, what was that honey, the trip to the Bahamas? First class, baby! ‘We’re in the money!..'”

    Certainly the fixed costs should be paid for, and SRP in the rate sheet referenced above makes a case that their rates are lower than neighboring utilities. Nonetheless, they need to seriously think about selling off their power generation assets and becoming purely a transmission co. Why hold onto declining assets?

    Also, I don’t see any utility decreasing rates when the price of costs like, financing interest rates, gas, and coal go down in price.

    The handwriting is on the wall. This is beginning of the end – the famed “death spiral.”

    • Jim Smith

      exactly. the more taxes and fees these idiots add, the better battery backups get. Not to mention the price of batteries continue to fall too. Of course, next they will make it illegal to not be connected to the grid and pay $50 a month for the privilege.

    • Mint

      The flat service fee only increased by $12/mo. The bulk of the monthly charges will be demand charges, which has always been present for businesses anyway. The market has always been there.

      This type of pricing gives you a clear value for shifting load with storage: $12-15/mo for each kW in the summer and $5/kW in the winter (and more for very high use). If a load lasts 4 peak hours, then 4kWh of batteries lasting 20 years will save you $2000. Technically, it only needs to cover the peakiest days of the month to get the savings, but it has to predict well to do that.

      So you can call it a death spiral, but it’s not gonna be easy to hit that price point at retail. Remember that energy charges are only 4-6c/kWh with this plan, and residential solar isn’t anywhere near that right now.

  • Marion Meads

    $50-$100 is for the whole year, and that amount is about $4.17-$8.33/month, big deal, NOT! This is a non-issue. State government need to earn some revenues, and I think the $4.17/month is very reasonable. Sometimes, you have to look at the scale of the charges over the entire year. Why should renewable proponents be all anti-tax?

    • Timothy

      I totally agree. Where I am in Canada the fee for net metering is a $38 PER MONTH base fee! So even with zero net usage year over year I still pay a quarter of the average monthly bill. Still, it is worth it. Utilities will not stop solar!

    • Dragon

      Where did you hear $50-$100 is yearly instead of monthly? http://www.azcentral.com/story/opinion/op-ed/2014/12/11/srp-rooftop-solar-reputation/20252671/ says it’s monthly.

      • Matt

        Having a monthly connection fee for all users would be fine. TOD pricing to that when NRG cost most you pay/get most is great way to get distributed generation in sync with demand and to move demand where it is best served. But charging $50/month only but to solar users is crazy. It is a clear attempt to keep solar away from homes and under their control to max their profits.

        • Mint

          It isn’t “only to solar users”. They have monthly service charges for regular service also. It’s $12 or $25 extra service charge per month depending on how many amps your connection is.

          Additional charges depend on what your peak demand is on the grid, similar to businesses.

          It is indeed going to hammer residential solar installation, but that’s what happens when it’s forced to operate on equal footing to every other generator, including wind and utility solar.

          Net metering without fixed charges is a farce. You could make a weak argument for the first few percent of PV, because it reduces the daytime peak generation needed from other sources, but after that the net peak is in the evening. It’s wrong for solar homes to be able to use as much power as they want in the evening as long as they produce an equal amount of daytime energy with a market value of 4-6c/kWh.

          Fuel and other variable costs are only 27% of SRP’s costs. Solar beyond a few percent does not reduce the other 73% cost of delivered electricity.

      • Michael G

        WOW! $50/month!!! That’s more than my entire electric bill in CA! (conservation) Thanks for finding that. I looked but obviously not as well as you did.

  • Larmion

    If a person with solar PV puts electricity on the grid and gets paid for it, he or she becomes a seller of electricity that is in no way different from, say, a wind turbine. As such, it is only fair that they pay the same tax and grid charges other power producers have to pay.

    In an ideal world, there is a private, separate grid operator that treats all those delivering power to its grid the same. In such an environment, a utility cannot try to block PV from being added but the PV owner doesn’t receive privileges a solar farm or other power station don’t get. It would also encourage properly sized arrays: just large enough to maximize self-consumption and nothing more.

    CleanTechnica rightly cries foul when utilities try to use their immense market power to halt PV, but sees no objection to market distortions that go the other way. That shows very little ideological consistency.

    • Marion Meads

      Plus the tax amounts to $4.17-$8.33/month. I’d gladly pay for this amount if this is implemented in California, but no more than $10/month. I can see California Government is heavily promoting renewables and EV, and a little dough is needed to keep them alive. Sometimes, the proponents of renewables become too greedy, it is all take and take.

      • Tom G.

        Marion:

        I live in Arizona but not in the SRP service area, however our Unisource rate structure is about the same. My total electric bill on a monthly annual plan is $112/month for my all electric 1707 sq. ft. home.

        I don’t see how a “$50 to $100 charge” can be considered reasonable and prudent.

        • MarTams

          I read original proposal, IT IS PER YEAR rate! So your monthly bill changed from $112 to $116/month, big deal, something not to be stressed about.

          • Tom G.

            I looked and looked for a link to if the fee is annual or monthly. All I could find is this recent story on this site.

            “Reportedly, the Salt River Project has a proposed a new rate plan that increases consumer costs by $600 per year, if you have your own solar power system.”.

            Seems the $600 is an annual cost which makes it $50/month. I think we will learn more as plans get firmed up by SRP.

      • Mint

        I agreed with your previous post, but you’re wrong here. Look at Exhibit 18 at the end of the document:
        http://www.srpnet.com/prices/priceprocess/pdfx/bb120514b.pdf

        It very clearly says “monthly charges”. There’s a connection charge of $32-45/mo, and monthly demand charges (for the summer, $6.61 for the first 3kW, $12.07 for the next 7kW, and $22.98 thereafter). There’s an example table showing that 11kW peak demand would be charged $127.30, 8kW would be $80.18, etc. But consumption charges are low at 3.71-6.33c/kWh. So if you used 40kWh/day (AZ avg), that would be ~$60/mo.

        This is actually similar to industrial pricing. Demand and consumption charges are separate.

        So now rooftop PV alone isn’t worthwhile, because it only saves your consumption. Welcome to reality, fans of residential PV.

        If PV is paired with daytime AC and/or storage, it can reduce the demand charge also. But long gone are the days of simple LCOE calculations.

      • Steve_R

        Why are you telling everyone that the tax is $4.17-$8.33/month??? It is $50 to $100 per MONTH in the articles that I have seen. Do you have a source for your contradictory information?
        Also, a tax for maintenance should be applied to ALL customers, not just those with solar.

    • Matt

      I would say that first you split the long distance grid, from distribution, from generation and make heavy piney for any cross ownership or management. Then if you place power on the grid you get a fee for how far the power has to go to get to a user. The current system is broken. Utilities were given cost+ on everything they built. Then they regulate themselves and set price as they wish. And poison the country cause 3-5 times external health cost of the electric they sell.

      • Larmion

        – Self-consumption relieves stress on the grid. Feeding into the grid does not; the added stress on the low voltage grid is roughly equal to the relieved stress on high voltage transmission.

        – A coal plant has massive externalities. A wind farm, geothermal plant or small hydro facility does not, yet they pay for grid access and maintenance. And they should. Renewables can compete on equal footing with fossil fuels in much of the developed world, they no longer need training wheels.

  • Will E

    tax should go to government or community.
    not to utility. there is big tax revenues in renewable energy for state and communities.

  • David in Bushwick

    Red state Texas is making profitable use of its significant wind resources.
    Why Arizona can’t seem to recognize the financial benefits from their abundant solar potential must be an effect of the extreme desert heat.

  • vdiv

    Cord-cutting suddenly has a whole new meaning, or does it?

    It is time to get a few batteries and declare independence from the monopolies.

    • No way

      If it was that easy a lot of people would be off the grid already. Even with their own generation most people benefit from having the utilities avaliable and the grid. That’s why everyone needs to pay for it too.

      • S Newman

        Agreed – but the devil is in the details.
        Although I’ll be exempt for 10 years, with the new pricing system, I’d actually pay MORE per month with 100% of my power produced by solar than I used to pay before I had any solar production!
        I am likely an extreme case, as my consumption is very low (most solar consumers have larger homes/high consumption) – but this doesn’t excuse the absurdity of the outcome.

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