The fall season is kicking off a sizzling solar power debate in California and one that has the potential to undercut the state’s climate mission.
Utility regulators there are in discussions over how to balance the interest of rooftop solar generators with the utilities on which they will still depend. Just how those hearings are resolved with have implications for the rollout of renewable energy not just in California but also around the country.
At issue is something called “net metering,” which is technical term used to measure the amount of money that rooftop solar generators should get paid relative to retail electricity prices. Utilities, generally, want to offer them the wholesale rate for what they send to them over the grid. Those are expensive wires to maintain and ones that all customers will use, even those who power their homes with solar panels. That’s because the sun is not always shining and the utilities would then have to provide them electricity over their networks.
The present net metering rules in California were set a dozen years ago, with the intent that they would expire when solar penetration reached 5 percent at any of three investor-owned utilities: Edison International’s SoCalEd, PG&E Corp. and Sempra Energy, which is nearing the threshold. Generally, those utilities are paying customers the full retail value for their electricity generated and transmitted.
California’s current regulatory regime was established in large part to boost solar sales. Now, though, the utilities are arguing that the price of solar power has fallen and that such assistance is no longer needed -- help coming at the their expense as well as those customers who remain connected to the grid. They are also saying that because solar energy is an intermittent resource that can’t be dispatched on demand, it is worth less “traditional” sources of power.
“Under PG&E’s proposal, customers who install solar will pay a small demand charge based on their actual use of the grid, which will pay for a portion of the cost of the distribution system they rely on,” says PG&E, in a filing.
By contrast, the solar community says that its fuel is carbon-free and is well-positioned to help the state reach its climate mitigation goals. Therefore, it’s a “premium” resource that is actually worth more than traditional power. At the same time, the federal investment tax credit (ITC) is scheduled to expire at year-end 2016, which will suddenly make solar 30 percent more expensive.
Under the current net metering rules -- ITC included -- most homeowners are able to recoup the cost of their solar purchase in about 5-6 years, says Michael Powers, founding partner of Stellar Solar in San Diego. But with some of the proposals now under discussion, he says that that such a pay back could be 12-14 years -- a deal breaker.
“That is why the solar industry is asking the California Public Utility Commission to postpone a net metering decision until after the impact of the ITC is fully absorbed, ideally in 3-to-5 years,” says Powers.
The utilities, however, do not want to wait: One proposal would pay rooftop solar customers half the retail rate for their power. In other words, explains Powers, homeowners could send back extra electricity at noon and get paid 11 cents a kilowatt hour but they would then have to buy back that same power from the utility for 22 cents at night.
“To me, this is like depositing $100 in the bank but when you go to take it out, it’s only worth $50,” he adds, noting that ill-considered policies would undermine California’s renewable energy and carbon reduction goals.
Can the state’s grid handle all of those renewable energy aims -- half of the generation mix by 2030? The solar energy community in California and across the nation thinks that the best way to increase green energy’s market share is through onsite generation -- and to keep such power off the grid, which will limit its wear-and-tear and save utilities money.
In October 2013, California’s commission agreed, presenting a study that examined how traditional utility customers would be affected by net-energy metering rules. They used the “avoided costs” suppositions, which then concluded that more onsite power means greater overall benefits.
And a similar brouhaha is building in Arizona, where the regulator called the Arizona Corporation Commission is rethinking some earlier decisions. While the main investor-owned utility there, the Arizona Public Service (APS) that is part of the Pinnacle West Capital Corp., had requested a roughly $50 monthly charge for self-generating solar consumers, the commission settled on $5 a month.
“Solar is the future for Arizona,” insists Barbara Lockwood, regulatory and compliance officer for APS. Getting the regulations right is thus critical, she says. APS will discuss this issue with solar advocates during Public Utilities Fortnightly’s conference taking place November 16-18 in Scottsdale, Arizona.
The trick going forward is to find the happy middle ground -- where utilities can afford to maintain their grids and customers are still motivated to go green. Deciding the issue, though, will have profound consequences for the electricity market place at a time when both the solar and utility industries are acclimating to a ever-evolving business paradigm.
