The Future of Residential Solar
The text below is a reprint of a very important article found in The Journal of Light Construction, February, 2016. It highlights some of the major changes the utility companies are lobbying for regarding the fee structure and fees charged for residential users that have photo voltaic solar panels.
This negative trend has been quietly growing over the last couple of years. It now has momentum and unfortunately is predictive of the future for residential solar energy.
The two major changes that the utility companies are trying to effect have to do with 1.) your monthly rates and 2.) the net metering agreements.
First, the utility companies are trying to increase the rates of those who have installed solar. This is being couched in two ways. First, the utility companies claim that solar users are not paying their fair share to support the infrastructure of the power grid. Last time I checked my bill, I was paying $0.836 per day to be hooked up to the power line. This fee is charged per day whether or not I use any power. The second spin is that only high income users are benefiting from solar. The utility companies want to "tax" you to support and subsidize the implementation of solar for low income energy customers.
The second big change involves net metering. While every state and provider has different net metering arrangements, the typical net metering contract has solar users only paying for the power that they use, net of what they produce. If a user is generating more power than they are using, the utility company pays (or credits) them for that generation. The debate is now focused on the rate of repayment for generation. They utility companies want the user to pay the regular (higher) rates and the utility company wants to reimburse the user for the generation at a lower rate. Does that make sense??? Only if you are a utility company.
These changes are happening right now all across the country. Some have already happened. Few legislators and energy commissions are opposing these trends. Unfortunately, before you invest in solar, make sure it makes sense (dollars and cents) based on the current state of solar power and understand the changes that will be implemented in the future that may affect you.
I have included the portion of the article below that pertains to California residents. Unfortunately, this article requires a subscription to view in its entirety. I have included other references to this topic below (scroll down).
State-level regulatory action could dim the future of residential rooftop solar
By Ted Cushman
This winter has brought some big news for the solar power industry in the United States. In December, a budget deal in Congress renewed solar tax credits for another five years, which also renewed the optimism of companies who install photovoltaic (PV) panels on roofs. But state policy is a whole other playing field—and in state after state, regulators are making decisions that could make or break the market for solar panels on homes.
At the state level, the big political football is the rate utility companies are required to pay residential customers for the surplus power that flows into the electric grid any time solar panels produce more juice than the house is using at that moment. Also in play is the “net metering” regime that determines how production is weighed against consumption (if production is accounted for month by month, homeowners may get nothing for surplus power they feed into the grid during summer months; if the rule is “annual net metering,” homeowners can trade off their June and July production against their December and January consumption).
States typically apply a cap to the total quantity of rooftop output that utilities have to net-meter in their service areas, and as one utility after another reaches that limit, regulators often reassess the costs and benefits of the jurisdiction’s whole net-metering program. When it comes to net-metering policies (and the real dollars they represent), the controversy is hot and the future is murky.
Powerful Players
Here’s the background: As solar panels have gotten cheaper, companies large and small have started to make money installing solar arrays on single-family roofs. But as the solar industry takes off, it’s facing a backlash from utility companies who see solar as a threat to business as usual. Profits for solar-power players—just like profits for conventional generation companies and utility grid operators—depend heavily on rules set by government, and the political, technical, and economic issues involved aren’t simple. But big utilities have been playing the political game—and counting the money—for a hundred years. And as solar providers muscle into that game, conventional power producers and power transmission companies aren’t about to step away from the table.
And the power companies do have a case. Most solar-equipped houses, the utilities point out, aren’t really self-sufficient. Even if they produce more power than they consume in a year, they still need a utility connection at night and on cloudy days. But net-metering rules in many states require utilities to buy excess power from rooftop panels at retail rates, even if the utility could get its juice cheaper from a conventional source. Utilities reason that solar-equipped customers aren’t paying a fair share for all the power plants, transformers, and transmission lines that bring power to their homes when the sun’s not shining. And they say that the costs solar owners don’t shoulder show up in the power bills of customers who don’t have solar on the roof—an argument that allows big power companies to position themselves as Robin Hood heroes, defending poor customers who can’t afford solar panels against exploitation by better-off homeowners who can.
Washington Post reporter Joby Warrick has seen this battle coming for years. In a 2014 report, Warrick wrote: “Three years ago, the nation’s top utility executives gathered at a Colorado resort to hear warnings about a grave new threat to operators of America’s electric grid: not superstorms or cyber-attacks, but rooftop solar panels. If demand for residential solar continued to soar, traditional utilities could soon face serious problems, from ‘declining retail sales’ and a ‘loss of customers’ to ‘potential obsolescence,’ according to a presentation prepared for the group. ‘Industry must prepare an action plan to address the challenges,’ it said.”
That action plan is in top gear now, at the federal level and in states around the country. The utility industry’s first tactic—fighting solar incentives and subsidies in state legislatures—fizzled, according to Warrick’s report: It turned out that support for solar panels on houses was strong among conservative and liberal voters alike. So utilities took their battle to more favorable ground: They started pushing their case in state utility commissions, lobbying for new monthly fees on solar-equipped houses. In that arena, outcomes have been mixed. But the battle rages on—especially in “sunshine states” like California, Nevada, Arizona, and Florida, where solar power has the potential to displace a lot of conventional generation. Let’s take a closer look.
California
Regulators in Sacramento heard the same arguments that regulators in Nevada did, but in December, they arrived at a different conclusion. California’s power utilities had asked to stop paying the retail price for power supplied by rooftop panels, instead offering to pay homeowners the wholesale rate. But California regulators decided to keep the existing net-metering arrangement in place. Some fees are set to increase for California owners, however: They’ll now pay a one-time interconnection fee of about $150 (which conventional power consumers also pay), and they’ll have to pay a two- to three-cent surcharge per kilowatt-hour (kWh) on the power they draw from the grid (the money is earmarked for low-income-assistance and renewable-energy programs). Previously, solar owners paid the surcharge only on the net power they used (which could be nothing); now they’ll pay it on any power they take in, even if their excess production balances their intake and their net bill would otherwise be zero.
Here are a few more sources for additional info on this topic: