Accessing the email bag to address disgruntled blog readers.
There is a serious energy and climate policy debate about the appropriate role of behind-the-meter generation, particularly rooftop solar, in a carbon-free electricity system. Serious discussion includes topics like
- the relative cost of rooftop solar versus grid-scale solar,
- the potential savings on distribution costs thanks to production close to the point of consumption,
- the potential voltage on the distributed solar distribution system due to backflows,
- environmental damage avoided when rooftop solar is added,
- environmental damage avoided through grid-scale solar generation,
- damage to the environment caused by the construction and operation of a solar or wind farm,
- the extent to which solar customers transfer fixed system costs to non-solar customers,
- how to fairly integrate production behind the meter into the system
and other important facets of the debate. My IE colleagues and I have has been known at weigh in on some of these discussions from time to time.
When we do, we often hear from solar owners with their own arguments about the correctness of their panels. It’s tempting for an energy geek like me to focus on the serious political discussion and just ignore some less thoughtful arguments that pop up in my inbox.
But the owners of solar are categorical, sometimes angry, above all concerned about the environment, and many. And they vote, literally and figuratively, with their wallets. So today I’m going to access the email and respond to some of the arguments I’ve received from rooftop solar panel owners that (mostly for good reason) rarely make it into policy discussions.
[These are based on actual emails, though I have edited and condensed the arguments.]
Argument #1: “You claim I get the retail price for the electricity my panels send to the grid, but I just looked at my bill and I actually get less than 4 cents per kWh for exports.” You only receive this lower compensation for the excess kWh that your system injects into the grid above the amount that compensates for all the kWh that you take from the grid during the year. For example, if during the year you consume 1300 kWh from the grid and inject 1325 kWh into the grid, you will indeed be paid a lower amount like $0.04/kWh for the additional 25 kWh. But, you will first get the 1300 kWh you consumed from the grid offset by the first 1300 kWh you injected into the grid. In other words, rather than having to pay the retail price for these 1300 kWh, you will not have to pay anything because it will be deducted from the first 1300 kWh that you inject into the network. You will therefore have saved the full retail price on these 1300 kWh. The vast majority of solar homes do not produce a surplus in a year, so most solar homes are credited with the retail price for all of their exports.
Argument #2: “When I feed electricity into the grid, my utility sells it to my neighbor at retail price, so if he pays me retail price, that’s a wash.” Alas no. The utility would still sell the electricity to your neighbor, even if you didn’t have solar on the roof, only they could have bought the electricity for your neighbor at the wholesale price, which in California is on average less one third of the retail price. Like many of us here on the EI blog have writing onthis difference is used to pay all kinds of fixed costs, from costly renewable energy contracts signed years ago to revive the industry, to mitigating wildfires and compensating past victims, to energy efficiency programs, to supporting low-income customers income, rooftop solar subsidies and many other expenses. When the utility pays you the retail price for the injections, they end up with less revenue for those fixed costs, which means the regulator then allows them to raise the retail price further, so they can still cover. Even most California rooftop solar advocates now acknowledge that there is such a cost change, although they claim that there are many other cost changes in the system as well.
Argument #3: “Rooftop solar is disrupting the electric industry and utilities are just fighting against their inevitable extinction. The solution is to let them sink, like Kodak and Blockbuster, rather than continue to subsidize their outdated business model. This stems from a misunderstanding of what electric utilities are doing these days. Most of them are no longer in the power generation business. They buy power from independent power producers, much like non-profit Community Choice Aggregators (CCAs) do, and sell it at cost to customers. Utilities make their money by building and maintaining transmission and distribution lines, on which they are allowed to earn a rate of return on their capital investment. Electric utilities may disappear one day, but that will be when we no longer need transmission or distribution lines, because each customer generates their own electricity – 24 hours a day, 365 days a year. It’s unlikely to happen in my lifetime, and probably not in yours if you’re reading this blog post.
Argument #3A: “Utilities have invested in bad technology – grid infrastructure – which is no longer profitable. That should be their problem and utility shareholders should absorb the losses like in any other market.” Utilities could easily recover all their costs if they were treated like businesses in any other market and allowed to set their own prices. They’re not allowed to do that, because they’re regulated monopolies, and part of that regulatory framework is that they’re allowed to charge prices that generate enough revenue to cover their costs, unless it’s demonstrated that they were reckless or fraudulent. Costs that fall into these categories should be eliminated, but everything else is up to us, the taxpayers. Legally and in practice, the savings realized by the owners of solar panels on the roofs will be paid for by other customers.
Argument #3B: “It’s time to remove the utility’s monopoly and allow others to compete to sell electricity, including customers. » Yes, very well. In California, with CCAs and production behind the meter, this is already the case for the energy component. But we still need transmission and distribution lines, and no one is seriously suggesting that these should be operated other than as a regulated or public monopoly.
Argument #4: “There are no more obstacles for the poor to switch to solar energy. The companies will install the panels on a homeowner’s roof for free and sell the electricity to them. Some companies offer such long-term power purchase agreements to homeowners with good credit, as well as what is effectively a lien on the house, and at a higher cost per kWh than buying or renting the panels. Of course, low-income households are much less likely to be homeowners and less likely to have good credit. So, in the real world, there are still very big barriers for the poor to turn to solar power. That’s why, in 2019, 4.6% of the 1.3 million PG&E households with an annual income of less than $50,000 have solar power, while 15.4% of the 0.7 million households with incomes over $200,000 have solar power, according to a study we will publish in July.
Argument #5“With electricity rates above 25 cents per kWh, rooftop solar is the only thing that makes electrifying my heating, hot water, or vehicle profitable.” There’s certainly some truth to that, but let’s be clear about how solar customers afford electrification: by having other customers subsidize them through even higher electricity prices. The change in cost when a home goes solar makes electrification even less affordable for everyone. The problem of soaring electricity prices cannot be solved by shifting the costs from those who have solar energy to those who do not.
Media discussions of energy and climate change are riddled with myths from all political directions, whether it is solving our problems easily with massive investments in nuclear energy, carbon capture or a system of mainly distributed production. We must continue the serious debate about the role of all sources of electricity generation, but we must also tackle popular myths that would otherwise deflect serious debate. And we all need to be open to change your mind due to changing technology and new data. This is how we will achieve a clean and fair energy transition.
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