When I first started writing about energy living in Sacramento in the late ’80s, the technology to convert sunshine into electricity was among the most expensive options available.
Flash forward to 2015, and my, has the world changed. Today, the ability to convert simple sunlight into electricity through a solar photovoltaic (PV) panel placed on one’s roof is nearing the cost of power supplied by utilities in key regions of the world, including California. As a result, utilities in California – as well as Arizona and Hawaii – are pushing back.
On Thursday, a public demonstration took place on the steps leading to the California Public Utilities Commission, the regulatory body that is the key decision-maker to determine the way the economics of solar power are calculated for state consumers. This protest is a harbinger of things to come as utilities try to reinvent themselves in a world where smaller and cleaner power sources replace larger centralized power plants, such as the shuttered Rancho Seco nuclear facility.
Since the Sacramento Municipal Utility District is a self-governing municipal utility, the decisions at the PUC will not have direct bearing on many Sacramento area residents – except for those in outlying districts who get their electricity from Pacific Gas & Electric Co. However, any precedents set by the PUC on the controversial policy known as “net metering” may have spillover effects in Sacramento, as well as throughout the nation, if not the world.
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What is net metering?
Some form of net metering exists in 44 states, allowing homeowners and commercial entities to barter electricity with their utilities.
At night, when virtually all of us are drawing power from the utility grid, your meter measuring consumption spins forward, adding to your monthly bill. If you have a solar panel on your rooftop and the sun is shining to generate electricity, the same meter would actually spin backward under net metering during the day, taking demand for power off your utility.
Utilities see net metering as a policy that takes advantage of their grid infrastructure to serve, in essence, as a huge battery that can absorb and then discharge solar energy to the economic advantage of its customers. They argue the policy subsidizes a renewable energy resource that only directly benefits the few.
For renewable energy advocates, net metering was a long-standing policy that had successfully added new power supplies that were more efficient, since they were located right at the point of consumption.
The passage of Assembly Bill 327 in 2014 lifted a cap on the number of customers that could take advantage of net metering in exchange for reforms in the way rates would be calculated for those who use more or less electricity. The law also set into motion regulatory hearings, which set the stage for another showdown between utilities and consumers, which will culminate in a decision at the PUC before the end of the year.
The new twist to this rate reform debate are proposals by PG&E to assess a “demand charge” on residential customers with solar PV systems, which would increase costs attached to going solar.
Such charges have been imposed on most commercial customers for quite some time. In fact, the policy has led to a major surge in interest in the use of lithium ion batteries, such as those manufactured by electric vehicle companies like Tesla.
Consumers would avoid the demand charges by using power stored in batteries rather than drawing electricity from the grid when demand is high. A demand charge is based on one’s highest usage (i.e., demand) within a period of time, typically a month. Even if that spike in usage lasts only 15 minutes, the customer is assessed a demand charge over the entire month.
Only a very few utilities, such as the Salt River Project serving eastern Arizona, have imposed such a demand charge on residents. Once such a demand charge was imposed, the market for new rooftop solar dropped to nearly zero. Just last month, regulators in Arizona rejected efforts by utilities to impose other charges on customers that help negate the benefits of going solar.
Interestingly enough, the PUC refused to approve a demand charge for all residential customers earlier this year, so the fate of the more recent proposals by PG&E is clearly up in the air.
Shooting themselves in the foot?
Hawaii is a state that has put net metering on hold. Because it is an island, the large amounts of solar PV can have major impacts on frequency and voltage – two aspects of the physics of electricity that need to stay within a limited bandwidth, or appliances can get damaged or the entire grid can go down. Yet Hawaii is also a laboratory of innovation, where many new kinds of batteries are being installed to help store solar energy when supply exceeds immediate demand.
Because California’s grid is so much larger than an island, we do not face the same magnitude of physical impacts as Hawaii. Yet utilities may view net metering in a more favorable light if they are successful in negating the benefits to consumers of net metering.
Why? Extracting the greatest value from solar PV in the absence of direct subsidies – such as a federal tax credit that also happens to expire next year – only builds interest in batteries, whose costs are now following a similar trajectory as solar PV. Already, SolarCity, SunRun and other solar leasing companies that have spurred new ways of going solar PV with little or no out-of-pocket upfront expense on the part of the customer are showing where this market is going, pairing solar with batteries capable of virtual grid independence.
It is true that the declining costs of solar PV translate into less need for a subsidy. Net metering actually preserves a customer’s reliance upon the grid to make the system work, more or less, for both parties. Taking away net metering may only hasten efforts of customers to go “off grid,” building what in essence are little microgrids that would still have power when the larger grid goes down.
With signs of climate change all around us, utilities may want to think through the consequences of what they ask for – since the future growth of rooftop solar appears to be inevitable over the long term.
Peter Asmus has been covering energy issues for more than 25 years. He is author of several books, including “Introduction to Energy in California” (University of California Press). Learn more at peterasmus.com.