California’s Misguided Rooftop Solar Debate
The goal should be equitably saving the planet, not growing one industry.
California’s residential solar policy may be on the cusp of major change. In mid-December, the California Public Utilities Commission (CPUC) issued a proposed decision (PD) that would gradually scale back the subsidies that were adopted more than 20 years ago to support the then-infant solar industry.
The PD would reduce the compensation that households receive for the power they inject into the grid, ending net energy metering (NEM) under which customers get paid the retail rate for their supply. It would also phase in a monthly fixed charge on solar customers to cover their share of system fixed costs, such as costs of transmission and distribution lines, wildfire mitigation and compensation, and investments in early stage technologies, among others. In addition, the PD would beef up incentives for installing batteries alongside rooftop solar.
For the PD to be adopted, a majority of the five commissioners must support it in a formal vote, which they could consider as soon as January 27.
You might think that the PD would supercharge both sides of a policy debate about the value of residential solar. How much does it reduce grid investment? How much would it help balance local demand and supply? Is it cost-effective? Is California rooftop solar policy equitable? All issues that other EI bloggers and I have weighed in on previously.
You might think that, but media and stakeholder comments on the PD have instead focused on how much the new policy would reduce the profitability and growth of companies that install residential solar.
So instead of a debate about the appropriate role of residential solar in addressing greenhouse gas emissions in California and beyond, the reactions have largely been about how much subsidy rooftop solar companies in California need in order to stay in business. If that sounds to you like climate policy is taking a back seat to political horse trading, you aren’t alone.
This redirection of the residential solar debate highlights a larger reality about problematic regulatory policies: individuals and businesses make investments in response to those policies, and many come to believe that they have a right to see those policies continue indefinitely.
As California retail electricity rates have skyrocketed – primarily to pay for rising fixed costs that rooftop solar doesn’t alleviate – NEM has made residential solar a bonanza for the households who adopt it and the companies that install it. Responding to those incentives, over a million households have put in solar and entrepreneurs have built successful companies that sell it and install it.
That isn’t a criticism of those consumers or entrepreneurs. People are busy. It’s challenging enough to suss out all of the benefits, costs, and risks of a major household purchase or a new business plan without also diving into debates over the best climate policy.
Yet, as electricity prices have increased and the CPUC has stuck with NEM, the ballooning subsidies have induced residential solar firms to go big on selling more dumb systems, without storage or grid communication. Those installations now do little to reduce grid costs or cut GHGs in California, but are still the vast majority of new systems going in today. The result is costing non-solar households boatloads of money.
The distortion has been exacerbated by a California law that says rates charged to solar households must ensure “that customer-sited renewable distributed generation continues to grow sustainably…”
Let’s pause for a moment to appreciate the uniqueness of that legislative mandate. California doesn’t just have laws intended to reduce greenhouse gases and promote renewable energy generation; it also has an explicit provision that requires continued growth of a mature industry selling a specific deployment of a specific technology, regardless of its cost or value. Imagine what the outcome would have been if we had a similar law promoting miscanthus-based biofuel, tidal power, flywheel storage, or any of the other technologies that promoters say are nearly cost-effective, but just under-utilized.
So now firms in the rooftop solar industry are howling that the PD will slow or reverse their growth, while supporters of the PD are arguing that rooftop solar will still do just fine. It has even led to the dizzying argument from the industry that their technology is over 50% more expensive than the PD claims, so they need larger subsidies. Without larger subsidies, they argue, the industry won’t “grow sustainably”, so it is required by law, regardless of whether it is good policy.
Meanwhile, some current solar owners, and potential future adopters, express outrage that the PD will rob them of their “right” to freely generate their own electricity. These arguments tend to be so wound up in freedom rhetoric and resentment of big government and regulation that I wonder if they remember that we are fighting a global externality, which requires collective action. In reality, of course, they are still free to generate electricity, and even to pump a lot of that into the public grid. They just have to pay for the grid as they continue to use it.
The PD does infringe on the “right” to get paid the same rate for injecting power into the grid as they and others pay for taking power from the grid. Thankfully, that is not a right you will find in the Constitution. Still, misconceived rights arguments illustrate the consequences of regulations that are allowed to fester long past the time they make policy sense. Stakeholders who benefit find reasons – whether based on liberty, fairness, or some other admirable social goal – that it would be wrong to take away their special deal.
As is common when government buys out the beneficiaries of outdated regulation, the proposed changes would be phased in over time. The PD would assure that nearly everyone who has already put in rooftop solar still sees substantial net savings overall. The goal isn’t to punish early solar adopters, but to correct the policy path we are on in which the only people left paying for the grid – the grid that all of us are going to be using for a long time – will be renters and low-income customers.
I don’t agree with everything in the PD. I would prefer to see a faster phaseout of the over-compensation for exports to the grid. And I would much prefer to use funds to lower bills and increase renewable access for all low-income customers, not for the lucky few who will get solar. That could be done in part community and small-scale solar, which is more cost effective and doesn’t rely on distorted retail rates.
But no one following this issue is going to get everything they want. The PD is still a bold step towards a more rational climate policy, a policy that combines all of the decarbonization tools and technologies we have to chart a cost-effective and equitable path to zero emissions.
I’m still tweeting (mostly) energy news/research/blogs @BorensteinS .
Keep up with Energy Institute blog posts, research, and events on Twitter @energyathaas.
Suggested citation: Borenstein, Severin. “California’s Misguided Rooftop Solar Debate” Energy Institute Blog, UC Berkeley, January 10, 2022, https://energyathaas.wordpress.com/2022/01/10/californias-misguided-rooftop-solar-debate/
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Severin Borenstein View All
Severin Borenstein is Professor of the Graduate School in the Economic Analysis and Policy Group at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He received his A.B. from U.C. Berkeley and Ph.D. in Economics from M.I.T. His research focuses on the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General's Gasoline Price Task Force. In 2012-13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017. From 2015-2020, he served on the Advisory Council of the Bay Area Air Quality Management District. Since 2019, he has been a member of the Governing Board of the California Independent System Operator.
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The E3 report on the cost-effectiveness of *all* the proposals that had enough detail shows that the Total Resource Cost for all the solar-only installations is far below 1. Assuming the draft 2021 Avoided Cost Calculator they used was reasonable, why are we even bothering with unpaired rooftop solar? Yes, we want to save the planet, but we have to do it in a cost-effective way. What is so wrong with utility-scale solar? (I agree with the PD’s push for pairing solar with storage, which at least provides resiliency.)
Reference: https://willdan.app.box.com/s/3jpscul3lbtof5erje7f4bkqkk96uahp/file/816006172639 (Figure 4, also Figure 9 with storage)
Let’s start with the problems with utility-scale solar. We’ll need more utility scale solar to achieve our GHG emission reductions, but the current cost estimates are based on projects located in already disturbed high insolation areas with ready transmission access. Those cost estimates fail to show the supply curve of rising costs as new plants are built in areas with greater environmental value and/or in less favorable solar insolation such as in the Central Valley. In particular, the California desert region is environmentally sensitive and further expansion beyond the borders defined in the DRECP is problematic. (I worked on the development of that plan.) In addition transmission costs are substantial and generally rising. A more accurate assessment of the incremental cost of transmission alone for those utility scale plants is 4 to 9 cents per kWh. When we add that to the generation plant, now we’re exceeding the cost of commercial distributed solar and approaching the current residential rooftop cost. So these resources are roughly cost effective when we correct the analysis.
Perhaps residential rooftop customers are overcompensated, but given that they are less than 10% of the total customer base (and less than 5% of the load), they cannot account for the fact that utilities’ rates are 50% and more higher than the national average. Even if they were 100% subsidized, other customers’ rates would only increase at most by 10%! The other 40%+ or more is coming from mismanagement by the utilities and the CPUC turning a blind eye. Let’s focus on the real reason WHY NEM customers might be overcompensated–that their retail rates are too high! If they received the national average retail rate of 13 cents per kWh instead, they would be close to the total cost of utility scale solar delivered to a customer.
I am curious if you noticed the E3 report on the cost-effectiveness test CARE’s proposal was the only one with a ratepayer impact measure (RIM) score of 1.0? [See Figure 5] Did you notice the CARE proposal has a first year cost of $0? [See Figures 1, 7, 11, 12, & 13] Would it surprise you that that’s because when you separate the retail imports from the wholesale exports there is no cost shift between NEM solar customer generators and other utility customers. Then the question comes down to the export compensation rate. Is it at CPUC avoided cost calculator (ACC) rate ~ $0.05/kWh or PURPA full avoided cost based on your utility’s costs to build finance and operate their own utility scale solar project plus cost to build transmission ~$0.55/kWh. That’s what we are suing CPUC in Federal Court over and that’s the elephant in the room no one is talking about. It’s not up to me and it’s not up to the CPUC either. It’s up to a U.S. District Court Judge to decide.
re: “What is so wrong with utility-scale solar?” Too much of it is damaging wilderness areas. There needs to be a recognition that utility-scale is not harmless, and has environmental costs. There’s not much environmental damage with rooftop and other urban PV. In fact it makes use of surfaces that are otherwise going unused, both for behind-the-meter and otherwise.
Trueth be told, there are over 13,000 IBEW employees working for California utilities, and they are convinced, by the big utilities, that if the big utilities, like PG&E fail, their jobs would be in jeopardy. It will not be solar on rooftops that cause their failure, it is they’re not keeping up with the current need for microgrids and the elimination of above ground utilities in forested land. Most rooftop solar projects are done Non-Union while utility sized projects, with government backing and financing, are all done by union Workers. Oil fired and natural gas fired power plants are also manned 24/7 by IBEW members and the solar industry needs less workers after installation. Wind power is better because Maintenace is always needed to those towers and only IBEW members can do the work. The hydro-Electric and nuclear power plants are also manned by IBEW members. As an IBEW member myself, I understand how keeping the statewide grid viable is good for union jobs. This new NEM-3 does nothing to help make or maintain current union jobs as such because commercial and industrial job losses will hurt Union members and the lack of power that results, will stop infrastructure union jobs for commercial EV charging stations could be rolled back for lack of electrical power.
In the future, there will need to be some kind of compensation made to the utilities because the homeowners, with solar, are using the grid for “Long Term Storage” and since there is no real storage, it is just a financial credit that does not help maintain the grid. I have a battery based off-grid system and my cost for replacement batteries is $100.00 per month prorated. My utility bill before the off-grid system was over $220.00 monthly and now it is the $100.00 cost for batteries plus the $80.00 per month PG&E bill so i saved just $40.00 per month but I am GREEN for the most part. If the utility had battery storage, then a monthly fee to generate to it, would make sense and GREEN sense at that. Allowing Solar customers to generate even more electricity to pay for the “Storage Fee” would make for more electrical power during daylight hours and cover the infrastructure for the EV revolution. If you believe in man mad climate change, then NEM-3 is too much too soon and needs to wait until the rooftop solar is at least 20% of the generated power used by the utilities, not the current less than 4 %. now geberated.
As just a layman who designed and installed 34 panels on my house in 2012, I always wondered if I sent power to the grid it would end up going to a neighbor, rather than have Utility energy created from 30 miles away, probably saves the utility the cost of producing extra energy to get that energy to my neighbor. I assume the utility charges the neighbor full cost (Generating and transmission) for the energy that I actually created and transmitted for no cost to the utility.
I can see the future of neighborhood energy producing from local solar producers and sell back to the utility or to the neighbors at reasonable prices.
Just a thought.
This was Thomas Edison’s view of local DC power plants powered by steam when Westinghouse convinced everyone to go to AC power and transmit it from long distances away from populations because of local pollution produced by coal fired boilers. Little did they think of non-polluting Solar or wind power in those days. I took DC solar and powered DC 12-volt Batteries and then powered my home with local inverters from the 12 volts DC, 100% clean. Thomas Edison’s dream come true, on a small scale. You can choose Dirty AC power from the Grid or Choose clean DC power from your roof. Utilities want you to use Fossil fuels until they own all the solar and wind in 30 to 50 years. This NEM-3 is their effort to do just that. We can do better. Ask Gretta Thornburg and listen to the science.
Good Thought. Right now, the homeowner incurs all the expenses and line losses in the system before it passes through his utility meter into the meter next door. The meter next door pays a premium price for the power and the homomer is given an IOU for tier-1 credits that if it is not redeemed by the true-up date, the utility gets to keep all the credits except for 3 cents. Now, with NEM-3, the utility wants to bleed the new solar homeowners dry and take away any incentive to save the planet from fossil fuels that the utilities make money on converting them to electricity. If this passes, all the rooftop systems in the future will be standalone micro grids and the homeowner next door won’t get any of that clean power. it will cost the solar roof installation the additional cost of batteries that in turn will make the system a micro grid divorced from the utility, the national grid and in the end will destroy the mega utilities and eventually will be broken up into locally controlled micro grids. The bad thing about this is when Texas has another freeze, no one will be able to send their clean extra electricity to them like the Infrastructure Bill that just passed congress and was signed into law is intended to do. Only the dirty coal, oil and natural gas power plants, that are sitting idle because they have no customers any more to sell to. Of course, who is going to keep an expensive power plant open when there are no customers daily to sell to unless the utilities charge even more for the power they sell. As they say, “It’s the MONEY HONNY” and homeowners will go “off-grid” in high priced markets like California and will not put solar on in low priced markets like New Mexico. If you look at Hawaii, their natural micro grid system has such high fees and connection costs, Tesla is able to sell full blown solar plus Powerwall “off-grid” systems already. Just look it up on the Tesla Website. When half of the customers disconnect from the grid completely, the rest of the customers will pay twice the price to make up the difference to keep the grid running. By the way, i have a standalone micro grid on my home and it works great.
Ray, I agree. The concept of local energy administration is explained by futurists like Jeremy Rifkin.
Currently, only the electric companies (generation, grid, administration components) are represented as generators despite the systems, like yours and mine (32 panels since 2013), that generate power provided as AC current to our neighbors.
First, break every utility into separate companies representing generation, grid, and administration. Better for competition and accountability.
Then, gradually, make a new system. Rifkin uses the world wide web as an example, only instead of servers, routing, and information: neighborhoods, routing, and power. Grid is a fixed cost that must be paid, but separately from generation and only for routes used for energy exchanges. Emergency grid routes are becoming obsolete and should be handled by the local government and the grid owner.
CCAs are going in that direction: generation is separated from distribution.
“I always wondered if I sent power to the grid it would end up going to a neighbor…”
Ray, I did too. So I asked someone who I thought would know: Norbert Soski, who designed the solar electronics on the International Space Station in the 1990s, and is now working on flight electronics for Jeff Bezos at Blue Origin.
The answer is simple: nobody knows. And because it depends on so many variables: how much electricity you’re generating, how much your neighbor is consuming, the distance of everyone who is consuming and/or generating electricity on the grid at the moment, how much they’re generating/consuming at the moment, et cetera, et cetera, the answer is literally unknowable.
Norbert did share with me an intuitive way to imagine the flow of energy on a grid. If you pour a bucket of ultra-clean water slowly into a dirty river, while a friend is filling his bucket from the river a few yards downstream, some of your clean water will likely flow into his bucket. If your friend was standing 20 yards downstream, it would be very little; if half a mile downstream, none of your water will end up in his bucket. At best, you could assume the closer he was to you, the more likely he’d get some of your water.
Similarly, in the future there will be no way to measure how much electricity you’re providing to either your friend, or your utility. For that reason, no utility would be interested in buying electricity from you – it’s insignificant, it’s unreliable. The utility’s job is to provide a reliable supply of electricity, and they would never know when it was cloudy in your neighborhood, or even if your system was down. In truth, your clean energy is worth to your utility exactly what your bucket of clean water is worth to your friend, half a mile downstream: nothing. It’s worthless.
California has been telling us your power is worth something, however. Worse, it says we should reimburse you at retail rates – what we are paying them for electricity, even if it’s not needed, even though resistance eats up 9% of it (California’s grid-wide average energy loss) – you are reimbursed for your generation as metered at your home, not at ours.
I think this relates to the point Severin is trying to make: net metering, as it stands, grossly exaggerates the value of generation from home solar panels. Arguably, it causes more problems than it’s worth. If you feel you can save money by putting solar panels on your roof, by all means go for it. But don’t pretend solar panels on California homes are worth higher rates for everyone in the state, or worth footing the entire bill for grid maintenance. From the perspective of everyone else, their contribution is worth a clean drop in a dirty bucket of water.
First, the muddy river is a bad analogy because the grid is more tightly plumbed than a river. Each circuit is like a pond with a single inlet and electricity generated by customers push back against the flow of electricity at the head of the circuit. Then the electricity that from the customer flows to the other customers on the circuit. This principle is very well established.
As for the claim that the energy the customers produce or save has no value runs completely counter to basis of California’s energy efficiency for the last 50 years. That policy has been largely successful and has led to a substantial slowing in the growth of electricity demand. Even solar rooftops have reduced the expected growth in the CAISO peak by at least 6,000 MW.
Richard, no. The entire CAISO grid is maintained in instantaneous equilibrium by CAISO. There is no “single inlet” for each distribution circuit (there could be hundreds of homes with solar panels – each is an inlet). If net demand is greater than supply on a distribution circuit, constant power is maintained by generating more power elsewhere; if supply is greater than demand, CAISO must reduce generation elsewhere to accommodate the power flowing out from your little pond. Though this principle is often misunderstood, your version of it is well established nowhere.
“As for the claim that the energy the customers produce or save has no value runs completely counter to basis of California’s energy efficiency for the last 50 years.”
The quantity of energy customers produce or save has only been considered synonymous with energy efficiency, and only in California, for the last 15 years. Everywhere else, energy efficiency is a ratio: that of energy output to energy input. So I’m not going to argue about the pet definition California has invented or any cockeyed justification for it. But I will note it illustrates the illiteracy of California’s policymakers and renewables advocates, illiteracy that makes maintaining dependence on natural gas in our state, for oil majors like Shell and Chevron, like taking candy from a baby.
“That policy has been largely successful and has led to a substantial slowing in the growth of electricity demand…”
The only people who care about slowing the growth of electricity demand are those with abundant access to it. Energy conservation is a relic of the OPEC oil embargo, unnecessary but for added carbon emissions or scarce, intermittent supply. Ask about energy efficiency in nuclear-powered France and they will look at you like you’re wearing athletic shoes and cutoff pants.
“Even solar rooftops have reduced the expected growth in the CAISO peak by at least 6,000 MW.”
All the more impressive given the CAISO peak, except on rare occasions, occurs after sunset – when solar is incapable of reducing consumption (but nice try).
Today’s solar rooftop installations are still 5 times higher costs than large ground mounted systems. Raising the monthly fee on NEM-3 plus giving less credit for the summer excess production that solar users NEED for their wintertime heating and lighting, Will kill not only the California residential solar but also kill NEW HOME SALES since new homes have to come with solar built in. The additional property tax burden, for the life of the home, the additional fees, for the solar rating on the home and the lower compensation will force people to remove any solar, that came with their home, because it will be a net loss under the PG&E/PUC plan OR go completely “OFF-GRID” with all new homes and solar installations. The reneging on the 20 years locks in on NEM-2 contracts will hurt all of us middle income people who took out long term loans to put in the solar and are paying interest on those loans. Rooftop Solar is still only 4% of all the homes in California and has not made electricity more expensive for the other 96% but is just Utility hype on the subject. If it was 50% of all homes have solar, then just reducing the credit but allowing people to install 200% of their last years bill rather than the 115% now allowed could compensate the homeowner and provide more clean energy to the utility at lower costs that then could be-re-sold to compensate for infrastructure costs. As a Retired 50-year member of the IBEW local 595 in Alameda County, I have solar panels and am on NEM-2 with a Tesla Solar Glass Roof. When battery storage becomes a cheap as solar panels, then, I will get the battery storage. if the fees are so high that being connected to the grid is more expensive than being off grid with battery storage, i would pull my meter and depend on my storage and my already installed Gasoline Generator and transfer switches PG&E had me get during the Enron Crisis.
Exactly, I have 5.2kW PV solar system with 17kWh of lead-acid batteries and a breaker switch to PG&E to stop stealing my electricity.
Rooftop solar is to California as ethanol is to Iowa.
Reducing the cost paid by the utilities for energy purchased from residential generators to the average wholesale cost is only fair. Taxing those who install solar with a grid participation tax is pure protectionism by the big shareholder owned utilities. If there are fixed costs, then those should be paid by everyone through the monthly standing bill not targeted at those who install solar. They should add time of day energy rates to encourage the installation of batteries.
PG&E as well as the rest of the California utilities already have time of day rates that are a high as 41 cents per kilo watt hour in the summer from 4:00PM to 9:00PM. Since these hours are outside the normal production time for solar most of the year, they are already making a profit back from solar customers on time of day. Adding the tiered rates where solar customers produce at tier-1 but must buy it back in the winter at tier-2 also lines the utilities pockets. I installed solar, with batteries, and the cost of my off-grid system, pro-rated over 25 years is 16 cents per kilo watt hour. I have a micro grid and paid retail for everything from 2007 to 2018. As built, it and kept track of the energy produced plus, I did a battery replacement in 2018, my calculations have remained constant because as Solar panels prices dropped, the copper wire, labor prices and other construction materials have increased. The lowest residential Electrical rate, charged by PG&E is 22 cents per kilo watt hour and that is at low time, tier one, winter rates. The average cost is 26 cents per kilo watt hour and my off-grid system make my own power for 6 to 10 cents less. East Bay Community Energy charges 10 cents to 11 cents per kilo watt hour and PG&E add 16 cents or more for infrastructure costs and fees. When you say average wholesale cost, 10 to 11 cents are the figures East Bay Energy Uses. If the utility allowed its customers 10 cents and could install solar panels double the current 115% of previous years usage, then the utility could sell all that extra power at retail and double their money. Right now, they both only allow 3 cents recovery compensation for any unused energy. Those 3 cents only are why I turned off my Gas Furnas and am burning up all my excess banked electrical energy rather than let them take it for only 3 cents. This puts me 10 years into the future when Gas lines will no longer be connected to homes in California, and we are “All-Electric”. After all, 3 cents is what electricity cost back in 1964 when natural gas was 15 cents per therm. Today, Natural Gas is over $2.00 per therm and going higher. it takes 15 kilo watt hours of electricity to heat as much as one therm of natural gas. What they are paying at 3 cents is equivalent to 45 cents per term is you just burn up the electricity instead.
One must separate the argument for changing the deal for new solar vs. that which is already installed. Let me address the latter only.
The State encouraged those with capital to invest in new renewable generation capacity (i.e. rooftop solar) so California or its utilities didn’t have to. To do that they had to encourage people to use their capital (or credit) on that activity rather than some other, by offerring an attractive deal. One can liken that to the homeowner buying a bond where he invests some capital for an agreed upon return–which in the rooftop solar case is the NEM tariff.
If you bought a bond and after a few years, you would go to court if the lender said, “My situation has changed and I am not going to pay you as much interest as I promised” or “We have decided to charge you a monthly fee for getting your interest payment because others are complaining.” Well you can’t take the State to court, but that does not make it ethical.
Its funny how the State finds it much easier to take promised money from individual Californian investor/homeowners than from IOU shareholders (let alone ENRON). If such a change goes foward, no one should ever invest any money on a plan that relies on the PUC honoring a promise on rates.
“…you would go to court if the lender said, ‘My situation has changed and I am not going to pay you as much interest as I promised’ or ‘We have decided to charge you a monthly fee for getting your interest payment because others are complaining.’ Well you can’t take the State to court, but that does not make it ethical.”
Unethical is:
1) Claiming the State of California has promised to pay retail prices for your electricity until the end of time, and
2) Failing to share the financial burden of maintaining the grid you use to sell your electricity, and
3) Reimbursing you at retail prices for your electricity when it isn’t needed, and
4) Forcing California to burn gas to back up your solar panels when they’re generating nothing at all.
Max Sherman’s point is dead on. Retail customers cannot be expected to understand all of the intricacies of what it going on with grid electricity–they are responding to a state-initiated policy. NEM 1.0 and 2.0 were given 20 year deals (not in perpetuity) and they banked on that guarantee. There are many other deals that the CPUC has approved that are at least as bad, including approving too many RPS contracts for terms that were too long, paying PG&E a 50% premium on the cost of Diablo Canyon and rescinding the 10 year restriction on the recovery of utility gas plant costs constructed after 2005. These actions dwarf any subsidy to NEM customers.
Carl,
I did and I won at the U.S. Court of Appeals for the Ninth Circuit. Check my comment and the link to CPUC website. Also there’s other links in the Motion for Stay to CPUC Federal court documents I filed at CPUC to show their Court filings against us. They don’t want to pay export compensation to rooftop solar NEM what they’re charging utility customers for the cost to build finance and operate their utility owned solar. That’s called full avoided cost under federal law. The PD focusing on cost of roof top solar NEM, that’s just a side show. Ignore that man behind the curtain!
1) Claiming the State of California has promised to pay retail prices for your electricity until the end of time,
No, only long enough for homeowners to recover their initial investment, not forever.
2) Failing to share the financial burden of maintaining the grid you use to sell your electricity,
The utility is taking your electricity and selling it to your neighbors at full price. tier 2 while paying tier one value so they make a profit and at true-up, pay only 3 cents per Kilo Watt hour and keeping the rest of the value to cover infrastructure on NEM-2
3) Reimbursing you at retail prices for your electricity when it isn’t needed,
With only 10% of the electricity is generated by solar and 4% by roof top solar, they are running gas fired power plants around the clock except when they can cut one or two back during peak solar or wind production and usage time for wind and solar.
4) Forcing California to burn gas to back up your solar panels when they’re generating nothing at all.
Our East Bay Community Energy says they use wind and hydroelectric to provide power when the sun does not shine. I cut back on natural gas usage in my inefficient gas Furnas by using my solar generated electricity bank, with the utility, that uses high efficiency gas boilers to produce the electricity it gives me back in the winter.
NEM-2 had all those things considered when implemented 3 years ago and yet Chicken Little is saying the “Sky is Falling” over the 4% of actual roof top residential solar that is out there. The State has mandated all new homes be built with solar and this is the Way utilities can profit by it, not that they need more profits. If they said, “we need a meter charge on all customers to build battery storage for micro grids and those batteries supplied everybody their nighttime power, then that would be reasonable and then they could build up the battery infrastructure faster and then charged a small fee because solar customers are using the utilities batteries rather than buying their own, that would make sense if the utility had batteries in place, but they do not. With electric automobiles being mandated along with solar panels plus the elimination of natural gas for heating, cooking and hot water, we need more incentives to get more roof top solar from the State of California, like what New York State is doing, not less. NEM-3 as proposed is too much takeaway too soon for California.
If it was a bad and/or unethical deal from the start then the CPUC and the utilities should not have offered it in the first place. Your items 2 through 4 should have been considered before instituting the policy (item 1 is false), and not the responsibility of the homeowners making an investment based on what now may turn out to be a bait and switch scheme.
Severin,
Your article made me feel sad. My unmet need for you to understand I feel certain this is all a side show to take the public’s eye off what going on in the federal court. The issue is what is avoided cost. Would you please take a look at this Motion for Stay in the NEM proceedings.
Thank you.
Michael E. Boyd CARE
Click to access 436667373.PDF
Thank you for the link, Michael. True, CPUC’s definition of “avoided cost” in 2005 did not measure the relative costs of one source of energy compared to another. As defined in the Standard Practice Manual, avoided cost was intended “to measure the overall cost-effectiveness of energy efficiency programs from a societal perspective, taking into account benefits and costs from a wider perspective as opposed to one individual or stakeholder.”
But note the language: it didn’t apply to sources of energy at all, but to energy efficiency programs – to the benefits of conservation. It didn’t apply to solar panels, wind turbines, nuclear plants, coal plants, or hamster wheels. The benefits of conservation were calculated as the sum of the following components:
1. Electricity and natural gas commodity, adjusted for energy losses.
2. Environmental externality, which quantifies the reduced impact on the environment resulting from less generation of electricity and direct combustion of natural gas.
3. Transmission and distribution (T&D) capacity, which captures the reduced demand-related capital expenditures, line capacity losses and maintenance costs associated with energy savings.
4. System reliability, which includes the cost of maintaining a reserve margin and other ancillary services.
5. Price effect of demand reduction, which recognizes that reduced demand results in a decrease in the market-clearing price for electricity.
There have been many CPUC proceedings since involving avoided cost, and honestly I would rather endure a series of painful dental procedures than read them all. So since 2005, maybe CPUC has managed to twist the definition of efficiency to include solar and wind energy and created a new calculator, one that calculates the avoided cost of home solar panels on the above-listed components.
If that’s the case, tell me: should ACC include environmental externalities like the cost of disposing solar panels? What about the cost of shipping them 6,000 miles from point of manufacture in ships burning bunker oil? What about the emissions of all those gas peaker plants, necessary to backup California’s home solar on cloudy days?
What about costs of system reliability – phase and voltage irregularities, and the ancillary services necessary to correct them? For a truly fair accounting, shouldn’t we be deducting the added costs of those externalities from solar’s avoided cost?
I’m disappointed in the CPUC approach and the labeling of rooftop solar policy to date as ‘misguided’ and in need of “major change”.
Sadly, I see this whole conversation as an incredibly siloed one. The issues of ROOFTOP SOLAR, ENERGY STORAGE AND E-MOBILITY — “A NEW ENERGY TRIFECTA” are intimately connected. If we are to have any real effect upon climate change within the current centralized utility industry context this must be viewed as a ‘package deal’. Is the climate change impact of our policies the real issue or is maintaining the profits of the status quo the issue?
Direct incentives for those non-solar customers to go solar are obviously be needed on the local, state and federal levels. Currently EV incentives (with increases for low-income) are largely in place but generally oversubscribed and underfunded. The commitment to BOTH EV adoption AND the rooftop solar/storage effort as a whole needs to be strengthened and engineered as such NOT made weaker!
I contend in such a future there can be a balance in equity for all. With the addition of increasing loads (revenue) that EV’s will provide and the subtraction of rooftop solar/storage (revenue lost) the net cost to utilities will be only the investments in infrastructure to service/manage such a situation. Additional action such as a FEDERAL BUYOUT of old grid-connected, fossil-fueled generation facilities – ie: so-called ‘stranded assets’ will also be key to the viability of a clean grid and personal equity going forward.
Currently NEM proposals look as if industry is trying to tear down our personal clean energy standards and manufacture a perception of inequity at the expense of our environment. Should we also propose that we tear down our own personal standards of living to match those of the poorest within our society? .. No .. Ideally we would seek to raise the standard of living for ALL .. So too should we seek penetration of rooftop solar for ALL in addition to the support of a clean energy grid.
The habitability of our earth is at stake.. let’s stop playing games & get to work!
Jeff Gould
Good comment.
Mr. Borenstein, have you noticed we are in a climate emergency? Do you know that universal building electrification and electric transportation was hardly mentioned 5 years ago? That we have only recently had good storage options? These completely change the future analysis of the benefits of rooftop solar, which has always been a part of California’s plan for the clean energy transition.
The benefits of electrifying existing built-properties include not needing huge areas of open space for solar farms, reducing costly transmission lines, and harnessing individual initiative when our governments are failing us on the climate front, and helping clean the air which causes so much distress in low-income folks in the Valley, etc.
Can HAAS do a better analysis?
“…That we have only recently had good storage options?”
Candace, California does not have “good storage options” now, and never will. As of July, 2021, California had a total of 1.39 GW of grid-scale output capacity, and 5.56 GWh of storage capacity. To give you an idea of how pitifully insignificant that is for powering our grid: Californians consume 711 GWh of electricity every day. All of California’s grid-scale storage would thus be capable of powering the state for 5.56/711 = .78% of one day, or 11 minutes, 14 seconds.
To make matters worse, many residents seem to believe it’s only storing clean electricity. But it isn’t – it’s either storing a grid mix, or the direct output of a gas plant (Vistra’s Moss Landing Energy Storage Facility, the largest in the world, is charging electricity from the direct output of Moss Landing Power Plant – the fifth-largest gas plant in the state). All of those “paired” solar-storage facilities? They’re only paired by proximity – because it looks “green”. And due to resistance losses, storage is effectively making all stored energy 10-20% dirtier than the electricity used to charge it. When stored, the carbon footprint of electricity from Moss Landing Power Plant, a state-of-the-art, combined-cycle gas plant, is reduced to that of an average coal plant.
California is indeed failing us on the climate (and social justice) front, but it’s because our state “requires continued growth of a mature industry selling a specific deployment of a specific technology, regardless of its cost or value” – as Mr. Borenstein claims it does.
There may be no good storage options for renewables but there are options. How to address the duck curve? Can a solar user have a battery to store his/her excess solar during the day and use it at night? Perhaps utilities could provide loans to solar owners to install battery storage. I assume such energy, if self generated, would be 100% clean energy.
Half of our renewable solar energy comes from rooftop solar. To me that is a testimony to the failure of large utilities and the success of individual entrepreneurship. But, given that our day-time generation has been so successful, and we now need to address night-time use, solutions need to be worked out.
I am not a solar owner, by the way, but, since I am electrifying my home (and universal electrification needs to be in this discussion), I assume I am one of the people whose rates are in this discussion. I have looked into solar for my own home and, as a business person, am questioning the costs.
-My costs would be high because the portion of the roof for installation would have to be rebuilt to accommodate panels.
-But, other than that, I have had two estimates, one a lease and one a directly paid, for installation and they were both about $28,000 before credits or rebates. At the time, I did not qualify for a credit.
-The biggest problem for rooftop solar and the utilities (correct me if I am wrong) is the duck curve. So storage becomes essential to continuing decarbonization. If I add a battery to my solar installation, it would be about $10,000.
-Financing $40,000 over a 20 year period at 3.558% (today’s prevailing rate) is $443 a month. At the end of that time, I would own the system but I would have had to buy another battery 10 years before ownership.
-My total yearly PG&E cost is $3,431/year. My total financed solar cost, per year, without any PG&E grid or other charges, would be $8,747 a year and would run for 20 years with a replacement battery midway through. You can do this calculation with an all-cash payment. You can also do one with investing the $40,000 in stocks or bonds and see how it would come out. But, right now, I don’t see any advantage. I see solar owners as pretty heroic, as they are beating utilities at what they claim to be their own game and bearing the responsibilities that come with it.
So I stay on East Bay Community Energy and pay for the 100% clean option. Climate Change should be our number one concern. People without solar need to help pay for the transition, IMO. This is cost shifting as a transition for a livable future.
The metric of how long you could power the State on its storage is not a useful one as that is not what the storage is for. While a homeowner might want storage for that purpose (which I do), the grid uses storage to level the load.
Solar companies like to sell the notion that your “clean” solar electrons are going into your batteries–and the utilities like that so they can charge you more if you want to charge your batteries with their electrons. Zoom out a bit and the answer is that it is the kind of generation that comes on or off the grid as a result of storage use. If you didn’t charge your batteries; some generation would go off line somewhere because of it. Most of the time that is one powered by natural gas. So those storage electrons are made of natual gas….regardless of what one’s Tesla app says.
The same thing is true, btw, when you switch from gas appliances to electric ones in your home. Somewhere a gas plant is firing up to supply you with those “clean” electrons to turn back into heat.
Thank you, Severin.
As you explain, the primary objective of clean energy policy should be efficient and equitable economywide decarbonization. Not overtly focusing on maintaining a specific policy, that incentivizes a specific application of one technology, without regard for the benefits and costs of that policy and without regard for who bears those costs. It’s sad to see this larger question go missing from the NEM update debate.
The fascination for energy freedom through rooftop solar truly confounds me. Rooftop solar (freedom) advocates forget that they have the privilege of being able to consume however much electricity they need and when they need it at predictable prices. They also have the ability to sell the electricity their rooftop solar panel generates at predictable prices. These privileges come from being connected to the grid and from the current regulatory construct.
If energy freedom advocates really want to have their energy freedom cake, they are free to eat it too by disconnecting from the grid. Very few, if any, do.
(Note: These are my own personal views)
I built an off-grid solar panel system with batteries to see if it could be done and how much it would cost. Tesla has been building off-grid systems in Hawaii and those people are very happy. For backup, when the sun does not shine, you either connect to the utility and pay only for what you use or have a BACK UP GAS OR PROPANE GENERATOR IN PLACE. i have been using the utility for back up until i got my Tesla Solar Glass Roof installed in 2020. An off-grid system, with batteries, pro-rates at 16 cents per kilo watt hour and the cheapest utility price for electricity is 26 cents in tier one when averaged for a 600-kilo watt hour monthly home usage. A 1200 kilo watt hour home would be 30 cents per kilo watt hour when tier-1 and tier-2 are averaged together. I was in Tier-5 (48 cents per kilo watt hour) at 1200 kilo watt hours per month before my off-Grid system and at 600 kilo watt hours a month after. You do not need to connect your solar panel system with batteries up to the grid. The president of Tesla Cyber Truck division had just 4 power walls and had no meter connection to PG&E on his home in Portola Valley near San Jose, California. if the utilities make the rates so high that going off grid for all or part of the year with batteries and not selling any power back, California customers will do it. We won’t freeze here in sunny California.
Mohit
I don’t think the NRDC has fully considered that the incentive will now be in place to fully disconnect from the grid. Looking at the current costs for household microgrids and considering the essentially free storage provided by a Tesla or an EV pickup, disconnecting will look favorable compared to the coming increase in PG&E rates that will approach 40 cents per kWh in a few years according to PG&E’s 2023 GRC application.
My SDG&E summer rate just went up to $0.63 on-peak, $0.39 off-peak and $0.11 super off- peak. Winter is $0.42, $0.37 and $0.10. I just need to make sure I keep all of my usage between midnight and 6:00 am.
Thanks for this response Richard. How much do you think it will cost in solar + storage for a customer to completely disconnect from the grid, be resource adequate at all times, and maintain the same lifestyle they currently have? Especially if they are an EV customer. Remember the oversizing of solar and storage that would be needed to make it through the doldrums and a planning reserve margin to account for high load days.
There’s at least one condominium complex in San Francisco that is currently off grid. And importantly a customer is 15 times more likely to experience an outage from a distribution grid outage than from a generation/transmission outage. (It’s in my past testimony.) Being off grid avoids those outages. This is particularly valuable for rural customers. EVs will be able to charge many places, not just at home. There are other opportunities to go off grid in various, creative ways at the neighborhood level as well.