Monday, November 23, 2015

Should Residential Solar Pay A Utility Fee?

By: Eugene Wilkie

When we were first starting out in solar 20 something years back interconnecting solar to the utility was not an option. It was around 2000 that Sandia Labs really came out with interconnect design for solar inverters. Since then the ability to interconnect to the grid has grown in leaps and bounds from equipment side to regulations by utilities to allow net metering.

There have been many reasons that solar has enjoyed  this hockey stick growth model. Public education, net metering, huge cost reduction, and incentives are the main reasons for accelerated growth. I believe that the whole solar residential market owes its growth due to being allowed to interconnect to the utility so lets first define NET METERING.

This is the definition from SEIA or Solar Energy Industry Association.

Net Metering

Net metering allows residential and commercial customers who generate their own electricity from solar power to feed electricity they do not use back into the grid. Many states have passed net metering laws. In other states, utilities may offer net metering programs voluntarily or as a result of regulatory decisions. Differences between states' legislation and implementation mean that the benefits of net metering can vary widely for solar customers in different areas of the country.

What Is Net Metering?

Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a residential customer has a PV system on the home's rooftop, it may generate more electricity than the home uses during daylight hours. If the home is net-metered, the electricity meter will run backwards to provide a credit against what electricity is consumed at night or other periods where the home's electricity use exceeds the system's output. Customers are only billed for their "net" energy use. On average, only 20-40% of a solar energy system’s output ever goes into the grid. Exported solar electricity serves nearby customers’ loads.

This digital meter runs in both directions to accommodate electricity generated at this customer’s home.
A 4 kilowatt PV system on a home in this area would offset around 4911 kilowatt hours
of electricity each calendar year, saving the homeowner over $380 on their utility bill.
(Source – NREL PV Watts, EIA)
The way I explain it to our customers is that the grid is your battery and that you charge that battery during the day and withdraw from the storage at night. It is such a great storage system that you can over deposit during the summer then use it in the winter. In my experience with energy storage it is by far the most reliable and cost effective. Or one could look at it as a bank that you deposit savings into and withdraw when needed.

Just about every customer that we visit wants to have no power bills and emergency power with at least a five year return on investment. If I add batteries to completely disconnect from the grid the return on investment jumps up into the ten year ROI. I probably am working in solar in one of the most difficult markets, Washington State. The power is one of the cheapest energy markets in the US. We have an abundance of Natural Energy and we have been harvesting it since the 50's. We are selling a large amount of solar in this market due to NET METERING, LOCAL & STATE INCENTIVES, and of course the low cost of solar products. Yes we had to skinny up our margins but we are doing plenty of work to offset this.

Our average system that we sell cost around $33,000 that is using all the incentives which is around a 3-4 year return on investment or ROI. If I were to add a battery system and disconnect them from the grid or equal sized to their solar system it is another $33,000 and probably more. Our solar is warrantied for 25 years. Battery last 10 years adds huge replacement or maintenance cost. Yes we are hearing on the news every day the leaps that battery technology is making. I am in the market, pricing these storage systems and the economics are miles away from being financially viable for total offgrid.

The $33,000 solar system we sell is our smallest for the most part. So lets just do a comparison. If the utility charges you a meter fee of $25 a month it is $300 a year or $7500 for the 25 year life of the system. The storage system for the would be another $33,000 plus maintenance and 10-15 year replacement cost.

Our motto for years has been Why Rent Your Power When You Can Own It. I believe that even renting your storage still leaves the control for the most part in the customers hands. If one of our customers is still concerned about the ability to have autonomy during power outages we suggest a critical load back up battery system. Another words enough battery storage to handle some lights, fridge, and outlets to charge. We get a lot of request for this.
So lets talk about fairness. We know that the utility has a cost to at least upkeep the lines you are connected to as well as administration costs. The customer has just spent a huge amount of money (if they are owning not leasing) to get as close as possible to zero out their electricity bill. So who and how is responsible to offset the utilities cost? They have a customer still connected to their grid they HAVE to maintain but they are no longer making those great profits from the sell of power anymore.

If one were to just take the two previous points for utility cost versus solar customer is a very narrow view of the total benefits solar is providing to the utility and here is where it can get a bit complicated.

Lets start with this scenario. If you have a residential neighborhood of 20 houses and 10 of those houses installed solar. The power they produce is over what they are using in their house and is going onto the grid feeding the homes around it. About 20-40% of the power they are producing so realistically they are producing enough for 13-15 homes from the 10 with solar. So here is where it can be difficult as all utilities charge differently as far as TOU or time of use. For the most part utilities charge far more during PEAK HOURS which usually lasts from 7 AM to 7 PM or when everyone is using their power. We know that the energy over produced is used locally by neighbors. So the utility is not producing or shipping that power for three to five homes but they are collecting premium prices from non solar residents. Peak hour charges are about 30% of your bill. Yes you are buying the power back at night but that power is priced far below day time energy cost. 

So for example if your electricity rate during the day from Southern California it is $0.17 a KwH during peak hours or daytime and $0.09KwH at off peak or night. So they are charging the consumer that does not have the solar $0.17 you then buy your credited power at night for $0.09 a KwH. They are making a profit of $0.08 a KwH then wanting a fee from the original generator of the solar system. Remember they are not paying generation cost or transmission as the power is produced and used locally.

Lets just take for example one of our average systems of 7 kw. It produces 9,863 KwH in Washington State. So if 30% of that is Peak usage your personal peak usage is 2959 KwH leaving 6904 KwH the utility is selling to your neighbors at $0.17. If you calculate that by the profit they are making from selling your power and then discount your power charge at night for the $0.08 the utility makes it is $552 per year that they make. SCE or Southern California Edison has about 300,000 residential installs to date. If they were all our minimum size of 7 kw they would have profited $165,600,000.00

My point is this. For the most part utilities that have Time Of Use charging systems for electricity are profiting and at the same time returning to the trough for even more by adding a meter fee. Thier base power is usually provided with fossil fuel and they will probably tell you that they have to buy that power no matter what due to their contract they signed with that energy producer. So YOU the solar producer are being asked to once again subsidize fossil fuel and to add insult to injury it is coming from those investing in clean energy. But they are not the only ones that are attacking residential and small commercial solar.

There have been a group of very influential investors into large utility solar projects. Berkshire Hathaway and the Walmart family to name some of the bigger players. and They can not sale you their solar power if you already have solar so they have spent a huge amount of money making false claims about the cost of residential solar to the utility to protect their investment.

Americans have stood up and the majority now support solar energy. We have the same old fossil and special interest wanting to keep it in Corporations pocket not the end user.

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