A threat to solar energy savings
Homeowners’ incentive to install solar panels could dwindle if new fees proposed by utilities take effect.
Tired of growing electricity bills, Miguel Espinoza decided to turn to the sun, rather than the grid, for power.
The Inglewood resident signed in March with solar leasing giant SolarCity to fix his electric bills at $130 a month — down from the $250 to $300 he had been paying.
Those savings, however, would eventually evaporate if state regulators approve proposals from California utilities to charge solar users more for their connection to the grid.
“This thing would be worthless to me,” Espinoza said.
Existing rooftop solar customers would receive some exemptions from the net-metering changes for 20 years after they installed their systems. But their costs still could rise because of separate regulatory changes, already enacted, that allow higher rates for users who buy small amounts of electricity from the grid.
For new purchases of rooftop solar, the utility proposals could wipe out the potential savings on power — the main incentive for buying the systems.
Lyndon Rive, chief executive of SolarCity, describes a “catastrophic” future for rooftop solar if the California Public Utilities Commission approves the proposals, which are set for hearings to start Oct. 5.
At issue is the practice of net metering, in which utilities credit solar users for surplus power their systems create, which gets fed back into the grid for use by other customers. Solar users are credited at the same rate they would pay the utility for electricity.
Utility proposals call for crediting solar users at about half the current rates. Utilities would also charge monthly fees, based on the size of a homeowner’s solar system.
The debate’s outcome could shape solar policies throughout the nation, as utilities seek ways to tinker with the costs and benefits of solar. Other states look to California as an innovator on solar policy. The state by far leads the nation in deployment of rooftop and utility-scale solar technology, followed by Arizona, New Jersey, North Carolina and Nevada.
The proposed fees could make solar power systems unaffordable — which is exactly what utilities want, Rive and other solar proponents say.
“This is a clear indication that the utilities are trying to stop competition and the solar industry,” said Rive, whose San Mateo, Calif., company operates in 19 states.
Utilities contend that rooftop solar owners — often wealthier homeowners, who can afford the high upfront installation costs — haven’t been paying their fair share of the cost of maintaining power lines, transformers, substations and power plants. Solar users typically must stay connected to the grid, either because their systems don’t generate enough power to cover their needs or as backup power after the sun sets.
The expansion
of solar, utilities say, means that the costs of grid maintenance are being shifted to traditional customers, who tend to be poor or middleclass families.
“All customers who use the grid should help pay to operate and upgrade the grid,” said Caroline Choi, Southern California Edison’s vice president of energy and environmental policy.
Edison, San Diego Gas & Electric Co. and Pacific Gas & Electric Co. have proposed plans that include reducing compensation to rooftop solar owners for the electricity they generate and adding monthly fees of as much as $3 for every kilowatt of capacity they own.
Under Edison’s plan, for instance, an owner of a 6kilowatt solar system would pay an $18-a-month charge and receive 8 cents a kilowatt for electricity sent to the grid — about half the current amount.
“Costs for residential solar have fallen dramatically, and it is time to update the structure used to enable rooftop solar to reflect the advances in the solar industry,” Choi said.
Utility critics point to a different motivation: Rooftop solar poses a threat to the utilities’ century-old business model of centralized power and the regulatory framework that supports it. In essence, the more utilities spend to maintain the grid, the more money they make.
The industry trade association, the Edison Electric Institute, referred to rooftop solar and its consumerfriendly cousin, energy efficiency, as “disruptive challenges” in a 2013 report.
Utilities have a legitimate need to balance the rooftop solar coming onto the electric grid with their costs, said C.R. Herro, vice president for environmental affairs at Meritage Homes, which builds houses with net energy metering in mind. But he said the strategy should not be “this kneejerk step away from solar.”
“The utility issue is real,” Herro said, “but I think they’re being very myopic.”
Herro — whose company will open the first of nine homes in Fontana this month that will produce as much energy as they use — said the trouble for the utilities is that solar is helping meet demand during the day. But by late afternoon, as solar generation decreases, the utilities have to ramp up their power plants to meet evening usage. That ramping up is costing the utilities money.
To Herro, the utilities would be better served by using storage earlier in the day to capture excess solar power and releasing that energy in the evening for lateday demand. In addition, he said, just as customers are charged tiered rates that are higher during high-demand periods, rooftop solar owners should receive tiered compensation when the utilities buy back the power.
A recent assessment by the North Carolina Clean Energy Technology Center found that 16 of the 44 states with net-metering policies were considering or enacting changes. Wisconsin and Arizona recently imposed significant increases in the amounts that utilities can charge solar users.
After the Arizona policy took effect, applications for rooftop solar installations dropped from hundreds a month to a handful, said Sean Gallagher, vice president of state affairs for the Solar Energy Industries Assn.
“I think it’s clear nationally,” Gallagher said, “that the utilities are concerned about the impact on their business with customers generating their own electricity, and they’re pushing back. What California does may legitimize some of these proposals in other states.”
Gallagher’s organization contends that rooftop solar doesn’t cause any additional financial burden on customers who receive their electricity only from the grid. Rooftop solar, Gallagher said, helps utilities avoid having to build more power plants and transmission lines, saving all customers money.
Espinoza, 48, said he began leasing solar panels as yet another way to manage his family’s expenses. He said his wife and two children already share a home with another family to cover housing costs.
The 2,000-square-foot home he has lived in since 2010 has three bedrooms and two bathrooms on one side and two bedrooms and one bathroom on the other. It doesn’t have air conditioning, just regular fans and basic amenities.
The utilities’ net-metering proposals smack of a bait and switch, he said.
“They push customers to save energy,” Espinoza said. “When we go the extra mile to get solar panels, then they want to add these fees. It’s just not right.”
Frustration with utilities has led consumers to begin mounting their own fights, and it has created some unlikely political alliances among grass-roots groups.
Debbie Dooley, a cofounder of the Atlanta Tea Party, has campaigned in Wisconsin and Indiana to protect net-metering laws. Dooley helped expand solar in Georgia, and she is helping lead an effort in Florida to expand solar in the Sunshine State.
Dooley has tapped libertarians and environmentalists such as Greenpeace and the Sierra Club, in addition to conservative groups such as the Christian Coalition.
“Fossil-fuel interests and these monopolies will stop at nothing to protect an outdated business model,” Dooley said.
Michael Campbell, program manager for California’s Office of Ratepayer Advocates, said his agency believes that California’s netmetering rules need revising. But he agrees with Rive that some of the utilities’ proposals could hurt the expansion of rooftop solar.
Under ORA’s plan, utilities would be allowed to charge rooftop solar owners $2 a month per kilowatt of capacity with no reductions in compensation for the electricity the owners generate. Regulators have until the end of the year to develop new rules that would take effect by July 2017.
“What we’re recommending,” Campbell said, “is something where you don’t chill the investment in solar.”