New rates undermine solar systems at homes

Economics of electricity can often be at odds with clean energy goals.

LAFAYETTE, CALIF. — It was only t wo years ago that Elroy Holtmann spent about $20,000 on a home solar array to help cover the costs of charging his new electric car. With the savings on his monthly electric bills, he figured the investment would pay for itself in about a dozen years.

But then the utilities regulators changed the equation.

As a result, Pacific Gas & Electric recently did away with the rate schedule chosen by Holtmann, a retired electrical engineer, and many other solar customers in this part of California. The new schedule will make them pay much more for the electricity they draw from the grid in the evening, while paying those customers less for the excess power their solar panels send back to the grid on sunny summer days.

As a result, Holtmann’s solar setup may never pay for itself.

The paradox i s playing out around the country. Even as policymakers at the federal and state levels promote clean energy to fight global warming, the economics of electricity can often be at odds with those goals.

Thrust in the middle are utility regulators. Even if they support greening the grid through technology adopters like Holtmann, the regulators are also responsible for ensuring that the utilities can afford to supply power to the largest number of custom- ers at the most equitable rates. That includes people without the money or inclination to install solar collectors.

For more than a century in the United States, the public utility rate system assumed a one-way flow of electricity from central power plants to their customers. The role of utility regulators was to adjudicate reasonable rates for the consumer, while allowing an adequate rate of return on the money power companies spent generating and distributing the electricity.

But now, even though rooftop solar energy still accounts for less than half of a percent of the energy generated across the country, its growing popularity is challenging regulators and utilities to rethink their old ways.

Last year, Nevada and Hawaii moved to end retail-rate credits awarded to solar owners for energy sent back into the grid.

In Arizona, a utility won the right to make solar customers pay mandatory monthly fees called demand charges, which have been common among large commercial and industrial customers but unusual for residential consumers.

During the first quarter of this year alone, at least 10 states were weighing or approving rate design measures that could undermine the economic appeal of home solar systems, according to data compiled by the North Carolina Clean Energy Technology Center.

The challenge is to design a new kind of rate system — one that accurately values electricity that can now flow in different directions and at different volumes at different times of day.