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Solar power adds to nonusers’ costs

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Booming rooftop solar installations in California are bringing an unwelcome surprise to the homes and businesses that don’t have the devices: an extra $1.3 billion added to their annual bills, more than half of that for Pacific Gas & Electric customers.

Power companies in the state, the nation’s biggest for solar power, are required to buy electricity from home solar generators at the same price they resell it to other customers, meaning utilities earn nothing to cover their fixed costs. The rules are shortsighted because eventually rates must be raised to make up the difference, according to Southern California Edison, which has joined with competitors to estimate potential losses.

As more homes and warehouses get covered in solar panels, higher rates imposed on traditional consumers risk a growing conflict between renewable-energy advocates and power companies that foresee a backlash in California and 42 other states with similar policies. The tension has also emerged in countries including Spain and Germany, where solar investments are curbing investment in the power grid.

“You get into a situation where you have a transmission and distribution system with nobody paying for it,” said Akbar Jazayeri, vice president of regulatory operations at Edison, a unit of Edison International and California’s second-largest electric utility.

To deter losses as solar abounds, states typically set a cap on the amount of photovoltaic power utilities must buy under what is called net-metering policies. Those allow a meter to run backward during the hours a day when a home or business is selling the power to the utility. California’s limit is 5 percent of a utility’s aggregate peak load.

New customers

About 20,000 customers of San Diego Gas & Electric had connected 146 megawatts of solar panels to its grid as of Nov. 1, accounting for 1.2 percent of its peak load. The company is adding 409 new net-metering customers a month, said Stephanie Donovan, a spokeswoman for the state’s third-largest utility.

SDG&E can’t collect about $18 million to $20 million a year in grid costs from customers with rooftop solar panels, according to Dan Skopec, vice president of regulatory affairs for San Diego’s Sempra Energy, the utility’s owner.

The utility will be shifting about $200 million in annual costs to customers without panels when the state reaches its cap, Skopec said. Solar customers “avoid charges, not just for energy, but also the costs of the transmission and distribution system,” he said. “That’s why we say it is not sustainable.”

Pacific Gas & Electric, the state’s biggest utility, will pass on about $700 million in annual costs to people without solar systems when the state hits the cap, according to Denny Boyles, a spokesman. Southern California Edison will transfer about $400 million annually, according to spokesman David Song, for a total of $1.3 billion from the three utilities.

That’s about 3.9 percent of the $33.5 billion spent on electricity in 2010 in California, based on the latest figures available from the U.S. Energy Department.

“The problem exacerbates with each new system that goes on a roof,” said Mark Bachman, an analyst at Avian Securities Inc. “Utilities will need to get reimbursed for their grid costs by a shrinking number of consumers.”

California utility customers installed 245 megawatts of solar panels in 2011 and have already added more than 315 megawatts this year, according to the California Solar Initiative, a state program to encourage rooftop energy systems.

Solar growth

Installations of U.S. residential and commercial solar systems totaled about 1,050 megawatts in the first three quarters of the year, according to the Solar Energy Industries Association, compared with about 1,100 for all of 2011.

SolarCity Corp., which installs and owns rooftop solar systems, has seen its stock rise 49 percent since its initial public offering last week. The San Mateo company has built solar power systems on more than 45,000 U.S. buildings, and its home state is its largest market, according to its website.

Growing demand for rooftop solar has been driven, in part, by net metering, said Eran Mahrer, vice president of utility strategy at the Solar Electric Power Association.

The policy “has been the most important tool,” he said. “There’s a lot of debate about what is fair. The caps provide a checkpoint where regulators and utilities can stop and revisit the effects.”

Raising caps

The growth is also driving efforts to raise net-metering caps. California revised the way it calculates its limit in May, effectively doubling to about 5 gigawatts the amount of solar energy that state utilities will eventually be required purchase.

California utilities oppose efforts to expand net-metering programs. Solar customers, who typically sell power to the grid when the sun is shining and use the income to offset charges for using electricity at night or on cloudy days, “are just using our system as a storage device,” said Jazayeri. “They should pay something for that service.”

So far, regulators haven’t been sympathetic to utilities’ complaints about rooftop solar power. The California Public Utilities Commission in January rejected San Diego Gas’ request to impose a “network use charge” that would have added a fee to customers with rooftop solar panels.

Easing stress

And solar developers say rooftop systems actually benefit the power grid by providing power during the hottest parts of the day. That eases stress on wires and transformers and helps utilities defer maintenance and upgrades, said Todd Pedersen, chief executive officer of Blackstone Group LP‘s Vivint Inc., which installs residential solar.

“We need an honest cost-benefit analysis of adding distributed solar to the grid,” Pedersen said. “It’s in everyone’s interest to resolve this now, because I see no signs of slowing as solar becomes cheaper than the utilities in most states.”

People in other countries are protesting higher rates stemming from net-metering programs. In Germany, the world’s largest market, Chancellor Angela Merkel is facing a backlash against higher power bills related to renewable energy. Grid fees will boost household bills an average of 10 percent next year, according to industry analyst Verivox.

‘Not sustainable’

Permitting net-metering programs to grow indefinitely is “not sustainable,” said Assemblyman Steven Bradford, D-Gardena (Los Angeles County). He wrote legislation that was approved in August requiring the state to conduct a detailed study on the economic impact of rooftop panels before making any additional changes to the cap. He expects the study to show net metering has a negative impact on utilities and customers who don’t have solar systems.

“You can’t purchase wholesale power at retail prices and not affect your bottom line,” Bradford said. “Utilities are seeing it already.”

SF Gate

10 Comments on "Solar power adds to nonusers’ costs"

  1. Rick on Tue, 18th Dec 2012 9:35 pm 

    Option 1, solar / wind on every home and business. Goodbye to the crooked utility companies, and nukes, and coal.

    Option 2, the CEOs, Presidents, and the VPs at most utility companies live like kings. This is not an assumption. So, perhaps they could work for less, of setting their loses. Hmm, that’s not going to happen.

  2. Jeffrey P. Colin on Tue, 18th Dec 2012 9:37 pm 

    This is evidence that new housing could be built with some housing having completely “off the grid” options. If homes had centralized Solar Panels for sets of housing, such as is done in some places in Canada, there would be no need to involve utilities at all. Costs are split between multiple owners, and Green Power independence is created. Perhaps the state of California would be better served to offer developers incentives to build more “off the grid” housing?

  3. John Kintree on Tue, 18th Dec 2012 10:40 pm 

    What is the typical cost per kw of installed peak capacity for these California solar system?

    How many kWh of electricity per year are produced from these typical residential installations?

    What is the EROEI with these systems?

  4. Anthony McCarthy on Wed, 19th Dec 2012 12:13 am 

    According to researchers solar is lowering power prices in Germany

  5. BillT on Wed, 19th Dec 2012 1:20 am 

    When you have all kinds of leeches in a money stream, you pay higher prices for lower quality. That is the down-side of ‘for profit’ capitalism. The electric companies (and any other corporation) Have to give some of your money to the stockholders (who do nothing to earn it) and to over-paid executives who also do nothing productive and usually make all the wrong decisions.

    Stand alone is the only way to go with solar and wind. To be connected to any power company is to be dependent on them for your future electric needs…if you have no battery back-up of your own.

  6. DC on Wed, 19th Dec 2012 1:33 am 

    This hatchet piece brought to you by the amerikan coal and oil cartel.


  7. Bimmerdude on Wed, 19th Dec 2012 7:56 am 

    The reality is that the utilities already include the cost of their grid in your electric rate. If they buy your power at retail.. they do lose the cost of the grid in that price.. They should be purchasing your power at wholesale price like any other utility so that the cost of sending your power over the grid is recovered.

    Its as if cars buying gas at the pump pay the highway maintenance taxes.. but biofuel cars fueled at home get to drive the highways without paying the tax for the maintenance of the highway.. That doesn’t work if you want to continue to have a highway to drive on!

  8. rollin on Wed, 19th Dec 2012 6:20 pm 

    “Power companies in the state, the nation’s biggest for solar power, are required to buy electricity from home solar generators at the same price they resell it to other customers, meaning utilities earn nothing to cover their fixed costs.” That is the major premise of this article.

    The electric bill has separate chages for transmission, distribution, and nuclear decommisioning which take care of the infrastructure transmission costs. The utility gets all those charges when it sells the solar energy to the new customer. That kind of blows a hole in the whining about utilities not getting paid for their infrastructure. So is this a bogus article, again?
    Also, why should a utility make money on power produced independently by solar owners? They did nothing to fund that system and they benefit from it.More bogus logic in this article.
    I know a number of states that allow the utility to pay a lower price to the solar power provider than they charge for electricity, while they are not allowed to do that with other commercial providers. Talk about cheating the public.

  9. Bob Owens on Wed, 19th Dec 2012 10:53 pm 

    The poor utility companies! They forget to mention the billions spent on their nuclear plants where all the cost over-runs and maintenance costs are passed on to their customers. The nuke plants are always offline but we get to pay for them! And they are complaining about solar! Wake up America! Stop being stupid.

  10. Kenz300 on Thu, 20th Dec 2012 4:44 pm 

    The price of oil, coal and nuclear keep rising and causing environmental damage.

    The price of wind and solar keeps falling and getting more efficient every year.

    Easy Choice.

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