When California’s utility regulators kept a plan in place to pay rooftop solar owners the retail rate for the electricity that they return to their providers, those refs may have triggered a national trend. Is it the right decision?
In Late January, the California Public Utilities Commission voted 3-2 to allow solar customers to continue to get paid retail rates — power that is now sold back to the utilities over their own wires. The question is whether those solar customers should get paid the same as what utilities are charging for it or whether they should get paid the wholesale rate, which is notably less.
The difference between the two will determine just how fast a payback on expensive rooftop solar will occur and whether the trend toward more solar rooftop installations will continue. Utilities want to pay the wholesale rate, saying that it cost a lot of money to keep the grid up-to-speed and that if customers peel off, then it leaves fewer-and-fewer homeowners and businesses left to pay those expenses. It’s a divisive issue now taking place in at least 20 states across the country.
“Utilities, spurred on by their trade association the Edison Electric Institute, have been waging a battle against distributed solar for two years,” says Sean Gallagher, vice president of state affairs for the Solar Energy Industry Association. “Utilities want to slow down rooftop solar while they try to figure out what their futures will look like.”
The Edison Electric Institute responds by saying that its members spend $25 billion a year on upkeep — and that its utilities are also participating in these markets, to vary degrees and at various points in the process.
California, though, has given the rooftop solar industry a shot of energy. The vote, which can be revisited, will mean that the payback for rooftop solar panels is about 6 years, compared to 12 years under the utilities’ proposal.
While the commissioners elected to enact a one-time interconnection fee of between $75 and $150 for new solar customers — money to be used to help low-income households pay their utility bills — the regulators also voted to pay all such customers the retail rate for the electricity that they resell under the so-called net-metering rules. That amount, though, will vary depending on what time of the day the electricity is delivered to utilities.
The net metering rules in California were set a dozen years ago, with the intent that they would expire when solar penetration reached 5 percent at any of three investor-owned utilities: Edison International’s SoCalEd, PG&E Corp. and Sempra Energy, which is nearing the threshold.
California’s current regulatory regime was established in large part to boost solar sales. Now, though, the utilities are arguing that the price of solar power has fallen and that such assistance is no longer needed — help coming at the their expense as well as those customers who remain connected to the grid.
They are also saying that because solar energy is an intermittent resource that can’t be dispatched on demand, it is worth less “traditional” sources of power. And when the sun is not shining and those customers need power, well, they still depend on the utilities and their distribution network.
Will California’s decision become the national norm? Not if Nevada has a say in the matter. In December, it decided that utilities would no longer have to pay solar customers the retail rates for the electricity that they send back over the wires. So, instead of getting about 11 cents per kilowatt hour for their power, customers will eventually only get about 3 cents. In addition to that, the same solar customers would have to pay a fixed monthly rate that will rise to $38.51 in 2020, all of which will be used for grid upkeep.
As a result of all this, most customers will pay the utility less if they don’t put solar on their roofs and, three companies are leaving the state of Nevada: Vivint Solar was the first one to go before Solar City Corp. and Sunrun said they would follow suit. In the case of Solar City, it said it would cut 500 workers.
Meanwhile, Hawaii’s Public Utility Commission voted to reduce the net-metering credits they give solar rooftop customers. In essence, it ended the program last October, although the tariffs are set up to encourage more investment in battery storage that would inject electrons into homes and businesses when the sun is behind the clouds. The result: an 8-9 year payback, says the solar association’s Gallagher, a bit more than than the 5-7 years his group had wanted.
And a similar firestorm is taking place in Arizona, which is also trying to find the sweet spot where customers would be encouraged to go green and utilities could maintain their grids.
All those states are fierce battlegrounds over the future of rooftop solar. Utilities have a huge investment — but many see new possibilities ahead. In the eyes of solar companies, it’s not just a matter of economic survival but also a matter of environmental well-being.
