Time for a Utility Overhaul?


Rooftop solar is again under attack by some utilities, who claim that net-metered solar-electric systems (among other energy-efficiency measures) are impinging on their profit margins.

As more rooftop renewable systems tie into the grid, some utilities — especially the investor-owned utilities (IOUs) that provide electricity to about 70% of the U.S. population — are loath to let go of their lucrative earning position. Last year, IOUs’ total revenues topped $200 billion.

There’s a disconnect when it comes to pairing solar and the grid, and that’s because the utility business model doesn’t match up. Of course IOUs want to protect their interests — they have a pretty cushy setup. As monopolies, they have guaranteed profits from a captive market. Beholden to their investors, they also have long-term investments on which they demand a “reasonable rate of return.”

David Roberts of Grist sums it up most succinctly: “Utilities do not own that distributed generation; it’s an investment upon which they receive no returns. And it represents a reduction in demand for what they are selling, a reduction in use of their grid infrastructure, and a reduction in the need for future power infrastructure.”

Under net-metering programs, utility customers who have solar-electric systems earn credits at the utility’s retail electricity rate for the energy their systems produce. Homeowners with systems that produce as much energy as the home consumes annually can zero out their bill. Good for the consumer; bad, say the utilities, for them. They cry foul, claiming that these grid-tied PV system owners are having their cake and eating it, too — using the utility grid and services without contributing to offset the utility’s fixed costs. As more people take advantage of net billing, many utilities say that someone - customers who don’t have PV systems, specifically — will have to pick up the tab.

As a homeowner with a grid-tied PV system that zeroes out my household’s annual electricity use, I don’t have a problem paying a fair amount to the utility for using their services and infrastructure. After all, my household relies on the grid at night and to fill in the energy gaps on cloudy days. And some IOUs are doing just this—implementing a small monthly service fee. However, others are proposing the development of a more stringent tariff that essentially values distributed energy production at a wholesale, not retail, rate. In other words: Sayonara, net metering.

Not so fast, says a January 2013 report by energy consulting firm Crossborder Energy. The study’s authors examined claims by California IOUs that “the state’s net energy metering (NEM) policy causes substantial cost shifts between energy customers with solar photovoltaic (PV) systems and other nonsolar customers, particularly in the residential market.” And what did they find?

“Recent changes in residential rate design,” says the report, “and updated models of the costs that the utilities avoid when they accept NEM power exported to their grids show that NEM does not [emphasis added] produce a cost shift to nonparticipating ratepayers; instead it creates a small net benefit on average across the IOUs’ residential markets.” The report goes on to say that “NEM is even more cost-effective for nonparticipants in the commercial, industrial and institutional (C&I) market.”

The paper points out that rooftop solar’s economic benefits — an estimated $92.2 million—far outstrip the utilities’ costs of managing net-metering programs and lowered revenues. The study points out that rooftop solar systems also:

  • Save on expensive fossil-fuel-based electricity
  • Reduce the need for new transmission and distribution infrastructure
  • Reduce electricity line losses, since the solar electricity generated is first used at the source
  • Save on the cost of managing power delivery
  • Save on the cost of meeting carbon and RE requirements.

So how can we solar users and consumers protect our net-metering agreements? It’s ultimately the lawmakers who will decide this, so contact your state legislators and ask them to support net billing and other clean energy incentives. Let them know that it’s important to keep rooftop solar moving forward — and unacceptable for the utilities to take even a small step backward. 

Claire Anderson, for the Home Power crew, with special thanks to David Roberts at Grist.org for his illuminating series on utility electricity. You can read his three-part series at http://bit.ly/RobertsOnEnergy.

Think About It...

“Just as fossil fuels from conventional sources are finite and are becoming depleted, those from difficult sources will also run out. If we put all our energy and resources into continued fossil fuel extraction, we will have lost an opportunity to have invested in renewable energy.”

David Suzuki, scientist

Comments (0)