Above, former Utility Executive Michael Osborne explains how Austin (Tx) Energy has begun thinking about the role of electric vehicles in the integrated smart grid of the future. Austin Energy is one of the most forward leaning utilities in the nation, and Osborne recently helped negotiate the lowest price for solar electricity ever, under 5 cents/kwh.
Meanwhile, utilities across the country are beginning to come around on renewables in the face of an unstoppable revolution.
(Reuters) – For years, the utilities responsible for providing electricity to the nation have treated residential solar systems as a threat. Now, they want a piece of the action, and they are having to fight for the chance.
If utilities embrace home solar, their deep pockets and access to customers could transform what has been a fast-growing, but niche industry. Solar powers only half a million U.S. homes and businesses, according to solar market research firm GTM Research.
But utility-owned rooftop systems represent a change the solar installation companies who dominate the market don’t want, and whether the two sides can compromise may determine if residential solar truly goes mainstream.
In Arizona, the state’s largest utility has proposed putting solar panels on 3,000 customers’ homes, promising a $30 monthly break on their power bills. In New York, regulators are weighing allowing utilities to get into the solar leasing business to meet the state’s aggressive plan to incorporate more decentralized, renewable power onto the grid.
Utilities can’t capture the benefits of net metering, because the utility can’t sell to itself at full residential retail rates; all it “gets” is the avoided cost of power, at wholesale rates. The tax benefits of the wind PTC are only available to passive investors, if my information is still up to date; that also excludes utilities.
How are utilities supposed to benefit, when the benefits are all from subsidies from which they are excluded?
E-P – You are consistently negative about net metering, but the simple reality is it works. From the utility’s side of the meter there is little difference between a customer who reduces his monthly energy usage through efficiency upgrades and lifestyle changes such as thermostat settings, and a customer who reduces his monthly energy usage through adding a PV array to his home. In both cases the utility gets less revenue from the customer – I believe you termed that ‘less return on their investment’ on an earlier thread.
But there is a difference between the two cases, and it’s a significant benefit for the utility. In the case of the customer who reduces usage through efficiency, he still has a daily load cycle whose peak demand coincides with the daily peak for many or most of the customers in the utility’s service area. The utility meets this peak demand through peaker plants (expensive) or purchasing power on the spot market (expensive to very expensive). For reference, the ERCOT price cap is currently $9,000 per MWh, much higher than the $110 or so per MWh Austin Energy bills its residential customers. Unless the utility has time of day pricing it can lose money on every MWh of peak power because the actual cost is higher than the billed cost.
In the second case, the customer who installed PV arrays, the PV system output is meeting some or all of his daily peak and thus minimizing his share of the aggregate demand. If the PV array is producing more energy than the customer is using the excess energy is flowing back into the utility grid and offsetting a small portion of the aggregate demand. There is no additional cost to the utility because the energy only goes as far as the nearest load (i.e. a neighbor without PV). One meter spins backward, one meter spins forward, so the revenue is a wash, and the utility meets demand with power it didn’t spend a penny to generate. The more customers who adopt solar, the greater the peak shaving and the greater the cost avoidance.
Phillip – Yes. Net metering is supposed to be nearly a balance annually, nulling out that customer demand. The whole argument about rates and who pays is tedious and wrong. The reason utilities are against it is the same reason they are against conservation. They want more electricity sales and they want more consumption especially during high rate times like summer daytime. Their model is connected to consumption and waste. Thats why the California PUC worked to decouple utilities.
In the past, without TOU, time of use metering, customers who conserved subsidized customers with high summertime air-conditioning loads. The talk of solar users not paying their way is just that, talk. The system has always had conservers subsidized energy hogs.
Good point about the rooftop solar provider excess being absorbed by neighbors. Like all energy conservers, rooftop solar reduces grid costs by lowering peak loads that determine next years planned generation and transmission necessary to meet peak demand, thus lowering everyones rates.
<sigh> No, it doesn’t work. It’s a massive subsidy to the consumer, paying them for the cost of keeping the grid operating. I’ve posted about this several times in detail and You Just Don’t Get It. Exactly what is wrong with you?
The wholesale cost of electricity around here is about 4.3¢/kWh, but the cost of standing ready to meet demand is in excess of $12 per kilowatt PER MONTH. Residential rates roll the demand cost into the per-kWh rate. Net metering PAYS the customer for the utility’s cost of meeting demand. That is NOT working, which is why utilities are up in arms.
Exactly wrong. Efficiency lowers the curve at all times. PV makes the curve much “peakier”, and can drive it negative at times. Get it through your head: utilities are not batteries.
Yeah, about that. If you look at the “duck belly” curve in the PV-heavy scenario, net demand goes from close to zero around noon to the evening peak around 7 PM (when the sun is low or set and PV generation is about zero). The utility still has to use that $9,000/MWh generation from time to time, but doesn’t have the 10 AM to 4 PM revenues to offset it any more… and is forced to pay residential users full freight for power that’s in excess and worth very little at noontime market rates. Of course, if you paid PV generators wholesale prices for what they put on the grid, there would be no market for grid-tied PV (or people would “eat a lot more of their own dog food”).
I keep telling you this. You keep not listening. What is wrong with you?
Skip Pruss on the value of solar. Minnesota found it more valuable than retail rates.
FYI, every state is a different case. Most utilities net meter at wholesale and sell at retail.
http://climatecrocks.com/2014/06/28/the-weekend-wonk-skip-pruss-on-the-value-of-solar/
Utilities apparently are not excluded from the advantages of solar subsidies. Not in Arizona where Arizona Power recently switched from bad mouthing solar to providing it to rooftop solar customers. Doubletalk.
The growth angle for utilities is in powering electric vehicles and beefing up the grid. They need to learn how to make that work.