Koch Brothers Attack Net Metering and Solar

[rolosrevenge]

This is going to drive grid defection. At $40/month (!!!!) that's $480/year.

Suppose you use 1000 kWh/month evenly spread across the days, and you use 1/3 of your power at night. I did some casual research, and you can get 12 kW of battery for $2580.

That's equivalent to 6 years of fixed charges at the rates you are paying. The batteries should last that long.

At such outrageous basic connection charges, anyone with low usage per month should go off grid immediately -- it's a no-brainer.

Here where I am, my fixed charge is $16/month or so. This isn't going to drive people off the grid. $40/month WILL, and VERY FAST.

High fixed charges encourage efficient households to go off-grid. This is not well-thought-out, as this will induce a death spiral for the utilities.

I will further note that the drug-addled lunatics at HECO in Hawaii are proposing a $50/month, or higher, fee:

As Hawaii Prepares for Utility Reform, the States Solar Industry Sheds 3,000 Workers : Greentech Media

This will make local batteries a no-brainer and completely eliminate the grid on Oahu *very, very quickly*. It is a plan for accelerated bankruptcy. The government may intervene to save HECO from its own management; except for that possibility, I'd be very tempted to short-sell Hawaiian Electric.

Remember, to go off grid and maintain the same level of reliability, you'll probably need to size your solar to produce about 5-6 times your daily needs and batteries large enough to store about 4 consecutive days of usage. Then the economics don't look so good.

 

[omgwtfbyobbq]

Or get a backup generator. Not to say that you can't oversize your array/pack to avoid using a generator, but at a low enough capacity factor the generator is less expensive. You can also manage your own consumption to minimize the need for additional generation.

 

[rolosrevenge]

But don't forget the maintenance on all of the equipment

 

[Robert.Boston]

But don't forget the maintenance on all of the equipment

And add in depreciation and lost interest on capital invested (or interest charges on loans taken out).

From an economist's POV: Most utilities try to recover the fixed costs of their operations through a variable charge on generation. @FlashZ's co-op is collecting more of those fixed costs through fixed charges. This shift is efficient, because it reveals the true price of using another kWh of power, which is artificially high under traditional rate structures. If taken to its logical extreme, where the retail $/kWh rate at retail is only a small markup over the wholesale $/kWh, then net metering works reasonably well because the utility isn't making a margin on power sales.

This shift to fixed charges also reveals the true cost of running the grid. Some may think it's too high, like @neroden, and choose to leave. My guess is that few people have the time, interest, space in the house, capital, and risk-taking needed to go off-grid. But the point is, as long as the prices reveal the costs, then we're letting people make informed decisions. Under the current retail rate structures almost everywhere, consumers see heavily distorted prices and therefore make decisions that aren't efficient (from a societal perspective).

 

[FlasherZ]

Ultimately, to center it back to the discussion, though, the solution chosen by the co-op addresses the complaint that the non-solar customers are subsidizing the solar customers' connections to the grid, which is the primary complaint that has popped up by these groups in opposition to net metering.

The motive isn't always fairness, though, and unlike my member-owned co-op, other utilities would love to make a profit from someone else's generation. Hiding fixed costs in the usage allows them to do that, because they can then justify paying excess generators a different rate than consumers.

 

[jgs]

From an economist's POV: Most utilities try to recover the fixed costs of their operations through a variable charge on generation.

...

This shift to fixed charges also reveals the true cost of running the grid. Some may think it's too high, like @neroden, and choose to leave. My guess is that few people have the time, interest, space in the house, capital, and risk-taking needed to go off-grid. But the point is, as long as the prices reveal the costs, then we're letting people make informed decisions. Under the current retail rate structures almost everywhere, consumers see heavily distorted prices and therefore make decisions that aren't efficient (from a societal perspective).

This makes a lot of sense, but I think it elides some of the more difficult-to-ponder societal benefits of running a grid. The one that came immediately to mind is the benefit that accrues from having universal electrification. Presumably (or I presume, anyway) there is such a benefit, much like there's a benefit from universal phone service, universal education, and so on. If rates are structured such that affluent customers disproportionately leave the grid, it doesn't seem like the story would end well. In a nutshell, the grid (or anyway, a grid) is a way of sharing resources (gasp, collectivism!). Off-grid is rugged individualism.

Granted that the rate structure isn't the only or necessarily best way to accomplish social policy. But I do think it's something it's been used for historically, whether acknowledged as such or not.

Disclaimer: my background in economics pretty much begins and ends with the "assume a spherical cow" joke.

 

[TheTalkingMule]

From an economist's POV: Most utilities try to recover the fixed costs of their operations through a variable charge on generation. @FlashZ's co-op is collecting more of those fixed costs through fixed charges. This shift is efficient, because it reveals the true price of using another kWh of power, which is artificially high under traditional rate structures. If taken to its logical extreme, where the retail $/kWh rate at retail is only a small markup over the wholesale $/kWh, then net metering works reasonably well because the utility isn't making a margin on power sales.

This shift to fixed charges also reveals the true cost of running the grid. Some may think it's too high, like @neroden, and choose to leave. My guess is that few people have the time, interest, space in the house, capital, and risk-taking needed to go off-grid. But the point is, as long as the prices reveal the costs, then we're letting people make informed decisions. Under the current retail rate structures almost everywhere, consumers see heavily distorted prices and therefore make decisions that aren't efficient (from a societal perspective).

Great post and really the thing I have the toughest time understanding as an outsider to the utility world. How is it so difficult to simplify costs at a retail level? Why aren't there simply fixed "privilege" charges that everyone pays for every minute they're tied to the grid and then simple usage charges on top of that? I have yet to see a provider who clearly illustrates the cost breakout.

I've been following solar in Germany for years so I tend to know more about their utility world that our own. Wholesale prices in Germany have absolutely plummeted in recent years due to solar output while retail costs remain the same or even increase. I find that very confusing and obviously counter-intuitive. Perhaps when generation is decoupled from the grid operators we'll see costs become more clear to the average consumer?

 

[Robert.Boston]

How is it so difficult to simplify costs at a retail level? Why aren't there simply fixed "privilege" charges that everyone pays for every minute they're tied to the grid and then simple usage charges on top of that? I have yet to see a provider who clearly illustrates the cost breakout.

There are long books and entire journals devoted to this question, so any summary will necessarily be incomplete. That said....

1. Distinguishing fixed costs from variable costs depends on your time horizon. In any given month, the transmission & distribution system is static, but over a decade it is reinforced to meet shifts in supply and demand.
2. Fixed assets can be viewed as "deep" or "shallow," depending on whether they serve all customers or primarily one set of customers.
3. Every cost must be allocated among customers according to some rule, aka "billing determinant" that has some equitable nexus to cost causation.
4. Rate design must be non-discriminatory, such that similarly situated customers pay under the same tariff. Different customer classes, however, e.g. residential vs. small commercial, have a lower standard of non-discriminatory.
5. The resulting allocation has to add up to a figure that is expected to cover the utility's costs plus a reasonable return on and of capital prudently invested.

Taken together, these points imply that there is a no uniquely best way to allocate costs.

Now add politics into this mix. Utility commissioners are either politicians or political appointees (or both), so they use the degrees of freedom in cost allocation to effect whatever political agenda they or their masters have. For example, most utilities have tariffs that either actively help poor, elderly, etc. through rebates or are skewed in some more subtle ways to help low-income families (by, e.g. putting a disproportionately small share of costs on those with low energy usage.) Net metering is another example: it's a way of incentivizing rooftop solar without the legislature having to explicitly allocate funds for those incentives.

Now add to all of this the fact that a state's utility regulations and a utility's tariff structure are giant accretions over time. It's very rare for a utility to start with a clean slate in rate design; it tinkers, adds riders or credits, etc. It's not unlike the tax code that way.

 

[TheTalkingMule]

Ugh. I guess it's going to be a long and ugly road to something rational. Germany is now pushing for an EU-wide "Energy Union" mostly to hedge against Russia and sell solar at mid-day, but I have to think they'll be moving toward "socializing" and upgrading the grid inside Germany over the next few years. Eventually generation and smart grid management will be necessarily separated by regulation, right? At that point you're simply paying the grid operator and cost couldn't be more clear.

EON has recently decided to divest itself from all generation in light of Germany's move into renewables and the coinciding plummet in profits from their traditional generation portfolio. That's the largest utility in the world's 4th largest economy basically removing itself from the generation game.

Firstly, it is not possible to optimally run an organisation which comprises two businesses pointing in fundamentally opposite directions. By creating one business that aims to develop new markets in customer solutions and renewable energy and another business seeking to optimise the operation of legacy assets necessary to run an integrated energy system, both businesses will be able to focus on a clearly defined business imperative and this will be to the benefit of investors and wider stakeholder community.

Amazing.

Now Germans are deciding whether to build new solar/wind carrying high tension lines to Bavaria or to just build new nat gas plants near the industrial demand.

To ensure Bavaria, home to energy-hungry firms Siemens and carmaker BMW, has enough power once nuclear plants are switched off in 2022, two "electricity highways" are planned to transport wind energy from the north.
But Bavarian state premier and leader of the Christian Social Union (CSU) Horst Seehofer has questioned the need for the transmission lines, bowing to concerns from local citizens that masts up to 70 metres high could be erected in their backyards. Instead he wants to subsidise gas power stations.

All of these trends in DE seem to be leading to a world where generation is cleaved from grid maintenance and renewable supply management. Will there be more money in coal or in smart grid management? I think we know the long term answer, but it's great to see the transitions being made so swiftly in Germany. They're dealing with reality rather than trying to hinder clearly unstoppable progress.

 

[neroden]

This shift to fixed charges also reveals the true cost of running the grid. Some may think it's too high, like @neroden, and choose to leave.

"True cost"? There is no such thing. You know better than this, Robert.

Consider. From the point of view of a household, the "true cost" is the incremental cost of attaching their house to the grid. This is very, very low if the wires are already running past the house.

Now, from the point of view of an entire community, the "true" cost is the cost of maintenance of the whole grid. This is not quite as low, but it is also very low.

90% of the time the grid just sits there requiring no maintenance at all. I think the wires haven't been replaced in my lifetime, and the local transformers were only replaced in order to comply with the no-PCB law. We're paying for crews to deal with storm damage, mostly.

It's obvious that $50/month is far higher than the "true cost" in these cases.

Of course, perhaps the utility thinks that "true cost" includes its corporate overhead: office buildings, billing, secretaries, lawyers, etc. It doesn't, but if you have a utility company, you do have a lot of corporate overhead.

Then again, if you're looking over the 100-year-plus period, then the "true cost" includes the cost of capital construction for building the grid in the first place. This is, of course, much much larger. But there is *no* fair way to charge the capital costs. If you attach them to monthly or yearly charges, you're inflating those charges.

Retail price, of course, has nothing to do with cost, ever. So the real question is what price structure is *competitive* with the alternatives.

The grid seems to be fairly valuable here in the snowbelt, where you genuinely can lose all your solar generation for a week, and it's nice to be connected to Niagara Falls. It still doesn't really cost that much at $17/month.

In Arizona, what's the *point*? Why is there a grid at all? Is it worth $50/month? (No.)

My guess is that few people have the time, interest, space in the house, capital, and risk-taking needed to go off-grid.

No risk-taking involved. Space is an issue in some places (not in Arizona). This means that the sole issue is capital. Now, that's a big issue....

And it's a market distortion, if you think about it. Banks are extracting fees for the use of capital, and they're doing so differentially depending on who's asking for the money. Individuals can't borrow at the same rates large corporations can. There's a distorted set of incentives when some people have more capital than others. This is the opposite of a free market.

But the point is, as long as the prices reveal the costs, then we're letting people make informed decisions. Under the current retail rate structures almost everywhere, consumers see heavily distorted prices and therefore make decisions that aren't efficient (from a societal perspective).

$50/month fixed costs are *also* a distorted price and *also* induce societally inefficent decisions.

It is good to design a rate structure which encourages societally valuable decisions. This isn't it.

- - - Updated - - -

Taken together, these points imply that there is a no uniquely best way to allocate costs.

Yeah, I see that you do know all of this.

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If rates are structured such that affluent customers disproportionately leave the grid, it doesn't seem like the story would end well.

Yeah, this is what I think too.

 

[ItsNotAboutTheMoney]

"True cost"? There is no such thing. You know better than this, Robert.

Consider. From the point of view of a household, the "true cost" is the incremental cost of attaching their house to the grid. This is very, very low if the wires are already running past the house.

Now, from the point of view of an entire community, the "true" cost is the cost of maintenance of the whole grid. This is not quite as low, but it is also very low.

90% of the time the grid just sits there requiring no maintenance at all. I think the wires haven't been replaced in my lifetime, and the local transformers were only replaced in order to comply with the no-PCB law. We're paying for crews to deal with storm damage, mostly.

It's obvious that $50/month is far higher than the "true cost" in these cases.

Of course, perhaps the utility thinks that "true cost" includes its corporate overhead: office buildings, billing, secretaries, lawyers, etc. It doesn't, but if you have a utility company, you do have a lot of corporate overhead.

Then again, if you're looking over the 100-year-plus period, then the "true cost" includes the cost of capital construction for building the grid in the first place. This is, of course, much much larger. But there is *no* fair way to charge the capital costs. If you attach them to monthly or yearly charges, you're inflating those charges.

Retail price, of course, has nothing to do with cost, ever. So the real question is what price structure is *competitive* with the alternatives.

The grid seems to be fairly valuable here in the snowbelt, where you genuinely can lose all your solar generation for a week, and it's nice to be connected to Niagara Falls. It still doesn't really cost that much at $17/month.

In Arizona, what's the *point*? Why is there a grid at all? Is it worth $50/month? (No.)


No risk-taking involved. Space is an issue in some places (not in Arizona). This means that the sole issue is capital. Now, that's a big issue....

And it's a market distortion, if you think about it. Banks are extracting fees for the use of capital, and they're doing so differentially depending on who's asking for the money. Individuals can't borrow at the same rates large corporations can. There's a distorted set of incentives when some people have more capital than others. This is the opposite of a free market.


$50/month fixed costs are *also* a distorted price and *also* induce societally inefficent decisions.

It is good to design a rate structure which encourages societally valuable decisions. This isn't it.

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Yeah, I see that you do know all of this.

- - - Updated - - -



Yeah, this is what I think too.

Revealing the cost doesn't mean perfectly apportioned, but it's a great start and certainly better reflects costs than the per-kWh model. When I charge my Volt at night I use extra electricity but don't even come close to peak-time stove demand. Fixed delivery, or demand-charge-based billing would significantly help EV ownership because electricity is itself is cheap and the benefits of widespread EV ownership to society would be stonkingly huge. Fixed delivery might not be sustainable since people might plug in at peak, but with modern metering it should be easy enough to shift to demand-based billing.

If you want to apply sin taxes or FITs to encourage efficiency and PV, that's fine, but we can't kid ourselves that the current pricing model and net metering are good models. Like paying for roads with fuel taxes, the pricing model is inherently broken and well-meaning proponents of new technology are exploiting the broken pricing, those supporting the status quo are responding with excessive, broken measures and we aren't getting to where we need to be, which is a pricing model that can handle a full transition to the new technology.

If you think that accurate pricing won't produce the desired societal outcome, you can make _supplementary_ changes to pricing, but if you don't get the underlying model right you'll never get the best outcome.

 

[3mp_kwh]

The resulting allocation has to add up to a figure that is expected to cover the utility's costs plus a reasonable return on and of capital prudently invested.

That last one isn't always the case. The public model accounts for about 15% of U.S. capacity, and does not seek that last 10% from rate-payers. There's no investor in a minority of utility arrangements, many successful by the nature of the mutual relationships which aren't skewed by the interests that can come from an investor. One example of the skew is EverSource Energy being happier if MA does not meet it renewables mandate, if it means more natural gas traveling lines they plan to build, and profit from. We need the natural gas, but they are a poor agent for something they cannot make money from (moving wind/sun). Another is the cost of scarcity, where PPA's, or fixed price long-term contracts are shunned, in favor of the uncertainty that can lead to higher power prices, ones that actually have no bearing on "cost".

 

[Saghost]

Remember, to go off grid and maintain the same level of reliability, you'll probably need to size your solar to produce about 5-6 times your daily needs and batteries large enough to store about 4 consecutive days of usage. Then the economics don't look so good.

So don't go off grid.

As far as I know, the argument and the legislation has all been about net metering. With a small to medium sized battery pack I can absorb the panel's overproduction in the day and use it at night.

If I never put power back into the grid, I don't need net metering, so I should be able to stay connected to the grid at the standard "non-solar" prices, and still draw power from the grid when I need more than the solar/battery combination provides. The $50 fee for net metering will pay off a battery pack and installation fairly quickly - especially after the gigafactory drives costs down.

The power company avoids duck-curve problems and reduces the amount of spinning reserve they need, I gain some immunity from outages and avoid the excessive fee. It seems workable to me.
Walter

 

[lolachampcar]

and so you have described the death spiral. Net Metering is a free battery for me. As long as FPL allows this, I will use it. When they succeed in imposing fees for its use, I will weight those against home storage and likely go home storage if it is anywhere near a close call. Hopefully, by then, some smart company will have done the engineering to use a MS battery in parallel with PV such that we can make use of those super safe high capacity batteries coming out of all the totaled Teslas (for reasonably minor damage).

 

[tdelta1000]

I think their idea would be to criticize anything they can not make money on or better yet... weaken that industry then take it over.

 

[jgs]

So don't go off grid.

As far as I know, the argument and the legislation has all been about net metering. With a small to medium sized battery pack I can absorb the panel's overproduction in the day and use it at night.

That's a very interesting take on it and seems to address the worst inefficiencies of both centralized and distributed, bravo. I expect it would need regulatory consent though, wouldn't it? I'm not expert in the rules that govern grid-tied systems, but my understanding is you're either grid-tied, in which case your PV system shuts down if it stops seeing input from the grid side (to protect line maintenance workers), or you're off-grid in which case such regulations don't apply to you. I don't think any changes are needed to current grid-tied PV systems to do what you describe
[*], but presumably you're not going to be permitted to hook your system to the grid without the utility's permission. The question is how willing they will be to grant you that permission without imposing some additional recurring fee, such as we've been discussing here.

Granted, if you're not getting a net metering tariff but just (at worst) feeding power onto the grid at no cost whatsoever to the utility, the rational thing for them to do would be to welcome that. The questions are first, whether there's some rational reason for them to resist it that I'm not seeing and second, whether the actors are actually rational.

[*] Well, maybe a little, because you probably don't want to charge your battery except when you're running a surplus from your PV.

 

[lolachampcar]

I believe there is legislation in place in Florida that prevents hooking PV systems up with a "view" or connection to the grid without a net meter......

 

[Saghost]

I believe there is legislation in place in Florida that prevents hooking PV systems up with a "view" or connection to the grid without a net meter......

Why am I not surprised?

It's almost like they control the game and want all my money, or something silly like that. :-/

 

[Robert.Boston]

The Hartford Courant reports on a study showing that the total value of solar injections at Conecticut homes is between 20 and 26 cents/kWh, implying that net metering in CT is not, in fact, a subsidy:
What Is Solar Really Worth? A New Report Floats Some Numbers - Hartford Courant

 

[Karma]

I believe there is legislation in place in Florida that prevents hooking PV systems up with a "view" or connection to the grid without a net meter......

You're exactly right, and here is a timely article in today's Tampa Tribune on the history of the power companies in Florida, their stranglehold on the legislature and executive, and profits, of course:

Big energys campaign cash keeps solar down in Florida | TBO.com and The Tampa Tribune