How can grid-tie solar be bad for everyone?

This is slightly off-topic, but nonetheless falls into my wheel house of all things electrical.

Many people are aware of the concept of grid-tie solar systems, either DIY or through a company like SolarCity. Sidebar: Stay away from SolarCity, its far better to simply buy your own panels and install them vs having SolarCity do it on their dime and then be locked into a 20 year power pricing agreement.

Recently however, a crack has been found in the system that threatens its future as more and more people do it. Its real simple to understand the problem, let me explain.

Most people get a power bill that has 2 or 3 cost components. The largest is the power generation fee, this may be something like $0.08 per kilowatt-hour. Then second largest component is the transmission fee. This is also billed by the kilowatt-hour and may be something like $0.035 per kilowatt-hour. The third component is a flat customer or connection fee.

What do these bill components represent?

Generation fee is the cost of the actual electricity you use and thereby needs to be generated somewhere at a power plant. It varies nationwide. In the mid-atlantic region its around $0.07 to $0.09 per kilowatt-hour

Transmission fee is a pass through capital expense. From the standpoint of your local utility company, this fee seeks to re-coupe all costs associated with running a utility and delivering power to your house. So it covers capital costs like power lines, poles, vehicles, equipment, it covers wages for the lineman, gas for the utility trucks, etc.,.

Connection fee is a flat charge that mainly covers the cost of your meter and the cost to actually bill you via paper.

Its important to note that the transmission fee is tied to your metered usage. The more power you use, the more you “use” the utilities infrastructure, and thereby you pay more transmission fees.

Grid-Tie Solar basically takes advantage of the system, an economist would call this arbitrage.

With grid-tie, your solar panels invert DC power into AC house power, and that power feeds back into your meter. When your household usage is greater then the solar output, the solar output gets used up at the source in your electrical panel with the extra power demand coming in through your meter. Another way to view it, your solar panels “slow” down your meter during peak usage. Even better, at times of low household usage, if there is an excess of solar power it flows back into the grid, the grid is effectively used as a battery. Even better still, the local utility would credit the negative meter hours against your account for the month. End result is a house that pulls 800 kilowatt-hours a month could have a metered power bill of only 50 kilowatt-hours if the panels were properly sized.

Whats the problem then? Why is this arbitrage?

Here is the issue. That house that pulls 800 kilowatt-hours a month, even though its bill might only show 50 kilowatt-hours due to the grid-tie solar generation, there are many times through the month where the house needed 100% power demand from the grid (cloudy summer day, hot summer night, etc.,.). So if you extend that thinking out logically, that house needed 800 kilowatt-hour infrastructure even though its being billed as a 50 kilowatt-hour house.

Lets look at the numbers:

800 kwh x $0.035 transmission = $28/month

50 kwh x $0.035 transmission = $1.75/month

WOW… The utility company just lost a ton of money that it needs for capital infrastructure to support your house. And even though you are only being billed for 50 kilowatt-hours, your houses footprint in the utility universe really hasn’t changed from that of a 800 kilowatt-hour house.

How did this happen?

Well, the utilities back in the day were sort of forced to allow net-metering – this is the concept of allowing your meter to roll-back while excess solar power was fed back into the grid. Nobody thought that wide spread solar use would take off. Utilities are in a bind now, they are seeing a huge drop in transmission fee revenue, even though they have the same number of households and infrastructure to support.

Why is this bad for me?

Well, when utilities have a revenue shortfall the first thing they do is jack up the rate for everyone else to make up for that shortfall. This has already happened in Nevada. Nevada has the highest rate of grid-tie solar adoption, and it was starting to eat into the pockets of the utilities. Earlier this month, the Nevada PUC changed the net-metering rates to effectively discourage solar.

Is there hope?

I sure hope so. The utilities have a valid concern, the infrastructure needs to be paid for, the current system definitely favor the homeowner with a solar panel array. But… there are better ways to resolve the issue. One option is instead of net-metering, have two completely separate meters – basically your original “untouched” meter, then a second new meter that is wired directly between the outside service and your grid-tie solar panel. With this setup, the utility can still subtract your generated hours from your main usage meter for the “generation” portion of your bill, but still be able to charge the full usage on the transmission fee side.

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