Solar customers can indeed cause the price of electricity to increase for people without solar, but only in places where many people install solar and electric utilities compensate people generously for their excess generation, a new study concluded.
The study, titled “Putting the Potential Rate Impacts of Distributed Solar Into Context,” was published last month by the Lawrence Berkeley National Laboratory, a federal research lab under the Department of Energy, and has conclusions that both solar advocates and utilities appreciate.
For one, it says that in most places, there is simply not enough rooftop solar today, nor is there expected to be in the next several years, to worry about the small impact on utility prices. Rooftop-solar advocates already are trumpeting that conclusion on social media. And that finding does bring into question efforts by utilities to amend solar rules in places such as Kansas, where few people use solar.
But utilities also find vindication in the words of report author Galen Barbose, who said that in states such as Hawaii, California and Arizona, where there are significant numbers of homes with solar, utility rates can increase by as much as 5 percent. The cost increases are highest if the solar panels in use aren’t adding much value by delaying the need to build new power plants.
“In these cases, questions about the value of solar become more important to assessing possible cost-shifting,” Barbose said in the study.
Utilities in Arizona and across the country have been fighting to rewrite policies that allow solar on rooftops. Utilities argue that people using rooftop solar create a “cost shift” where non-solar customers pay more than their share of maintaining the power grid.
Barbose wrote that the cost increases can be reduced if utilities reduce the payments to solar customers through net metering, the system where solar customers get full retail credits for surplus power they send to the grid. That’s a controversial subject, though, because net metering is a key element of making household solar affordable.
But it also is exactly the argument made by Arizona Public Service Co., Salt River Project and other utilities pushing for changes to solar policies.
“The point they reach, which is fairly obvious, is that in states where solar rooftop penetration is high, there is a much more significant impact,” said Jeff Guldner, APS senior vice president of public policy. “You read that and you are like, yeah, exactly.”
The study did not conclude whether the higher prices are fair — simply that rooftop solar can, at some level, affect prices. The study also did not address a key reason many environmentalists support solar, which is that solar does not have climate-changing carbon emissions, as fossil fuel plants do. Because there is no cost for emitting carbon in the U.S., that solar benefit doesn’t usually make it into economic analyses.
Arizona utilities contend that while solar panels generate lots of power at midday, their output falls off at dusk as the sun sets, and that is precisely when power demand spikes on the grid. To meet the demand, the utilities still need to fire up all of the nuclear, coal and natural-gas plants on their system, because solar doesn’t contribute much to that peak, the utilities contend. Solar customers avoid having to pay for those facilities by virtue of their rooftop panels and net metering, while non-solar customers pick up the tab.
The study based its estimate of a 5 percent price increase on markets where 10 percent of the electricity supply comes from rooftop solar. That would amount to a $5 to $6 a month increase for the average residential customer.
APS gets about 5 percent of its electricity from rooftops today, and the figure is growing, with about 56,000 customers using solar. “What you are saying is that 90 percent of the customers are going to see a 5 percent rate increase so that 10 percent of the customers can have rooftop solar,” Guldner said, citing the figures used in the study. “That is the really difficult issue with rooftop solar.”
Guldner said net metering was developed to create an incentive for people to install solar, which was almost unheard of 10 years ago because it was so expensive. It was meant as a jump-start, he said, not as a permanent solution for rooftop solar.
The report also says that in most places, the big-ticket items utilities must purchase, such as new power plants and transmission lines, have a much bigger impact on electricity prices than solar.
“Rooftop solar saves people money on their electric bills, and monopoly utilities do not like that one bit,” said Court Rich, vice president of the Arizona Solar Energy Industries Association and an attorney at Rose Law Group representing solar companies. “It turns out that according to this report, the primary reason our electric bills seemingly go up every single year is that monopoly electric utilities keep building stuff they may not even need.”
Rich said efforts to reform net metering and other solar policies are “misdirection.”
“If monopoly utilities really wanted to lower ratepayer bills, they could start by lowering their own inflated returns,” he said, referring to the return on capital investments that utilities are allowed by regulators. “While APS is asking its regulators to allow it to earn a very healthy 10.5 percent return on equity, if that return simply was lowered to a more reasonable — and still very healthy — 9 percent, Arizonans would save nearly $100 million every year on their electric bills.”
Barbose also wrote that cost shifts can be minimized if solar is installed with smart inverters, battery storage or other elements that help address peak demand and work better with the grid than solar alone. “Such strategies represent an alternative (and potentially less contentious) approach to addressing the effects,” he wrote.