January 26, 2016


Power Politics : Understanding the GOP's civil war over off-the-grid energy (JOSIAH NEELEY • January 26, 2016, American Conservative)

Since 2009, prices for solar power have fallen 70 percent. These declining costs, along with a healthy helping of government subsidies, have led to a rapid increase in solar deployment. And in April, Tesla Motors announced its new Powerwall battery, which can store excess electricity generated by solar during the day for use during less sunny periods.

Since utilities also can use storage technologies, low-cost storage needn't necessarily privilege distributed generation over grid-provided electricity, and the combined cost of solar generation and storage is still above that of grid electricity in most places. Still, these developments have not only made solar installation more attractive to many consumers, they also have everyone from utility executives to political activists to tech gurus reconsidering what the future of electricity might look like.

Innovative business models also are overcoming some of the traditional challenges to distributed generation. Many consumers are wary of paying the high upfront costs involved with buying and installing solar panels. In response, solar companies have marketed solar leases, where the company pays all upfront costs and maintains ownership of the panels, while charging a set monthly fee to the homeowner. The company then acts as a middleman, reselling the excess electricity the panels generate during peak periods. [...]

The biggest battles over distributed generation involve "net metering." Required in some form in 44 states plus the District of Columbia, net metering mandates that utilities must purchase the excess electricity a homeowner generates and credit the purchase against the homeowner's power bill, often at the full retail rate of electricity. But net metering schemes tend not to acknowledge that the price of electricity reflects not only the cost of generating the power but also the cost of building and maintaining the grid. Reimbursing homeowners at the full retail rate of electricity acts, effectively, as a subsidy.

Net metering tends to be popular across the political spectrum: in a recent poll by the ClearPath Foundation, 87 percent of self-described conservative Republicans supported policies that let them sell rooftop-generated solar power back to utilities.

As long as distributed generation remained a bit player in the electrical market, utilities regarded the costs of net metering as just an annoyance. As the proportion of distributed generation grows and the cost of grid maintenance is borne by a smaller and smaller base of electrical customers without distributed generation, the matter becomes more serious. The situation is roughly analogous to electric cars not paying for road repairs via the gas tax. A few electrical cars are fine, but what happens when most cars on the road aren't paying?

Utilities aren't eager to find out, and so they have been pushing for limits on net metering, including special monthly fees on net-metered homes. Last year the Salt River Project, an Arizona utility, imposed a monthly fee of up to $50 on homes that utilize net metering, effectively wiping out any monetary gain that comes from selling back unused electricity. While the rule has been challenged in court, the Arizona Public Service (APS), the state's largest electricity provider, has pushed for similar fees. Many other states are also considering imposing fees, capping the total amount of distributed generation eligible for net metering, or doing away with the program altogether.

Utilities aren't totally opposed to solar power: they increasingly like it, so long as they own it. At the same time APS was pushing for fees on homes that used solar power, it announced its own pilot rooftop solar program, which would see the utility install systems providing up to seven kilowatts of power and give participating customers a $30 monthly credit for 20 years. A similar program went into effect earlier this year in San Antonio. As with third-party power-purchase agreements, the utility would maintain ultimate ownership of the panels and the energy they produce.

Given the arguments typically deployed by utilities against solar, it may seem strange they would embrace the same model. Ultimately, what scares utilities most about distributed generation is the danger it poses to their monopoly over electricity generation. Shielded from competition for more than a century, utilities regard any technology that moves the grid back toward a more open and decentralized system as an existential threat. For the same reason, believers in the free market ought to look at the growth of distributed generation as an opportunity to move toward a more competitive generation system.

Posted by at January 26, 2016 3:50 PM