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Is Rooftop Solar Just Like Energy Efficiency?

Sort of. More expensive,  less well timed, grid-intensive energy efficiency.

Here in California, rooftop solar has been in the news quite a bit lately, as net energy metering and other distributed generation policies are under review at the Public Utilities Commission and in the legislature.

The Energy Institute blog has spilled abundant electronic ink on the economics of rooftop solar compared to grid scale renewables, the cost shift created by net energy metering, equity issues surrounding who is installing solar, where they are installing it, why they are installing it, and other related topics.

SolarEnergyEfficiency4

(Source: https://spectrum.ieee.org)

One frequent defense of rooftop solar goes, “Panels on the roof are just one of many ways to reduce your consumption from the grid, as are more efficient appliances, or just conserving electricity by living in a smaller house, drying clothes on a line, or using fans instead of air conditioning.” In response to policy proposals that would make rooftop solar less financially attractive, the rhetorical response is, “next are you going to penalize customers for living in small houses or not installing A/C?”

At first blush, it’s a compelling analogy. The cost shift associated with rooftop solar occurs because the electricity prices that consumers pay are much higher than the grid cost of supplying the power that it replaces. The difference covers many fixed costs, including grid infrastructure, public purpose programs (including energy efficiency subsidies), rate subsidies for low income households, and wildfire mitigation, among other things.

SolarEnergyEfficiency5

(Source: https://alcse.org/ways-to-increase-energy-efficiency/)

If you don’t buy an air conditioner and consume less electricity, you are also paying less towards these fixed costs, just as happens when you install rooftop solar. Any reduction in kWh you buy from the grid, whether it is due to efficiency, living more modestly, or solar, has this impact.

SolarEnergyEfficiency2

(Source: https://www.edfenergy.com/energy-efficiency/lighting)

Nonetheless, this defense of rooftop solar starts to break down when you look at it more broadly or more closely. More broadly, why are we recovering these fixed costs through the volumetric electricity prices at all? These costs are truly unrelated to a household’s consumption level, so we distort choices when we tax electricity to pay for them, as we have talked about in previous blogs.

No, it’s not about penalizing customers for consuming too little electricity. It’s about sharing the burden of a public resource in an equitable way – whether that’s grid infrastructure or wildfire preparation or subsidies for low-income households. We don’t rely on per-use fees to cover most costs of streetlights, parks, police, government data on the internet, or other public services that are mostly fixed costs. Why should we finance the fixed costs that are somewhat related to electricity – in some cases very loosely related – by raising the charge for electricity?

In addition, looking more closely at the argument that rooftop solar is just another efficient way to reduce demand from the grid reveals important flaws in the analogy.

First, if rooftop solar is a form of energy efficiency, it’s a really costly form. It doesn’t have the ancillary benefits of some efficiency improvements, like insulation, that make a house more comfortable. For most adopters, it’s a financial decision based on the price of the solar and the price of electricity. It’s attractive in California not because the cost of rooftop solar is so low – it is many times more expensive than grid-scale renewables – but because retail electricity prices are so high. It’s very expensive “energy efficiency” compared to LED light bulbs or buying efficient appliances, for instance. If a technology saves consumers 20-30 cents per kWh (retail price) by making an investment that costs 13 cents to 22 cents per kWh, but only avoids about 8 cents (including pollution costs) in electricity supply costs – as is the case for solar in California – good public policy shouldn’t prioritize that sort of investment.

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Second, rooftop solar in California (and many other locations) now delivers demand reduction to the grid at the lowest-value time, just when supply is plentiful. In 2008, I did an analysis showing that solar was more valuable than average supply, because of its favorable timing back then, but that finding is so 2000s. As more and more solar has blanketed the grid, many recent studies, including detailed work by Jim Bushnell and Kevin Novan, have shown that solar is now less valuable than average. Improved air-conditioning efficiency delivers at especially high-value times, as Judd Boomhower and Lucas have shown. Rooftop solar in California now does the opposite.

Third, to the electricity grid, rooftop solar would look like energy efficiency if it were just a reduction in demand, but that’s not what rooftop solar does. Half of the typical output from a rooftop system is injected into the local distribution wires, which makes it a very different product. Traditional energy efficiency doesn’t require special metering and tariffs to value those power injections. Generating power on rooftops for distribution on the grid can be valuable or costly depending on the exact location and timing, but it is definitely not the same as reducing consumption.

Very few energy efficiency advocates argue that a household can efficiency its way to zero carbon emissions, or that it should try. Energy efficiency can be a cost-effective way to eliminate some of a customer’s demand, not a path to virtually eliminating their electricity bills. In contrast, the typical new residential solar system in California is now about 6 kW capacity, which generates over 10,000 kWh per year (at a 20% capacity factor), about 50% more than the average California household consumes. Solar adopters are much bigger than average users, and – under net energy metering rules – they are offsetting the vast majority of their usage.

Like energy efficiency technologies, policy towards rooftop solar should be based on the specific benefits and costs (monetary, environmental, and others) that it brings to society, not the dollars that it saves the adopter. Analogies can be useful, but they can also be misleading. It’s time to debate rooftop solar based on what it is, not on what it is sort of similar to.

I still tweet mostly energy news/research/blogs @BorensteinS .

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Borenstein, Severin. “Is Rooftop Solar Just Like Energy Efficiency?” Energy Institute Blog, UC Berkeley, July 12, 2021, https://energyathaas.wordpress.com/2021/07/12/is-rooftop-solar-just-like-energy-efficiency/

Severin Borenstein View All

Severin Borenstein is E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He has published extensively on the oil and gasoline industries, electricity markets and pricing greenhouse gases. His current research projects include the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. In 2012-13, he served on the Emissions Market Assessment Committee that advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. He chaired the California Energy Commission's Petroleum Market Advisory Committee from 2015 until its completion in 2017. Currently, he is a member of the Bay Area Air Quality Management District's Advisory Council and a member of the Board of Governors of the California Independent System Operator.

30 thoughts on “Is Rooftop Solar Just Like Energy Efficiency? Leave a comment

  1. It’s important to distinguish between rooftop solar that’s installed at the building owner’s expense without subsidies or policies that help defray the costs like net energy metering, and installations that depend on subsidies and gimmicks to make the numbers work. I will also second Severin’s criticisms of the well-worn practice in California of using energy policy as a vehicle for funding social programs. Not only does it lead consumers to make uneconomic choices, it shifts the burden of paying for social programs from wealthier electricity consumers to those who are less affluent. In this respect the tax ends up being regressive.

    Since it is by nature both highly distributed and localized, rooftop solar does provide the kind of resiliency grids in the West need as wild fires become a bigger and bigger threat. I just wish I knew how to place a value on that attribute.

  2. I am a building energy efficiency assessor, and although I love efficiency and make my living at it, solar should not be attacked when it comes to tax dollars. Fossil fuel subsidies should be the first to go. Please stop attacking one of the few alternatives that we have, and go after the true culprit.

    Mickey Souza
    Energineers

  3. Would the conclusion change if we designed rooftop solar to better coincide with demand (i.e., have west-facing panels) instead of maximizing production?

    • Definitely, It would also change if you incentivised daytime hot water heating from the solar.

      It should be standard practice to have excess panels which are cheap compared to the total system costs and make output more stable on hazy days and earlier in the morning and later in the evening.
      Roughly following Australian policies where TOD prices are being introduced along with FITs being aligned with wholesale prices also helps.
      Then you have to get rid of the crazy permitting system which makes rooftop solar about 50% more expensive in the US than it is in Germany or Australia

  4. “Second, rooftop solar in California (and many other locations) now delivers demand reduction to the grid at the lowest-value time, just when supply is plentiful.”

    I’m reminded of a 2015 paper from the Breakthrough Institute titled “Is There An Upper Limit To Intermittent Renewables?”, with which Severin might be familiar. It hypothesizes the penetration of any renewable source of energy, in any location, is effectively limited to its capacity factor. In other words: if solar’s capacity factor in a location is 24%, when it passes 24% of grid penetration it not only becomes uncompetitive, it becomes worthless.

    https://thebreakthrough.org/issues/energy/a-look-at-wind-and-solar-part-2

    There are a number of unrealistic assumptions: a perfectly elastic market, no complicating political/socio-economic factors, time of year, etc. But if the foundation of authors’ hypothesis continues to be verified, there are implications for the possibility of an all-renewables grid even if other intermittent sources are available.

    “…it’s clear that wind and solar alone will come far short of decarbonizing the electricity system, let alone the full energy sector.”

    In renewables advocacy we often hear about plummeting cost of solar panels. But when the the cost of integrating it on a power grid are included, its cost inflates to multiples of the price of the amortized panels alone. For a good part of every sunny day, unsubsidized solar would be unprofitable even if the panels were free.

    • That was an interesting hypothesis at the time but it is really just a co-incidence. Peaking gas plants are unprofitable 90% of the time but they can make enough money when they are running to cover their costs. At the other extreme nuclear averages 92% capacity factor but it is still so expensive that its market share is falling.
      If rooftop solar is cheap enough it could supply something between 50 and 60% of demand even if 30-40% of output for some hours on some days was spilled. By moving dish and clothes washing and hot water heating, pool pumps etc to daytime hours, roughly 60% of household energy use can be covered by solar. for many retail and light manufacturing operations the proportion can be even higher. When penetration is high, the economics of rooftop solar can be improved by east west particularly west panel orientation.
      While behind the meter batteries are probably not yet strictly economically viable, the added security against outages and the ability to export more energy in the evening at higher prices will probably make even bigger rooftop solar installations economical within a few years.

      Even the penetration of grid scale solar can be improved by co-ordinating with hydro, pumped hydro and municpal and irrigation water transfer and again batteries, although grid scale batteries will probably top out at a relatively small proportion of grid supply. I suspect that wind, hydro, biomass, and rooftop solar will limit large scale solar to something like 25% of supply or less, apparently supporting the CF limit, but it is co-incidence not causation

      Grid integration can be managed quite cheaply as is done in South Australia, Western Australia and Germany where rooftop solar has contributed to a signficant downward trend in wholesale power prices.

      • An interesting hypothesis indeed, that has co-incidentally limited the market penetration of solar and wind to their capacity factors at every location worldwide since.

        “Even the penetration of grid scale solar can be improved by co-ordinating with hydro, pumped hydro and municpal and irrigation water transfer and again batteries, and again this, and again that…”
        I suspect the penetration of any source of electricity can be improved by coordinating it precisely with every other source, in some mystical world where an army of engineers is available to devote unlimited time and effort, and price is no object.

        That’s not your world or mine – we live in a world demanding practical solutions to existential problems. In our world, the only problem solved by solar and wind is one of guaranteeing methane a predominant role in electricity generation indefinitely. Needless to note here, doing so creates many more problems than it solves.

        • The assertion that renewables require continuing the same amount of methane use going forward is contradicted by the numerous studies (many already posted on this blog site) showing that reaching at least 90% renewables is highly cost effective and feasible, and even the last 5-10% is not extraordinarily expensive. The amount of renewable methane available can easily power that remaining generation if it comes to that.

          • There is no way renewables can reach 90% energy penetration. 50% is about the max before grid electrical instabilities become dominant problems. In ERCOT we are getting close to operating on the ragged edge right now.

          • If 90% renewables create an unstable grid, why is the CAISO able to operate day after day with many hours at well above 50% renewables? And other grids in Europe are able to do the same?

          • “The assertion that renewables require continuing the same amount of methane use going forward is contradicted by…numerous studies…showing that reaching at least 90% renewables is highly cost effective and feasible, and even the last 5-10% is not extraordinarily expensive.”

            Despite the numerous studies you describe (and fail to reference), empirical evidence shows clearly, and conclusively, that a high percentage of renewable electricity is possible only in countries endowed with abundant, unscalable natural resources – ones unavailable to more than 95% of the world’s population.

            • Of 195 countries, two generate more than 90% of their electricity from renewable sources: Iceland (99%+) and Norway (98.4%).
            • Seven more use renewables to generate more than 50% of their electricity (in descending order):
            Brazil – 84.1%
            New Zealand – 80%
            Sweden – 68.6 %
            Canada – 67.7%
            Colombia – 64.8%
            Venezuela – 60.9%
            Portugal – 59.7%
            • All rely on abundant hydro or geothermal power to generate most of their electricity.
            • None rely on solar and/or wind to generate most of their electricity.

            https://yearbook.enerdata.net/renewables/renewable-in-electricity-production-share.html

            Considering these countries as representative of others (including the U.S.) is blatantly disingenuous, and divorced from any realistic assessment of options for addressing climate change. True, in the U.S. renewables won’t require the same amount of methane going forward. They will require much, much more:

            Click to access USwindsolargas.pdf

        • I agree that use of methane as energy storage (i.e. through electrochemical production) makes a lot of sense. Not only is it much more energy dense that hydrogen and sequesters carbon, but it can be incorporated into existing natural gas infrastructure. The research is not quite to the practical level yet, but it is good you brought it to mind for the future.

          • I was suggesting to UTex profs this morning it would be neat if a demonstration neighborhood could be constructed in which H gas was pumped into the neighborhood and used for both heating and in fuel cells for electricity. We might be able to eliminate the need for an electrical grid altogether.

  5. How does this analysis change if the household installs a battery to store the electricity. Wouldn’t that solve the problem of releasing more energy into the grid when it wasn’t needed by saving it for that household to use when the sun goes down?

  6. When looking at the efficiency of NEM rates, we need to look carefully at several elements of electricity market and the overall efficiency of the utility ratemaking. We can see that we can come to a very different conclusion.

    I filed testimony in the NEM 3.0 rulemaking last month where I calculated the incremental cost of transmission investment for new generation and the reduction in the CAISO peak load that looks to be attributable to solar rooftop:
    https://pgera.azurewebsites.net/Regulation/ValidateDocAccess?docID=658445

    – Using FERC Form 1 and CEC powerplant data, I calculated that the incremental cost of transmission is $37/MWH. (And this is conservative due to a couple of assumptions I made.) Interestingly, I had done a similar calculation for AEP in the PJM interconnect and also came up with $37/MWH. This seems to be a robust value in the right neighborhood.

    – Load growth in California took a distinct change in trend in 2006 just as solar rooftop installations gained momentum. I found a 0.93 correlation between this change in trend and the amount of rooftop capacity installed. Using a simple trend, I calculated that the CAISO load decreased 6,000 MW with installation of 9,000 MW of rooftop solar. Looking at the 2005 CEC IEPR forecast, the peak reduction could be as large as 11,000 MW. CAISO also estimated in 2018 that rooftop solar displaced in $2.6 billion in transmission investment.

    When we look at the utilities’ cost to acquire renewables and add in the cost of transmission, we see that the claim that grid-scale solar is so much cheaper than residential rooftop isn’t valid. The “green” market price benchmark used to set the PCIA shows that the average new RPS contract price in 2016 was still $92/MWH in 2016 and $74/MWH in 2017. These prices generally were for 30 year contracts, so the appropriate metric for comparing a NEM investment is against the vintage of RPS contracts signed in the year the rooftop project was installed. For 2016, adding in the transmission cost of $37/MWH, the comparable value is $129/MWH and in 2017, $111/MWH. In 2016, the average retail rates were $149/MWH for SCE, $183/MWH for PG&E and $205/MWH for SDG&E. (Note that PG&E’s rate had jumped $20/MWH in 2 years, while SCE’s had fallen $20/MWH.) In a “rough justice” way, the value of the displaced energy via rooftop solar was comparable to the retail rates which reflect the value of power to a customer, at least for NEM 1.0 and 2.0 customers. Rooftop solar was not “multiples” of grid scale solar.

    These customers also took on investment risk. I calculated the payback period for a couple of customers around 2016 and found that a positive payback was dependent on utility rates rising at least 3% a year. This was not a foregone conclusion at the time because retail rates had actually be falling up to 2013 and new RPS contract prices were falling as well. No one was proposing to guarantee that these customers recover their investments if they made a mistake. That they are now instead benefiting is unwarranted hubris that ignores the flip side of the importance of investment risk–that investors who make a good efficient decision should reap the benefits. (We can discuss whether the magnitude of those benefits are fully warranted, but that’s a different one about distribution of income and wealth, not efficiency.)

    Claiming that grid costs are fixed immutable amount simply isn’t a valid claim. SCE has been trying unsuccessfully to enact a “grid charge” with this claim since 2006. The intervening parties have successfully shown that grid costs in fact are responsive to reductions in demand. In addition, moving to a grid charge that creates a “ratchet effect” in revenue requirements where once a utility puts infrastructure in place, it faces no risk for poor investment decisions. On the other hand the utility can place its costs into ratebase and raise rates, which then raises the ratchet level on the fixed charge. One of the most important elements of a market economy that leads to efficient investment is that investors face the risk of not earning a return on an investment. That forces them to make prudent decisions. A “ratcheted” grid charge removes this risk even further for utilities. If we’re claiming that we are creating an “efficient” pricing policy, then we need to consider all sides of the equation.

    The point that 50% of rooftop solar generation is used to offset internal use is important–while it may not be exactly like energy efficiency, it does have the most critical element of energy efficiency. That there are additional requirements to implement this is of second order importance, Otherwise we would think of demand response that uses dispatch controls as similarly distinct from EE. Those programs also require additional equipment and different rates. But in fact we sum those energy savings with LED bulbs and refrigerators.

    An important element of the remaining 50% that is exported is that almost all of it is absorbed by neighboring houses and businesses on the same local circuit. Little of the power goes past the transformer at the top of the circuit. The primary voltage and transmission systems are largely unused. The excess capacity that remains on the system is now available for other customers to use. Whether investors should be able to recover their investment at the same annual rate in the face of excess capacity is an important question–in a competitive industry, the effective recovery rate would slow.

    Finally, public purpose program (PPP) and wildfire mitigation costs are special cases that can be simply rolled up with other utility costs.

    – The majority of PPP charges are a form of a tax intended for income redistribution. That function is admirable, but it shows the standard problem of relying on a form of a sales tax to finance such programs. A sales tax discourages purchases which then reduces the revenues available for income transfers, which then forces an increase in the sales tax. It’s time to stop financing the CARE and FERA programs from utility rates.

    – Wildfire costs are created by a very specific subclass of customers who live in certain rural and wildlands-urban interface (WUI) areas. Those customers already received largely subsidized line extensions to install service and now we are unwilling to charge them the full cost of protecting their buildings. Once the state made the decision to socialize those costs instead, the costs became the responsibility of everyone, not just electricity customers. That means that these costs should be financed through taxes, not rates.

    Again, if we are trying to make efficient policy, we need to look at the whole. It is is inefficient to finance these public costs through rates and it is incorrect to assert that there is an inefficient subsidy created if a set of customers are avoiding paying these rate components.

  7. Of course renewable generation is not the same as energy efficiency. But energy efficiency was never the same as conventional generation in the first place until the efficiency community forced it to be with novel concepts like the cost of conserved energy and net zero buildings. Renewable generation is a lot more like generation than energy efficiency is. Those who pushed clever funding schemes to get energy efficiency paid for by rates are now seeing their chickens come home to roost and should fess up before throwing stones at solar.

    But blame is not the game, rather making the process work is what we should be looking for. How should we pay for low-income subsidies, air quality improvements or wildfire protection? The fundamental problem is that we are trying to use rates rather than taxes to pay for public goods. There is no fixed or variable part of a rate structure that is going to be fair to for example a homeowners. The pay-fors are important

    This structure has led to some of the highest utility costs in the country, which induce those with capital to invest it in methods that reduce their costs and thereby leave the remaining costs to a smaller pool. This is a version of the tragedy of the commons. Solar investors are doing exactly what the economics is tell them to do, which should have been what we wanted or we designed the programs badly. Eveb wiorse: Getting individuals who do not have capital to do this is like sub-prime lending–a disaster. It has already led to having people’s homes foreclosed on e.g. through property tax liens. Again too clever by far to try to do somehting for “free.”

    We should honor the deals we made with investors already, and not change the rules to punish them just because they have sunk costs. (I am suprized that this is even necessary to say.) The real question is the value is rooftop solar (especially with storage) going forward. To the investor there will be utility cost savings (and reliability increases) to compare to the first costs. If there is public value in having people do that, then there shoudl be an incentive.

  8. Is it rooftop solar alone or is it really solar plus energy storage that has the most potential to deliver shared benefits to the community along with all the obvious conservation and smart, load shedding technologies available? IMHO, we need more examples of distributed energy resources aggregated within communities where “electron” rich members can share the local generation benefits within their CCA with other members. Given that gateway systems like Tesla can do the TOU math on the fly, owners of energy storage are in control like never before. I tend to agree with greendave’s comments above.

  9. I think missing from this analysis is the fact that a lot of people (especially in PG&E-land) are happy to do anything that will decrease their dependence on unreliable, overpriced utility-generated power.

    The problem with public resources is that if they fail to meet public needs, people will go looking elsewhere. With decreasing costs for battery storage and the possibility of (soon) using EVs as a large auxiliary battery thanks to bidirectional EV chargers, the possibility of households going grid-free is increasingly realistic. That’s something academics and regulators should keep in mind as they advocate for continued electric fee/rate increases and reduced payments for rooftop solar generation.

    • A fixed grid charge will only accelerate this trend. Other industries such as telcom have successfully transitioned without imposing legacy charges–they did what we expect in a capitalist economy; shareholders absorbed their stranded costs and chose to invest other opportunities such as the Internet and cell phones. We shouldn’t be protecting poor investment decisions. I have a list of PG&E’s here: https://mcubedecon.com/2019/10/14/pge-apologizes-yet-again/

      • “We shouldn’t be protecting poor investment decisions.”

        This logic applies to rooftop solar just as much as it applies to utility investments. We can supply people with electricity just fine without rooftop solar. The same cannot be said of supplying power without a grid. The grid is our ace in the hole. The grid is the great communicator. The grid gives us access to diverse resources and diverse loads.

        Power system models of high penetration RE grids have evolved considerably over the last decade. In 2013 we saw the first model “predict” that over-building renewables would be a cost effective strategy. SEE: “Cost-minimized combinations of wind power, solar power and electrochemical storage, powering the grid up to 99.9% of the time” At the time wind and solar costs were much higher than they are currently. As solar and wind have gotten cheaper the the incentive to overbuild these resources has increased substantially and the expected combination of resources has also shifted.

        Here’s a quote from a recently published paper which provides some perspective on load growth. SEE: “Ultra-high photovoltaic penetration: Where to deploy – M. Perez, R. Perez & T. Hoff”

        “As shown below the considered energy consumption of the electric sector and to-be-electrified transportation and building heat sectors respectively amount to 3825, 2126, and 1462 TWh/yr.”

        This model, the first I know of to include electrification forecasts for both transportation and heating, expects solar to supply 3845 TWh – this total is close to 100% of current electricity demand. Over time we’ve seen most of these sorts of models evolve continuously towards building more utility solar, relatively less wind and minimal storage. In the Perez et al. paper they use the term “implicit storage” to describe how over-building RE minimizes the need for storage. This runs counter to the conventional (I would say highly misplaced thinking) in regards to using storage to supply diurnal balancing. I believe William Stanley Jevons would recognize the logic of this over-build approach instantly. Here’s a quote from The Coal Question

        “The state of the matter is as follows: Where coal is dear, but there are other reasons for requiring motive power, elaborate engines may be profitably used, and may partly reduce the cost of the power.”

        But if coal be dear in one place and cheap in another, motive power will necessarily be cheaper where coal is cheap, because there the option of using either simple or perfect engines is enjoyed. It is needless to say that any improvement of the engine which does not make it more costly will readily be adopted, especially by an enterprising and ingenious people like the Americans.”

        It should be easy to see how this logic applies to renewables. There is no need for an elaborate engine when fuel is cheap. As RE becomes cheaper we will use the power in increasingly inefficient ways – i.e. Over-build capacity and spill excess supply. This strategy isn’t efficient from a utilization standpoint but it’s the most economically effective path.

        Rooftop solar is going to have a place in the future but it’s no Sacred Cow. Clack’s recent work suggests over 90% of the RE supply in the future will come from utility scale projects. This is easy to understand when we have projections of utility solar to getting down to 1 cent/kWh.

        There is absolutely zero evidence raising fixed fees will result in a significant trend towards folks moving off-grid. This idea is laughable. This idea was so poorly thought out when RMI first proposed it back in 2014 that they quickly shifted the click-bait pitch to Load Defection. This logic has no meat on the bones. Firstly because electrification is likely to double household and commercial load. Secondly because a huge portion of end-users don’t have rooftops or land to install solar on. We’re not going to let one small group of customers get away with not paying for the grid. Severin is 100% correct. Raise the fixed charge and lower the unit charges. Once you do this everything lines up for electrifying heating and transportation.

        • First, I agree with your general point about how renewables can be built out. That study on overbuilding renewables for excess power was posted in a comment here several months ago (longer?).

          My point is why are we attacking customers first while leaving shareholders completely off the table? Customers have responded to the policy directive place before them. They are not sophisticated investors and we should never expect them to be so. They did take on risks of potential rate changes. (Working with businesses looking at community solar, it was going to take a 3% annual rate increase for the projects to pay off. That was no certainty in the middle of the last decade.) We established a policy on rates and remuneration that these customers counted on when making their investment. We’re now proposing to change the rules. In contrast, utility shareholders hide behind AB 57 protections to avoid any discussion about addressing the real cause of high rates. In fact in 2018 the utilities got ADDITIONAL protection when the CPUC issued a decision overruling a 2006 decision limiting recovery of newer utilty-owned generation costs.

          As for raising fixed fees and exit, I will provide the evidence–farmers have installed diesel pumps to escape rising demand and customer connection charges in California. I worked on a project approved by the CPUC that provided guaranteed rates over a decade period to lure back 2,000 pumps to the electric grid. We likely would see the same thing if we have income-adjusted fixed fees at the magnitude that has been proposed.

      • Those who successfully transition from the grid will no longer be paying PG&E a fixed charge; those who don’t, will. It’s not a “legacy charge” for a customer who is still using the grid, is it?

        Again we hear the tired comparison of modern electricity deregulation to that of the 1980s-era telecom industry, one that ignores fundamental differences between power electricity and wireless phone service. They have nothing to do with capitalism, stranded assets, or economics.

        One has to do with the physical impossibility of transmitting power electricity through the air. Unlike wireless phone service, Wi-Fi, or Bluetooth, power electricity requires transmission by wire, and thus an infrastructure that must be maintained, improved, and gradually expanded.

        Another has to do with the ability to regulate emissions – a relatively easy task when generating electricity for millions of customers at one location, but virtually impossible when customers generate their own electricity with natural gas or diesel generators (meager augmentation by solar panels, notwithstanding).

        For the State of California, the poor decision would be to avoid investing in an electricity infrastructure that benefits everyone – to continue to reward wealthy homeowners at the expense of those who can least afford it.

    • My co-worker recently asked me how long an 18 kWh battery would power his home for. It just so happened I had been looking at residential load patterns the previous day so I had the answer at my fingertips. It’s about a day. If the weather is just right you could charge up your home battery system everyday using rooftop solar and disconnect from the grid. Unfortunately the weather isn’t always just right. In fact there are about 20 days a year when the weather is terrible and your PV system would be producing at a fraction of rated output. On these particular extreme weather days you’d also tend to see higher than average loads.

      Off-grid homes have long since solved this problem by over-building their PV systems by about 30% and installing a back-up generator. If everyone in urban areas was using back-up generators the air quality would be gross. Fuel cells could potentially solve this air pollution problem but the costs would be relatively high and the maintenance on these systems would scare most potential customers away. One could make a case there’s a special subset of customers that could cost-effectively go off-grid but I’d say we’re talking about a few thousand customers vs. millions.

      Net-metering is a terrible regressive policy. We should be using the metric system… excuse me… We should be using FITs like the rest of the world. FiTs naturally ratchet down over time rather than ratcheting up like NEM does. I also agree with Severin 100% that we should be implementing much higher fixed charges and concomitantly reducing unit costs. We need to do this to make the electrification of heating and transportation affordable.

      • Stand alone batteries will not be in the standard house set up once the auto makers resolve the question of battery warranties and the utilities adopt the correct EV connection protocols. EVs will provide almost free storage. Today’s typical configuration has about 45-50 kWh of storage, which is nearly 3 days of average house usage. And new pick ups are holding up to 200 kWh. https://www.caranddriver.com/features/a36051980/evs-explained-battery-capacity-gross-versus-net/

        In those 20 days when the solar output is insufficient, the customer will be able to drive out to a central location and charge up the car to get through the next several days. The grid won’t go away entirely, but the circuit level grid may fade away.

        • The 20 day estimate applies to grids so it assumes access to all renewables – primarily wind and solar but also hydro. It also assumes a grid that covers a wide geographical area which means you’ll have resource diversity benefits. Off-grid homes can and should hybridize but I’d expect that a stand-alone site would have a higher number of under-performing days. 20 is a good estimate for grids but I don’t have an estimate for stand-alone sites. Your idea could still work but it would take more trips.

          I agree with you regarding EVs being used as batteries. It’s clear to me the combination of over-building RE and managing EV load will all but eliminate the utility of grid batteries. The IEA is forecasting average EV battery sizing of 75 to 85 kWh by 2030 but you’re right about the trucks having much larger capacity. My company is forecasting EVs adding a significant amount load to the evening peak in a business as usual scenario. No one has yet dared to imagine EVs lowering system peak. Coincidentally I spoke to an EV load modeler today. His opinion is that EV as well as heating modeling isn’t up to snuff quite yet.

          I agree some circuits could go away but I believe this would be rare. I think all the extra load from electrifying heating and transportation will tend to increase our reliance on the grid much more than rooftop solar reduces our reliance. In a recent paper a Berkeley team modelled out a high penetration grid. In the study they found the need for 360 GW of natural gas backup. Interestingly they found that 60 GW of this capacity was only used 1% of the time. It seems to me we should look into replacing this 60 GW of rarely used capacity with EV back-feed. If we could monetize this capability it would be a great way to incentivize EVs.

  10. If you can get the cost of solar down to about $1/watt at a home it may be better than energy efficiency and weatherization. My home made ground mounted trackable 2 kW solar is less than $1/watt and runs on and off the grid. I use it to charge up my Tesla model 3 and displace pool motor load and some AC load. Its still an R&D project trying to get loads to align with solar production so storage is not needed.

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