Who’s Afraid of Retail Electricity Rate Reform?
Even solar losers like me can see a big win in California rate reform.
Note: An earlier version of this post reported proposed electricity prices taken from PG&E testimony filed on April 7. There were some typos in that filing. These have been corrected below.
California just moved one step closer to changing the way households pay for electricity. If all goes according to these newly proposed plans, Californians will be paying lower electricity prices and an “income-graduated” fixed charge by 2025. The impetus for electricity rate reform? California’s retail electricity prices are high and rising.
Notes: An accelerating increase in bundled residential electric rates is forecast for all three IOUs. Source.
We’ve argued here and here that these prices are too high because we’re effectively taxing grid electricity consumption to pay for costs that don’t vary with usage (e.g. rising costs of wildfire risk mitigation, compensating wildfire victims, infrastructure costs, public purpose programs). These too-high electricity prices are slowing progress on electrification and straining the pocketbooks of lower-income households.
In response to these challenges, a new California law requires that residential electricity prices be reduced. Revenues not recovered in a per-kWh charge will be collected in a fixed monthly charge that increases with household income. By how much should electricity prices be reduced? How should income-graduated fixed charges be set? These are the issues being debated now.
Under this kind of reform, there will be winners and losers. Most low-income households will “win” reductions in their electricity bills. Households like mine — higher-income households with rooftop solar—are the biggest losers. No one likes to pay more, so some rooftop solar advocates -among others- are pushing back.
I love my solar panels. It’s amazing that we can charge our EV with homemade kWhs. Anyone who wants to invest in generating their own solar electricity should be able to do so. But the way we currently pay for electricity is broken and needs fixing. So, this week’s blog post offers a pro-solar — and pro-rate reform- perspective.
What does rooftop solar have to lose?
Before diving into the specifics of the different proposals on the table, it’s worth reviewing how we currently compensate rooftop solar generation in California, why the status quo is broken, and what the utility-proposed electricity rate structures would do to a solar PV owner’s electricity bill (mine).
Status quo rooftop solar compensation
Last year, our solar panels generated more than 4,300 kWhs. When we consumed our homemade solar electricity, we avoided paying the retail rate for grid electricity. Under net metering, when we exported our excess supply back to the grid, we were compensated at the retail rate minus a charge of about 2 cents/kWh. What we “earn” from our solar exports offsets most of the cost of the grid electricity we consume when the sun goes down.
The graph below plots our average hourly solar PV production in 2022 and the time-of-use EV rate averaged across hours of the year. Accounting for non-bypassable charges, our solar PV generation reduced our bills by over $1,200 in 2022!
What’s wrong with this picture?
In California, we use retail electricity prices to raise revenues to cover a long list of non-incremental expenses I described earlier. This means that only a fraction of the savings I see on my bill are savings that my solar panels are actually generating for the world. A significant fraction of my cost “savings” are just cost-shifted onto someone else’s bill since these costs still need to be paid.
The California Public Utilities Commission (CPUC) uses this E3 avoided cost calculator to estimate the social benefits generated by distributed energy resources. These hourly estimates include avoided fuel costs, benefits associated with reduced greenhouse gas emissions, avoided methane emissions, avoided marginal capacity costs, etc. If you compare these 2022 hourly Social Marginal Cost (SMC) values against my retail rate, the contrast is striking.
Note: The social marginal cost (SMC) numbers come from this 2022 Distributed Energy Resources Avoided Cost Calculator
During the hours of the day when the sun is shining, my retail price (black) is well above these social marginal cost estimates (green). Valuing our 2022 hourly solar PV production using these SMC estimates adds up to around $185 in avoided costs, far below the $1200 that our family saves. (E3 is working to incorporate some higher estimates of avoided emissions values — but these changes should have a limited impact during hours when my solar panels are cranking).
How would proposed rate reforms change this picture?
PG&E recently released a retail rate reform proposal that would make two important changes to my electricity bills. First, my hourly retail rate would be lowered by more than 30% (averaged across hours). Second, I would pay an income-graduated fixed charge of $92 each month (very low-income households would pay only $12). The graph below shows the EV-TOU rate that PG&E has proposed.
These proposed changes will reduce my solar PV “savings” and increase my monthly electricity bills. (The NEM reform that just took effect will not change this picture for me and everyone else who already has solar).
Reduced compensation for my solar generation means fewer fixed costs are shifted onto solar have-nots. This seems only fair. I benefit from wildfire risk reduction like everyone else. I also depend on power system infrastructure to export the solar electricity I don’t consume and to keep my lights on when the sun goes down.
Although I don’t love the idea of sending more money to PG&E every month, I see this bill increase as a feature– not a bug– of a reform that aims to recover power system costs more efficiently and more equitably. But not everyone agrees with me…
In defense of the status quo?
Under the PG&E proposal, my retail electricity rates would be reduced by over 30%. But there are other proposals on the table that advocate for much smaller rate reductions. The Solar Energy Industries Association (SEIA), for example, is recommending that the price per kWh be decreased by only 2%.
Here are the key arguments in defense of keeping retail prices higher (as I understand them).
1. We should play by the rules: SEIA cites an earlier CPUC decision that fixed charges should only include costs “that are caused simply by the customer’s presence on the system”. By this narrow definition, fixed charges include only the costs of connecting me to the grid and sending me a complicated utility bill every month. This definition excludes billions of dollars of costs that do not vary with incremental usage (e.g. wildfire mitigation, some power system infrastructure, public purpose programs).
If this is, in fact, the rule on the books, it needs to be changed. Adhering to it locks us into inefficient and regressive retail electricity pricing.
2. High prices promote conservation and efficiency: The SEIA proposal argues that modest reductions in rates would “retain a strong incentive to conserve energy and use it efficiently”.
I think this argument is misguided. If we are concerned about environmental conservation and efficient energy use, we should be working to accelerate the efficient electrification of homes and vehicles. Keeping electricity prices higher than SMC does the opposite by discouraging efficient fuel switching.
3. High retail electricity prices support investments in rooftop solar: The Sierra Club is recommending that, if rate reforms “unreasonably impair” the payback period for solar and storage, cost elements should be removed from the income graduated fixed charge.
Rooftop solar adopters should be compensated for the benefits they generate for the system. However, under the current rate regime, we are increasingly over-compensated. Keeping electricity rates high to keep my solar payback period artificially short would prioritize rooftop solar over other critical objectives such as electrification efficiency, cost-effective grid decarbonization, and affordability.
Solar losers, don’t be sore losers
California’s retail electricity rates are badly broken. The status quo rate regime distorts incentives, discourages electrification, and disproportionately burdens lower-income households. Absent reforms, the situation is only going to get worse as more high-income households invest in rooftop solar to reduce their utility bills, exacerbating the cost shift onto solar-have-nots.
SourceCalifornia now has an opportunity to course correct. Lowering electricity rates and raising revenues with an income-graduated fixed charge will reduce barriers to efficient electrification and shift cost burdens off of households that can least afford to pay. Fellow solar losers, I’m hoping we can all take a step back and recognize this as a big win for California and the climate.
Suggested citation: Fowlie, Meredith, “Who’s Afraid of Retail Electricity Rate Reform?”, Energy Institute Blog, UC Berkeley, April 17, 2023, https://energyathaas.wordpress.com/2023/04/17/whos-afraid-of-retail-electricity-rate-reform/
Keep up with Energy Institute blog posts, research, and events on Twitter @energyathaas.
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We added battery storage a few years ago to lessen grid demand during the high-peak, TOU evening hours. What is its effect, if any, on your graphs and the battery-enabled consumer’s bill.
Is the left axis correctly labeled? To my reading, the off-peak rate is 0.25 cents per kWh, I would expect something like $0.25/kWh.
THANK YOU! That was an error now corrected.
So these private companies want to access our income information and charge us more for using the same amount of electricity? Income is already taxed at the federal and state level, why don’t you use your billions in profit every year to upgrade your systems and leave the workers alone? I’ll fight this to my last breath. Energy companies and CPUC are so corrupt and work together only to the profit of each other, not the people.
I recently read a report that–I think–adds another reason for moving fixed costs off the margin and onto fixed electricity charges. In the “old days”, power plants had (relatively) low capital costs and high operating costs. With the trend now in favor of solar, wind and batteries, fixed costs (purchase price of the hardware) are relatively high and operating costs are very low. I think this suggests that marginal (operating) costs should be low, encouraging EVs and building electrification.
Your thoughts??
Gerry Bemis
CEC Staff
Indeed. It does seem rather strange when CAISO prices are near zero during the solar hours that retail prices would be the equivalent of $350/MWh. I think people have a hard time shifting their thinking on conservation. For decades it was all about save save save energy. Now we need to make rates as cheap as possible to encourage electrification. Unfortunately, CA is doing everything it can to make sure it doesn’t happen with exploding utility rates. Transmission, wildfire prevention, and a grid with decades of deferred maintenance that now has to be modernized will continue to put pressure on rates. Some say the answer is rooftop solar. Sorry no, the benefits of the shared grid are far too great, and rooftop solar, no matter what rube-goldbergian acrobatics are attempted in its defense, creates a huge cost-shift from the well off homeowners like Meredith. Love the quote: “Solar losers, don’t be sore losers!”
I would love to go off the grid, I do not need to subsidize SDG&E ratepayers, and my pv+battery+ev setup will probably work just fine.
I mostly agree although I’d describe the purchase price of solar/wind (utility scale of course) as relatively low.
20 cents/kWh is still rather high. I’d like to see the volumetric rate get down below 10 cent/kWh. This would accelerate electrification.
Agreed.
Interesting analysis.
What about batteries + solar? It looks like on the social benefit costs, tremendous benefit could be achieved by shifting solar energy to a few hours in the evening, if true, this is another example where the tariffs do not encourage that.
Highlighting how complicated and insane the California tariffs are. Encouraging some reductions of fossil fuel use while perversly preventing others (e.g., heat pumps). We probably need one tariff for all so that the best solutions can compete and win. Charging EVs on a hot August night is NOT a good idea when they might be charged at work off solar. More EVs only work with MORE solar to get the GHG reduction benefits and avoid massive infrastructure additions…. perversely, we’re driving less solar.
I don’t see any discussion of how/why the fixed charge should be income-graduated. The idea that an essential utility, sold by a private entity will now be priced based on the income of the purchaser is novel, and I daresay unwelcome to many. Current proposal has a fixed charge of ~$600/year for a median-income household, and even if they will save money overall, most folks will not see that as positive change. Traditionally small households that use little (e.g. condos with gas heating/cooking) are used to paying well under $100/mo in electric bills. This will be a huge change for them. More generally, we already have progressive taxation. Progressive pricing of goods and service feels like double-dipping.
Tiered electricity rates are effectively a form of progressive pricing because electricity use climbs with affluence. In the good old days you actually paid less if you used more.
Even if people save money they won’t see it as a positive change? An average house (non-electrified) in California uses 500 kWh a month so this new rate structure would produce a bill of roughly $101/month for 47% of the homes in PG&E’s territory.
Now let’s electrify a vehicle or two, add a heat pump, electric stove etc. Depending on how much charging takes place at home a median income household would see electricity use double or triple. For ease of math let’s assume 10,000 additional kWh and/or $2000 a year of additional electricity. This is a lot less than the $6500/year a 2-car household in California spends on gasoline.
Click to access 505736526.pdf
https://www.physics.uci.edu/~silverma/actions/HouseholdEnergy.html
This link (2022 data) suggests an average California household spends $700 per year on natural gas for space/water heating and cooking. $6500 + $700 – $2000 = $5200 per year in savings.
https://www.mantecabulletin.com/opinion/local-columns/greenies-setting-stage-most-californians-pay-3-times-more-stay-warm-winter/
“I don’t see any discussion of how/why the fixed charge should be income-graduated.” Here’s why, at least in good part.
Last month, the PPIC issued a report on income inequality in CA, which noted the following:
“The gap between high- and low-income families in California is among the largest in the nation—exceeding all but three other states in 2021 (the latest data available). Families at the top of the income distribution earned 11 times more than families at the bottom ($291,000 vs. $26,000 for the 90th and 10th percentiles, respectively). In 1980, families at the top earned 7 times more than those at the bottom, and the current gap reflects 63% income growth for the 90th percentile, and 7% growth for the 10th percentile over four decades.”
You also assert in your comment that “we already have progressive taxation. Progressive pricing of goods and service feels like double-dipping.”
Yes, CA’s state income tax structure is one of the most progressive in the nation, thanks to governors Warren, Reagan, Jerry Brown and others. And, as Meredith noted, IOU customers are paying high rates in good part because we are “effectively taxing grid electricity consumption” to pay for public purpose programs and wildfire related damages and mitigation. Meredith, Severin and others have argued that funding for these things should be shifted to the state budget. In theory I agree, but in reality that’s not happening anytime soon–if ever. So this rate reform is a proxy for that, and it’s not double dipping because these funds are dedicated to these non-energy rate surcharges and do not go to the state’s GF for discretionary use.
It’s likely that an income graduated fixed charge not approved by voters on a ballot will violate Prop 26 which requires direct cost causation. I also expect that another initiative that will expand Prop 26 to include private utilities if the courts deny this argument. I believe such an initiative could go further to eliminate the CARE discount as well based on what has happened to municipal water utilities. Trying to impose an income tax through the back door very likely could trigger a bigger backlash that could be pyrrhic.
Excellent points, Richard!
There are several reasons for indexing the fixed charge to household income:
1. Imposing a fixed charge of about $70 per month (it varies with the IOU) on low income customers would unduly burden them.
2. Higher income households impose higher KW demands on the power system, thereby driving the need for more investment in generation and T&D infrastructure.
One alternative scheme is to index the fixed charge to the market value of the connected property (which assumes that larger homes cost more and impose higher KW demands). Also, it would be easier to administer because property values are already publicly available, whereas household income is not.
Using your logic, the people that use more should pay more, panel size is a far superior method. Sum up all the panel sizes connected to the grid. A ratepayer’s portion of the cost is the ratepayer’s panel size relative to the sum.
Here’s the problem with that: the utilities do not publish the cost of the grid.
But f’ the cost. The climate catastrophe is an existential threat.
I agree that climate change is an existential threat. Even so, we should be implementing a strategy for combating climate change that is cost-effective.
Dropping the volumetric energy rate to closely match the marginal social cost is one tool for doing that. It will optimally incent purchases of EVs, heat pumps and water heaters, replacing natural gas.
Alameda County Water District used to have a $10.00 bi-monthly “Meter Fee” and after 14 years of drought, they now have a $60.00 bi-monthly fee since everybody cut back on their water usage and the water utility was going broke for lack of revenue. The fact the municipal water district did it sets a president for the Electric companies to do it. The only thing is, everybody pays the same fee based on the size of the service, not on the income of the individuals living as the served address. Most larger homes have a larger water service line than the standard 3/4-inch line and wealthy people own those larger homes. They could just make the fixed fee based on the size in amps that the service drops feeds and go from there.
Great points
The kWh ‘sent to the grid’ rate should factor in the COST rooftop solar would incur for batteries to store equivalent energy. Now the incentives can be pareto’d ie one can decide which way to go – store or sell to the grid.
[https://www.energysage.com/local-data/energy-storage-cost/ca/
As of April 2023, the average storage system cost in California is $1340/kWh. Given a storage system size of 13 kWh, an average storage installation in California ranges in cost from $14,810 to $20,036,
Where did you get those numbers? The cost of Lion battery systems are currently in the range of $400 per kWh of stored energy.
No the amount paid for solar hour by hour should be the cost on the grid. It has nothing to do with whether the homeowner has storage or not. If the homeowner does have storage they can serve their own load after the sun goes down since its certainly going to be worth more than the grid wholesale energy.
Gene, I fully agree.
Much better response than mine.
Your description of how rooftop solar is currently compensated is not quite accurate. The energy is credited at the going rate (-~2¢) delivered (SDG&E 29¢). When the sun goes down, energy is purchased at the going rate (SDG&E 53¢). The net is that the rooftop solar has to generate 2-1/2 times the the energy consumed to break even.
“Cost shifted onto someone else’s bill” Because the utilities are selling less electricity, which is exactly what is need to mitigate climate change, they have to charge more. It is the utilities that is shifting the burden, not rooftop solar.
“Cost” is not the right term, “Utility Company Profit” is more accurate.
Constantly noted is “Wildfire Mitigation”. First this has always been a known problem. To wit, the two negligence suits. (10 years later and the stockholders have yet to pay). This loss shows that the utilities cheated Californians and knew that they should have built better. Second, I have yet to see actual costs for this mitigation. What is the percentage increase?. Reference, please. Third, the utilities are quite excited about having to do this construction because construction is where the utilities make even more money; twice over. The construction is a no-bid contract done by subsidiaries of the utility’s parent company.
The proposed change encourages more, not less, energy usage. This is not what we should be doing.
Now onto the graduated tax. If this is a valid argument, then let’s go whole hog and nationalize the grid. The state pays for the grid out of the general fund. Income tax would necessarily be increased for this purpose. Then one would buy energy directly from the producer at near wholesale rate. Now one would argue against this because government run utilities would end up like the DMV. OK, that’s likely, but currently their run by a group whose greed shows no bounds.
I conclude that if this change is implemented, high income households will go completely off-grid, leaving the solar-have-nots shouldering all of the burden of feeding the corporate greed.
“’Cost shifted onto someone else’s bill’ Because the utilities are selling less electricity, which is exactly what is need to mitigate climate change, they have to charge more. It is the utilities that is shifting the burden, not rooftop solar.”
California IOUs–and at least LADWP among public utilities–have adopted “revenue decoupling” which compensates them for fixed costs regardless of their sales volume. So, it IS the rooftop solar customers shifting the cost burden in this regard, not the utilities.
And this is why revenue decoupling is a failed policy–it has given the utilities a free license to build as much as they want with the assurance that they will recover their costs regardless of market conditions. This is socializing losses, privatizing profits.
It also removes their incentive to oppose cost-beneficial conservation measures, which is why RAM was enacted years ago.
Obviously the Averish- Johnson effect still exists but that was always the case. It is up to the regulators to do prudence reviews of proposed investments.
Nothing is perfect Richard.
Dude,
“?Second, I have yet to see actual costs for this mitigation. What is the percentage increase?. Reference, please. ” This report-
Click to access 2022-sb-695-report.pdf
covers wildfire related charges over the years.
Mark Miller
Sounds like you are conflating a lot of unrelated issues.
To avoid perverse incentives a utility should be indifferent to the amount of kWh it sells and, in California, the three IOUs essentially are. As I recall, in California the Revenue Adjustment Clause (RAM) automatically adjusts the utilities’ rates to compensate for changes in kWh sales. That’s how the cost-shift is implemented.
Actually, the IOUs are not totally indifferent to kWh sales because increasing sales generally impose the need for added investment in the T&D infrastructure on which the the IOUs earn an allowed rate of return. So long as the allowed rate of return exceeds the utility’s cost of capital, increased investment produces increased profits. This is known as the “Averish-Johnson” effect, named after two RAND economists who first described it in 1962.
In practice, the rate of return almost always exceeds the cost of capital today. In the 1970s this was not the case because regulators would not allow the utilities to fully pass through the large cost increases caused by the dramatic jump in oil and natural gas prices. This produced a disincentive for utilities to invest in new generation or T&D infrastructure, threatening long-term power system reliability. This is why it is better to err in the direction of approving higher allowed rates of return to ensure service reliability.
“This is why it is better to err in the direction of approving higher allowed rates of return to ensure service reliability.” I’m pretty sure that the cost of money is rolled into the determining the ROI. And in that spread sheet that determines ROI is an inflation predictor to cover increased labor and maintenance. Doesn’t the utility borrow the money for these infrastructure project from its parent company, thus the cost of the money is not market driven.
And I say that there are 360 angles dance on the head of a pin. It’s all moot if we don’t mitigate climate change.
(ps sorry that my missive appeared to be conflating. I was trying to address each issue presented.)
The cost of money is indeed included in the determination of a regulated utility’s allowed return on investment. However, determining that cost of money is a very imprecise process, particularly when the stock of the regulated company is not publicly traded, which is generally the case when the utility is wholly owned by a parent company.
The parent is typically involved in activities whose risk profiles are very different than that of delivering electricity to customers, e.g., energy trading, building IPPs outside of the utility’s service area, etc. Trying to extract the business risk of the utility by applying CAPM to the parent company’s stock prices is a futile exercise.
Cost of capital determinations are like a Kabuke dance, where the utility witness produces a high number and other parties’ witnesses produce low numbers. The commissioners, being mostly politically motivated lawyers with little knowledge of finance theory, just split the difference.
But regardless of which entity raises the money that the regulated utility invests, it is market-driven.
In 2014 I conducted a case study of residential solar installed in the Southern California Edison service area. It clearly illuminated the huge subsidy paid to solar homeowners through net energy metering (NEM) as well as the cost-shift that was occurring.
Click to access IEI_NEM_Subsidy_Issues_FINAL.pdf
Several years later I conducted a study quantifying the total subsidies paid for residential solar in 15 states (NEM, federal ITC, and direct payments from state/local governments, and utilities. In most states the NEM was a major source of subsidy.
Click to access Solar-incentive-report-FINAL.pdf
In both studies I described the obvious solution to efficiently rewarding residential solar, i.e., setting the volumetric rate equal to the social marginal cost, a concept the Haas economists examined in greater detail last year.
https://www.next10.org/publications/electricity-rates-2
While it has taken almost a decade for California to see the light, better late than never – I guess. Let’s hope the CPUC ignores the specious arguments of Vote Solar and the other home solar granolas.
Bob if solar were to serve in real time the customers load but no excess energy is sent back to the grid such as the Signature Solar does, then the customer’s bill even in Austin Energy at the lowest amount would be the fixed costs added to the bill, i.e. the utility fixed monthly cost to connect that customer.
Now suppose the excess energy going back to the grid is valued as the real time incremental price of energy on the grid. If the meter negative energy were to record that for the customer and at the time of occurrence, then the homeowner with excess solar could be compensated by that hourly generation going back into the grid. This would produce additional income for the customer, even as the customer has already paid for the fixed charges. So that additional revenue being earned by the customer would be properly valued and paid for. It might be possible that the customer’s monthly bill could go to zero in which excess energy sales at grid prices pays for the fixed charges billed to the customer. In order to avoid the utility having to fill out tax forms the lowest the customers bill could go would be zero charge.
This seems like the fairest way to compensate both the utility and the homeowner. As I said before, the utility should not have a program spending money on the customer’s solar unless the utility wants to own part of the solar which seems like an unnecessary complication to me. There is another feature about Austin having separate rates for solar versus load billings. Austin charges taxes through its sales of energy. If customers with solar were to cut back on their energy purchased from Austin, it eats into the City tax revenue. Austin doesn’t want customers to serve their own load for this reason. For customers outside Austin, they have special rates that has the tax component removed. The Austin situation is not an ideal one to copy.
I agree with you.
Last time I looked Austin Energy requires a solar customer to separately meter the facility and sell all of its output to the utility at the utility’s avoided cost. The customer then buys all of the energy consumed at the current retail rates.
Several years ago I proposed that Maryland adopt the buy-all, sell-all model but also compensate the customer at the real-time energy price plus a surcharge to account for the value of emissions reductions produced by the solar energy. I published this in Public Utilities Fortnightly: “Buying Solar Energy by the Minute,” Oct. 2019.
Taking the home rooftop solar totally off grid is the answer. No connection fee, no limited access and no profits to the utility stockholders and executives. Just buy solar panels or a solar roof and batteries with a large enough inverter system to power every appliance and light one needs. RVs have been doing this for years, so they do not need to “plug in” to the outrageous prices they charge at campgrounds.
Great point. If there is a fixed charge, consumers should be allowed the option of disconnecting from this service.
“Taking the home rooftop solar totally off grid is the answer. No connection fee, no limited access and no profits to the utility stockholders and executives. Just buy solar panels or a solar roof and batteries with a large enough inverter system to power every appliance and light one needs.”
If one can make that work, more power to them. However, being connected to the grid for backup power is a big advantage that few customers with solar are willing to give up. However, not connecting your solar facility to the grid and using it to selectively serve isolated loads, like charging an EV, can be economic. I know of one guy who routinely does this.
So, unless you’re really wealthy like the Oracle executive highlighted in the article linked below, how do you afford to take “home rooftop solar totally off grid”? We just had one of the rainiest/snowiest/cloudiest winters on record, and, accordingly, the sun wasn’t shining anywhere near as much as during a “normal” winter, which poses enough problems for solar on its own. Yes, five to 10 years from now, the cost and longer-term capacity of batteries MAY open the door for upper-middle class homeowners — and perhaps fringes of the middle class — to do something along the lines of this Oracle executive, but we’re nowhere near that now — unless you’re willing to go without power for extended stretches or have propane in reserve.
https://solartechreview.com/2021-03-01-oracle-exec-built-own-microgrid.html
Existing analysis[0] over-focuses on shortfall and the extreme battery capacity required to make it through exceptional weather. We have fossil fuels and we can use them to handle the long tail. I satisfied 95% of my electric needs last year with solar+battery. The balance can be provided by burning gasoline or natural gas in a generator at lower cost than the grid.
The system is less than two years old and has already paid for itself in avoided grid costs, granted I designed and installed it myself. I currently use around 600 KWh per month and can nearly double that consumption before meaningfully increasing my deficit. It seems inevitable that high grid access charges will drive defections. They will certainly drive mine.
[0] https://linkinghub.elsevier.com/retrieve/pii/S0306261920300064
I am a retired inside wireman and I built my own off grid system that currently powers my home. Cheap RV solar panels and cheap lead acid batteries, a couple of MPPT charge controllers, some wire and fuses and a 3,000 watt, 12-volt, pure sine wave inverter is all you need. Diagrams and how to is found on the internet. Refrigeration, air conditioning, microwave oven, induction cooktop, some lights and electric heaters will all work fine with two or more inverters.
If the argument is the higher income households subsiding the lower income households is fair, why stop in electricity bill? How about the water bill, the gas bill, the garbage bill, the gasoline price, the cell phone bill? All of these services have components that is required to run the services that are not directly tie to usage.
“A significant fraction of my cost “savings” are just cost-shifted onto someone else’s bill since these costs still need to be paid.” Pacific Gas and Electric has been cost shifting to the wealthy and middle class for years with tiered rates for larger homes and programs like CARE that give discounts to low-income customers with gouging everyone else. The one area they do not cut is their profits and executive compensation… It is time to break up the big utilities.
Why is the base rate based on a family income level and not just cost of service which should have a fixed cost of around $50 per month which is what the cost is to serve a house with all the wires metering and admin costs. Its basically the distribution system cost and possibly include the transmission system as well. Customers need to pay this even if there is credit for selling solar back to the grid, would be a separate rate that may drop to nearly zero if the nodal price for energy generated by renewables drops to nearly zero. Likewise the cost of home solar should not be greater than about $1/watt and should not be subsidized in my opinion unless the people subsidizing the solar get the excess energy free. I.e. if subsidized you can’t make money selling back nor can you bank the solar energy but you have to use your own energy yourself or form some kind of neighborhood coop that self uses the energy the neighborhood uses for maximum neighborhood gain.
Income graduated fixed charges are just another slap in the face to the principle of cost-causation. Social welfare redistribution policy should be a function of the state and/or federal government, not the utility rate structure.
Gene,
How do we get residential solar down to $1 per watt? These Ma and Pa installations are labor intensive, relative to larger-scale solar, and cannot benefit from economies of scale.
I did not count my own labor cost. The hardware was carefully selected. Solar panels were $50 to $100 per 200 watt panel and they were listed as used, actually I think they were rejects due to a minor blemish here and there. The inverter is an MPP Solar LV2424, the green case one. The 24 volt battery is a 1 kWh half of a 48 volt battery out of a Chevy Bolt. I only float it, never charging or discharging it. A 120 VAC tie acts as the variable power connection. I take off 120 volt power from the inverter to the EV for example on the line going to a 120 VAC. The entire solar system is not connected to the house. I have fuses on everything. Here are the panels which 6 panels are rotatable. https://egpreston.com/solarpanels.jpg and inverter and battery https://egpreston.com/solarinverter.pdf . It works pretty nicely. So far I have generated about kWh since Dec 12 2020. 10 kWh can displace one gallon of gasoline when switching from an ICE to a Tesla M3 EV. When the car is charged up I run the power into the swimming pool cleaner system. Its already paid for itself and I’m cutting way down on CO2 emissions and not getting the energy from the utility.
I did not count my own labor cost. The hardware was carefully selected. Solar panels were $50 to $100 per 200 watt panel and they were listed as used, actually I think they were rejects due to a minor blemish here and there. The inverter is an MPP Solar LV2424, the green case one. The 24 volt battery is a 1 kWh half of a 48 volt battery out of a Chevy Bolt. I only float it, never charging or discharging it. A 120 VAC tie acts as the variable power connection. I take off 120 volt power from the inverter to the EV for example on the line going to a 120 VAC. The entire solar system is not connected to the house. I have fuses on everything. Here are the panels which 6 panels are rotatable. https://egpreston.com/solarpanels.jpg and inverter and battery https://egpreston.com/solarinverter.pdf . It works well generating about 7945 kWh since Dec 12 2020. That good for not burning about 800 gallons of gasoline if all it went to my EV. A lot of the energy went to running my swimming pool pumps, normally a waste of energy, but not when solar drives the swimming pool operation.
I did not count my own labor cost. The hardware was carefully selected. Solar panels were $50 to $100 per 200 watt panel and they were listed as used, actually I think they were rejects due to a minor blemish here and there. The inverter is an MPP Solar LV2424, the green case one. The 24 volt battery is a 1 kWh half of a 48 volt battery out of a Chevy Bolt. I only float it, never charging or discharging it. A 120 VAC tie acts as the variable power connection. I take off 120 volt power from the inverter to the EV for example on the line going to a 120 VAC. The entire solar system is not connected to the house. I have fuses on everything. Here are the panels which 6 panels are rotatable. https://egpreston.com/solarpanels.jpg and inverter and battery https://egpreston.com/solarinverter.pdf . It works well generating about 7945 kWh since Dec 12 2020. That good for not burning about 800 gallons of gasoline if all it went to my EV. A lot of the energy went to running my swimming pool pumps, normally a waste of energy, but not when solar drives the swimming pool operation.
Yes, the economies of scale go against rooftop solar. Here are some plusses, though. All of the construction and maintenance costs to every other ratepayer is zero. Roof top solar delivers retail energy and in doing so only uses as much of the distribution system that is between the rooftop and the nearest consumer. (mathematical proof: https://docs.google.com/document/d/1s0uLXdQLjhN7ICmjJfYLC8l8mQ6W8lz6AeodmxgQ67E/edit?usp=share_link ) When rooftop solar, especially +storage, becomes more prevalent, the need for new transmission lines is reduced.
WAIT, we can’t have that, the utilities make all of their profit in construction! The utilities will have to charge more per kWh because less energy is being delivered over its transmission lines. Woe are the utilities! What will they do? I know, make a ridiculous tariff only for the rooftop solar installations to ensure ever higher profits.
But what will they do when all of these installations say, “I’m sick and tired and I’m not going to take it anymore! I’m going off grid!”? Who will provide the utilities’ profits then?
Tempest in a teapot. It soon be all sorted out because nobody cares about climate change.
The whole proposal based on what your income is isn’t even relative to the size of your house or the power you consume.
It’s an income tax and giving a private company the power to tax is wrong. So now I’m supposed to send my income documents to PG&E? No way, no how. Never.