Just as a massive snow storm has bitten the eastern United States, a heated battle is about to consume the state of Colorado. It is pitting the rooftop solar energy business against the legacy utility companies, both of which fear they would get a raw deal as an increasing number of consumers potentially detach from the grid.
The price of rooftop solar panels is falling fast while the cost of utility-generated electricity is escalating. Meantime, state incentives are expected to lead to the use of more such distributed generation or onsite power. The debate is over how to share costs: Consumers generating their own juice say that they are preventing wear and tear of the utilities’ infrastructures while the power companies say that they must still maintain the grid and keep enough power on hand to meet peak demand, which benefits both traditional customers and distributed producers.
“The proceedings in Arizona, Colorado and California all indicate that avoided utility costs are emerging as the way to determine ‘net-energy metering’ photovoltaic value (PV),” says Wade Shafer, senior analyst covering North American PV at IHS IHS Inc. “However, with no single methodology for determining avoided costs, the debate over net-energy metering benefits to the greater power systems are likely to continue.”
Net-energy metering is the technical term used to measure the amount of money that distributed energy customers should get paid relative to retail electricity prices. Utilities, generally, want to offer them the wholesale rate. That’s because those power companies collect fees to pay for the upkeep of the distribution system. Those are wires that all customers will use, even those who power their homes with solar panels. That’s because the sun is not always shining and the utilities would then have to provide them electricity over their networks.
In Colorado, Xcel Energy Xcel Energy has said that when it credits residential customers at the full retail rate that it is actually subsidizing their energy use. Specifically, onsite producers get a 10.5 cent per kilowatt-hour credit there. But Xcel says that the credit should only be 4.6 cents, and that the rest is a subsidy. Of the roughly 16,000 customers who use distributed rooftop generation, about 1,700 of those are now getting credits from the utility, which means that they are producing more power than they need and are selling their excess energy back to the power companies.
The Colorado Public Utility Commission is about to consider this contentious issue. “Colorado ranks seventh in the nation with 314 megawatts of solar generation installed and 328 solar companies creating a bright future,” says Gabe Eisner, executive director of the Energy and Policy Institute.
The debate that Colorado is having comes atop ones that are taking place in California and Arizona. In October, the California’s Public Utility Commission presented a study that examined how traditional utility customers would be affected by net-energy metering rules. It used the “avoided costs” suppositions, which then concluded that more onsite power means greater overall benefits.
In mid November, the Arizona Corporation Commission made some decisions. While the main utility there, the Arizona Public Service (APS) that is part of the Pinnacle West Pinnacle West Power Corp., had requested a roughly $50 monthly charge for self-generating solar consumers, the commission settled on $5 a month.
The American Legislative Exchange Council, which drafts model legislation for the states to consider, has suggested that the responsibility for the grid remain a team effort. That is, it says that 500,000 workers are employed by utilities, which invest $90 billion a year in their businesses. It acknowledges that greater numbers of customers are using rooftop solar panels and that they are selling their excess power back to the utility via the grid — that utilities maintain.
“The current policy basically allows for rooftop solar customers to use the electrical grid – the poles, wires, substations, etc. – for free. The costs of maintaining the grid are then shifted to non-solar customers,” writes Stephanie Whyte, a government affairs representative for APS, in an op-ed.
The temperature tied to this debate is only going to get hotter. As the incentives to use rooftop solar panels increase, more homeowners are likely to make the switch. That could possibly leave fewer traditional customers responsible for maintaining the grid — a network that will need to eventually be expanded to accommodate a rise in energy demand. State regulators, such as those in Colorado, now have the unenviable task of creating an equitable and modifiable system.