Thoughts on Solar

Back in April we wrote about an attempt to eliminate Net Energy Metering - the primary economic benefit for rooftop solar - by way of a misleading petition filed with the Federal Energy Regulatory Commission (FERC). Here’s an update (h/t Utility Dive)…

The petition was filed by an entity called the New England Ratepayers Association (NERA) and if successful, would potentially affect net metering in the 45 states where it presently exists in one form or another.  The FERC regulates interstate electricity markets, and NERA portrayed net metering as a “wholesale sale” of energy, essentially subjecting rooftop solar systems as if they were utility power plants.  From NERA’s FAQ about the petition:

[N]et metering is having an unfair and harmful impact on ratepayers, especially low-and middle-income families. Given this problem, NERA has chosen to challenge net metering at the body which has the proper jurisdiction over wholesale electricity transactions.

Under FERC rules, the public had until June 15 to comment on the petition, and NERA found support from some usual suspects including the Heartland Institute (famous for its climate change denialism), the coal company Murray Energy (hilariously ridiculed by John Oliver a few years ago), the Competitive Enterprise Institute, Americans for Tax Reform (say what?), and Citizens Against Government Waste. 

Curiously, although several utility companies - including PG&E - had suggested that they would comment, none of them did.

In opposition was a very long and bipartisan group of people ranging from solar companies (well duh) and solar trade associations, to local state energy regulators.  For example, the National Association of Regulatory Utilities Commissioners (which includes the California Public Utilities Commission amongst its members) said in its comments:

The [FERC]… has for nearly 20 years acknowledged states’ authority and held that net metering does not involve wholesale sales subject to its jurisdiction… Relying on that settled law, states and utilities have developed and implemented net metering programs, and millions of Americans have made long-term investments in solar panels and other distributed generation for their homes and businesses.

Exactly!

Interestingly, Public Citizen dug up some IRS filings for NERA - which self-describes as "a non-profit organization focused on promoting sound public policy that protects utility customers, both families and businesses, and lowers the cost of regulated services” - that cast doubt on that claim.  According to the IRS filings, NERA consists of 15 members (identities not disclosed), ten of whom pay $20,000 in annual dues and five that pay $5,000.  Not exactly a grassroots organization!

Watch this space!

Talk about tone deaf - just as folks are stuck at home, sheltering in place, SCE jacked its rates roughly 6% across the board, because, you know, folks can so much more easily afford a rate hike while people are losing their jobs!  Here’s our (can you say outraged) take…

As of April 13, with little to no fanfare, SCE’s latest rate increase went into effect.  While different rates vary by somewhat different amounts, the overall average of 6.7% is expected to provide SCE with an additional $478 million dollars in revenue.  How nice.

The rate increase is not new; it is part of the CPUC-approved General Rate Case that was adopted in 2018 and covers rates for three years.  Nevertheless, at a time when other utilities, like PWP, are working hard to support their customers during a disastrous financial time, SCE’s willingness to press ahead with the rate increase is baffling, at best.

Using our regular proposal tool - Energy Toolbase - we decided to look at the results for three actual clients: a small usage client, a medium or really typical client, and then a very large usage client to see how the percentages played out.  Here are our results:

SCE’s Rate Increase - Click for Larger

The small user, with a total annual usage of 6,093 kWh (16.7 kWh/day) still has an annual bill on the tiered, Domestic rate plan of $1,267 and will experience a 6.24% increase or an extra $79 out of pocket.  Our medium user consumes nearly twice as much annual energy, 11,814 kWh (32.4 kWh/day), but because of the higher costs in the upper tiers of the Domestic rate plan, their bill is more than double.  After the 6.24% increase, the medium user is spending an extra $166.  Our large user - and this is not our largest residential client! - consumes 32,488 kWh (89.0 kWh/day), and has a bill to match, roughly four-times that of the medium user due to essentially living in the top tier of the rate structure.  After a 6.26% increase, they will be spending an extra $633!

We also looked at the same users switched over to a Time-of-Use rate (here, the 4-9 p.m. peak rate structure) and ran the numbers again.  One thing that leaps right out at you is that very large users will do much better on a TOU rate generally since otherwise almost all of their usage is billed in the top tier.  The percentage rate increases under the TOU rate are slightly smaller, with the small user paying an extra  $76, the medium user $160, and the large user $507.

Not exactly the sort of relief that ratepayers need at this time of unprecedented uncertainty.

We just learned from our friends at Energy Toolbase that Southern California Edison has just changed a rule about how solar PV systems with Energy Storage can operate, and the result - amazingly enough - results in greater savings for our clients!  Imagine that?!?  Here’s our take…

It used to be in SCE territory that when you added a storage system to your PV array, you could not export energy from the storage system to the grid and receive net metering credit.  That meant that when the storage system was discharging, it could not exceed what the home’s loads were demanding.  If your usage in the evening was low, or say you were out of town, your fully charged battery could not discharge at all - a poor utilization of that expensive storage system.

But now SCE - along with the other IOU’s, PG&E and SDG&E - have changed their rules to allow storage systems to discharge back to the grid and receive full net metering credit for that energy, as long as the storage system is solely charged by the PV array.  When you combine that rule change with electricity rates that favor storage, such as SCE’s TOU-D-Prime rate, the change in the rule can account for significant savings.

To get a handle on how big a change this will be, we went back to the data that we have for a client who we will be installing a small PV array and a 10 kWh Ensemble storage system soon.  (All of our data analysis and visualizations you see here were done using Energy Toolbase, simply the best presentation tool on the market.)

Solar PV & Storage - No Net Metering Discharge

Our client with the small, 4.6 kW, PV system and 10 kWh Ensemble storage system has a system payback of 11.4 years.  (Larger systems would have a faster payback.)  For this analysis, we imported his SCE interval usage data (provided by UtilityAPI) into Energy Toolbase.  ET then takes the performance output from the PV system, the charge and discharge parameters of the storage system, and overlays that on the existing usage - doing that calculation over every fifteen minute interval for a year.

The graph below shows one day, July 8th, as a representative sample.  Let’s break this down:

There’s a lot going on in this image (click on it for a larger version).  The dark gray is the historical usage demand based on the SCE data.  The value is shown at the top as “Current Demand” and at the moment we have focused on - July 8 at 4:15 p.m. - the historical demand was 1.94 kW. 

The green curve shows the modeled PV array output, using the specific parameters for this site - azimuth, tilt, shading, historical weather, specific equipment being used - as determined by NREL’s PVWatts tool (version 5).  Right now it is at 1.17 kW. 

The red line shows the percentage state of charge for the storage system, at this moment it is 83%.  Net Demand is what is being imported (positive number) or exported (negative number) to the grid.  Finally, Battery Power is how much power is being pulled from the storage system which at this moment is 1.94 kW.  At the bottom is the cost parameters for this rate schedule.  Under the pre-solar Domestic rate (which is a tiered rate) the cost of energy is 18.7 cents/kWh, whereas under the new rate structure it is more than twice that at 38.3 cents during the peak, 4-9 p.m. period.

 So… earlier in the day, as the output from the PV increases, and energy charges are cheap, the solar charges the battery for use later when the rates are high. As we cross over into the peak rate period at 4:00, the storage system begins to discharge and its output is exactly the same as the demand, meaning that all of the power from the PV system can be exported to the grid. 

But note that the battery power is only 1.94 kW, even though its continuous peak output is roughly twice that, 3.84 kW.  Under the old rules though, the storage system cannot output more than that, since it is barred from exporting to the grid.  As a result, when the peak rate period ends at 9:00 p.m. the storage system shuts off, even though it is still partially charged (nearly 40% capacity remains in this example).

That’s leaving money on the table!

Solar PV & Storage - Net Metering Discharge Allowed

Consider the same day, only now we can export the full output of the storage system as desired to maximize our time-of-use arbitrage.

Everything is essentially the same until we get to 4:00 p.m. and then things get very different!  Look at the difference in the output from the battery system, it is now putting out it’s maximum sustained power of 3.84 kW, resulting in more than 3 kW being exported during the peak price period

More importantly from an arbitrage perspective, the storage system is completely cycled.  Meaning that we have gotten full utilization from our storage system investment.  

What does that mean overall economically?  Payback is reduced from 11.4 to 10.7 years, a 6.1% improvement.  Gee, thanks, SCE!

So why are they doing this?  Simple: grid support. Having storage systems maximizing their output during the peak demand period (remember the Duck Curve?) helps the utility to manage its load, and reduce the need for expensive peaker capacity. Everybody benefits: our client (with faster payback), the utility (with better grid load management), and even non-solar/storage rate payers (as they don’t have to pay for that additional production capacity.  Win, win, win!

Of course, these economic benefits don’t really apply to a tiered rate structure, such as is used for residential rates in PWP territory.  But if you are in SCE territory, adding smart storage, like the Enphase Ensemble system, just became a lot more lucrative.

For the most part, the regulation of the solar industry - particularly the residential and commercial solar industry - is a function of state regulators.  In California, both the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) have been the major players in shaping the policies that govern solar installations, including policies like Net Energy Metering (NEM) which determines the economic value of going solar.  But now, a petition from the other side of the country could change all of that, and force states to turn control over the solar industry to federal regulators.  Here’s our take…

The Federal Energy Regulatory Commission (FERC) is ”an independent agency that regulates the interstate transmission of electricity, natural gas, and oil.” Well, wait a second, what does rooftop solar have to do with the “interstate transmission of electricity"?  At first blush, certainly nothing - the excess power from your home solar might go to power your neighbor’s house, but it certainly isn’t crossing state lines. (As a recovering lawyer I could go into a lengthy discussion of the Constitution’s Commerce clause and how that has been broadly interpreted to cover an amazing array of things that seem local, but are actually interstate commerce - but I will spare you that discussion!)  

The hook here is in the greater detail of what the FERC does: “Regulates the transmission and wholesale sales of electricity in interstate commerce."  Under NEM rules, excess energy put out onto the utility’s grid by a “behind-the-meter” solar system, i.e., all grid-tied residential and commercial PV systems,  is then resold by the utility to its other customers.  A petition to the FERC filed by the New England Ratepayers Association is asking FERC to find that those sales are under the exclusive jurisdiction of the FERC.  From the petition:

The law is incontrovertible. The [Federal Power Act] draws a bright line between state and federal jurisdiction over energy sales. Sales of energy at wholesale are subject to the exclusive jurisdiction of this Commission. Sales of energy at retail are subject to the jurisdiction of the states. The sales at issue in this Petition are wholesale sales because the energy is being sold to the utility for resale to the utility’s retail load…  and therefore the Commission is required to exercise its rate jurisdiction over them. [Emphasis added.]

Wow!  Now that is interesting - energy exported to the grid, for which the PV owner is paid retail rates (or closer there to), and which the customer down the wire pays full retail rates, is somehow transmogrified into a wholesale energy sale!

But what is the point of all this?  Simple - if these are wholesale energy sales, then FERC has sole regulatory control, and pro-solar policies such as NEM would be replaced by, at best, compensation for excess energy exported at the wholesale rate.  Never mind that SCE is charging you anywhere from 19¢ to 40¢, you are only going to be compensated at the 2-6¢ rate!

Much of the “logic” behind the petition argument will be familiar to readers of this blog: rooftop solar is economically inefficient, NEM distorts wholesale energy markets, and imposes unfair burdens on ratepayers without solar.  Nevermind that all of these points have been debunked before (their expert calls those debunking efforts “irrelevant"), what is important to note is that while many of us are locked out and hunkered down during this crisis, are opponents are not.  They are hard at work, hiring top-dollar DC lawyers to press the case while the rest of us are just trying to get through the month.

Make no mistake about it - if this petition is successful, it will be the end of NEM as we know it, and not just in New England, but nationwide!

This is where organizations like CALSSA(for solar installers here in CA) and the Solar Rights Alliance (for solar system owners) are so critical.  If you are a solar installer, or run a solar company and you are not a CALSSA member, shame on you.  Join!  If you have a solar installation on your roof and you don’t belong to the Solar Rights Alliance - wake up!  Join!

NERA’s petition was filed on April 14th and under the fast track rules that NERA requested (and paid a $30,000 filing fee to secure), comments are due by mid-May.   We will update you when we learn more about its progress.  Watch this space.

It is hard to believe, but the First Earth Day was fifty years ago! A lot has changed since then, but too much hasn’t! Here’s our take…

Earthrise from Apollo 8 - 1968. (NASA photo.)

I’m giving away my age here, but I was a high school student on that first Earth Day and was heavily involved in environmental causes, so the notion that people around the world would come together to raise consciousness about the damage we were causing to the environment was an eye-opening moment for me.  The need for change was so dire - air quality in Los Angeles was unhealthy much of the year, a river in Ohio was so polluted it caught fire, toxic chemicals were released into the atmosphere without concern for their secondary effects - that the task ahead seemed nearly insurmountable. 

The EPA did not yet exist (it was founded eight months later), nor did the Clean Air Act (also later that year), nor the Clean Water Act (1972).  On this day fifty years ago, we were practically starting from square one.

Space flight in general, and the Apollo program in particular, had helped spur the environmental movement, as those first images of Earth from lunar orbit captured the public imagination in a way nothing else ever had.  Truly we were a small, fragile planet in the vast darkness of space, and with no Planet B - certainly not the Moon - people started to realize that we needed to change what we were doing if we were to live in a sustainable world.

In the decades that followed, much progress was made.  California pioneered the way in reducing smog-forming emissions from automobiles, and tough regulations eliminated the indiscriminate dumping of toxins into the air and water.  Air and water quality slowly began to improve, even as the population of the country increased by more than 50%.

To be sure, there were times of lapse, particularly when the economy went into a downturn.  In the early 1990’s I was working as an air quality environmental advocate while California was experiencing a recession.  The constant refrain from the polluters - counterfactual but persistent - was that environmental regulations were “job killers” and that we needed to rollback standards to spur economic growth.  That argument was counterfactual because, as numerous studies proved, environmental standards actually were a net job creator, spurring innovation and job growth.

Fast forward to today.  Despite our progress, we have a long way to go, and for today’s generation the threat of climate change dwarfs the challenges that were confronted fifty years ago.  

Added to that challenge is the sudden, virus-induced economic calamity that we are just starting to comprehend.  Already we are seeing anti-regulation forces and climate-change deniers try to use this crisis as a way of eroding the progress that we have made toward a more sustainable society.  The solar industry is not immune from that attack and we will have more to say on that in the coming days.  Suffice it to say that the forces of greed are never vanquished, and though, at times, we make progress against them, they are biding their time, looking for an opportunity to reassert themselves.  If we are not vigilant, this may well be such an opportunity. There will be time enough to write about where those alarm bells are clanging. 

Today, however, it is important to look back over these past fifty years, just as the Apollo 8 crew looked back toward Earth, and put into perspective what we have accomplished.  It took guts, perseverance, and maybe a little luck to achieve what we have.  With more of the same, we will overcome the challenges of this era.

Happy Earth Day!