The problem is not too much solar. That might seem self-evident, but that is basically what utilities around the country are arguing — and trying to ‘fix.’ As energy users are increasingly turning to solar to generate their own emission-free power, utilities are responding by trying to get rid of net metering, and change rate structures to impose large fixed charges. The outcome? Less solar. We have long argued that the problem is
not too much solar, nor is it net metering, the policy that is helping customers in 43 states choose sunshine as their energy source. Rather, it’s a utility business model (and perhaps a regulatory paradigm) that needs updating. In this vein, The Department of Energy’s Sunshot Program released a useful new document: Rethinking Standby and Fixed Charges: Regulatory and Rate Design Pathways to Deeper Solar PV Cost Reductions The paper makes a lot of arguments that we’ve been making, with the benefit of having a DOE logo to remove the smell of patchouli oil. The CliffsNotes are as follows:
- Utility arguments on cost shifts often contain a lot of horsemalarkey. Not only do utilities fail to appropriately credit the benefits of solar, but they cherry-pick arguments about cost-shifting to inappropriately discriminate against net-metered solar users. Common rate design practice is to look at a utility’s cost of serving its customers over one year and divide those costs into two categories: ‘fixed’ long-term investments in infrastructure and the like, and ‘variable’ costs that change according to how much electricity is produced and delivered. This short-term snapshot makes fixed costs appear unavoidable, and – the utilities argue – by reducing their utility bill payments, solar customers are by definition not covering as much of those fixed costs as their non-solar counterparts. But of course individual investment in local generation can reduce the need for both fixed and variable costs over a proper time frame. As the Arizona Residential Utility Customer’s Office noted: “Fixed costs are not fixed forever; every cost is variable given the proper time horizon.” It’s time to start treating distributed generation like it’s going to be around for awhile.
Fixed charges have a ‘disproportionately negative and unduly burdensome impact’ on customers who go solar. Instead, a three-pronged approach of 1) decoupling, 2) bare minimum bill that is only assessed if customers buy little to no utility energy, and 3) time-of-use (TOU) rates, phased in gradually to all customers — should keep everything copacetic (that is, both solve for utilities’ revenue requirements and allow solar customers to get appropriate value for their generation) for a long time to come, at least until customer-sided solar reaches ‘significant plurality’ (20-30%) of utility peak load.
It’s really worth a read.