Is Rooftop Solar Subsidized?
I would categorize my opposition to this argument into two general categories:
1. The cost/benefit analysis is complicated, with most studies concluding that rooftop solar provides neither a significant cost nor benefit to non-solar energy customers.
2. If there is a mismatch between fixed costs and usage costs for solar customers, then there is a mismatch for all customers.
Cost/Benefit:
When I first installed solar, I paid $10 a month as a "basic service fee." A year or two ago it was raised to $15 (for everyone, not just solar owners). Recently NV Energy wanted to raise this fee to $45 just for solar owners and the PUCN agreed. They also did away with the one-to-one trade off between energy delivered to the grid and energy received from the grid. Now you buy energy at the retail price but sell it at wholesale. There was significant backlash (and lawsuits in the works) and now NV Energy is recommending that the PUCN grandfather in prior solar customers. If the grandfathering goes through, then I'll be in good shape, but these moves still effectively kill rooftop solar going forward.
I'll admit that maybe the deal was too sweet in the past, but calculating additional costs without admitting any benefits is messy business. Figuring out how much of NV Energy's operating costs go to building/maintaining the grid and how much goes to delivering power seems rather impossible as the two tasks are so intermingled. Plus none of the data that they presented to the PUCN noted that solar delivers power at the precise time of day when NV Energy needs it most. All time-of-use billing schemes aim to transfer usage from the daytime to the evening. The reason being that the power provider needs to build capacity for peak power, even though they run below that capacity most of the time. Solar also helps power companies reach their government mandated renewable energy portfolio targets. Additionally, there is significant line-loss when delivering power, so when I deliver 1 kWh of energy to my neighbor, that offsets more that 1 kWh that NV Energy would have to produce at a power plant.
The bottom line is that the power provider should not be the main source for data that a PUC considers when making decisions on solar agreements.
Fixed/Usage Costs Mismatch:
Even if the cost/benefit analysis were crystal clear and showed that solar was a net cost on non-solar customers, I don't see why they should be singled out for not paying their fair share. If the basic service fee doesn't accurately reflect the power company's fixed costs, why not try to fix this for everyone? If we rework the billing to accurately reflect fixed/usage costs and to keep NV Energy's revenue constant, that would involve raising everyone's basic service fee and lowering everyone's per kWh rate. That means that the current system is over-billing the half of the state that has above average energy usage (since usage billing rates are currently too high) to "subsidize" the half of the state that has below average energy usage. It's pretty clear why power companies and PUCs aren't eager to take on that inequity. Yet a few thousand solar owners are apparently fair game.
With the spread of companies like SolarCity that largely do away with large upfront costs (and the need for federal/state direct subsidies) for rooftop solar, this is going to be a fight that we'll see moving from state to state. As usual, we'll see all parties involved lining up wherever there is the greatest economic/political benefit to themselves (myself obviously included).
Comments
Still, I can't see much of an argument for subsidizing the installation of solar panels. Maybe you could put a price tag on the greenhouse gases that are saved by using solar energy. But, you would have to take into account green house gases associated with producing and shipping the solar panel, and any other environmental impact from the panel, including disposing of the panel when its useful life has expired. The easier solution would be not to subsidize the solar panel, but to tax carbon, if you can figure out the size of the externality associated with carbon--a big if.
You write:
"Figuring out how much of NV Energy's operating costs go to building/maintaining the grid and how much goes to delivering power seems rather impossible as the two tasks are so intermingled."
To me this seems doable. Can't they just separate out grid maintenance from other power generation?
"Plus none of the data that they presented to the PUCN noted that solar delivers power at the precise time of day when NV Energy needs it most."
All other things being equal, prices go up when demand goes up. But then, sometimes costs go down with economies of scale. It could be that the more expensive energy cost-wise is not at peak hours.
Also, Is there any evidence that NV energy "needs" the energy generated during these times? in other words, is there any evidence NV energy cannot meet peak demand without solar panels? If NV energy can meet peak demand, and can produce it at a cost lower than wholesale, then it may be losing money by buying power from individual solar panels.
"If the basic service fee doesn't accurately reflect the power company's fixed costs, why not try to fix this for everyone?"
Most business don't charge their customers fixed costs and variable costs separately. For example, I don't get charged different price at a restaurant based on whether I sit down inside, thereby using up more of the restaurant's fixed costs, and less if I go through the drive through. NV energy, is, of course, not the typical business. Still, probably the case that the basic service fee does not cover NV energy's fixed costs.
And frankly, it seems like it would be appropriate for fixed costs to be divided based on usage. If you use more energy, then perhaps you should be paying for a larger percentage of the fixed costs, but by paying a higher price per kWh.
From what I’ve gathered, this is where the pending lawsuits are focused, on the idea that there was a bait and switch. It’s a bit messy who get help accountable though. The main lawsuit that I’ve read about was going to be filed against NV Energy. But it was the PUCN who actually made the decision, albeit based on data and arguments supplied by NV Energy. In the latest episode of the saga, NV Energy asked the PUCN to grandfather in existing solar customers. PUCN met again and said no, but they extended the phase in period from 4 years to 12 years. I’m guessing this hurts any lawsuits against NV Energy. It also makes me wonder if this was the plan all along when NV Energy asked for grandfathering, but that’s getting into conspiracy theory territory.
I’m not a fan of government getting involved in markets either, and I would be completely fine with them ending the 30% federal tax credit or state-level incentives for upfront costs. But having the government butt out of energy policy isn’t going to happen. They’ve imposed large tariffs on Chinese solar panels. They still give tax breaks to oil and gas companies. Then there’s ethanol. Singling out solar panel owners seems a strange place to start the fight against subsidies. And I’m still not convinced that charging solar panel owners the same basic service rates as other customers should be considered a subsidy.
Let’s look at a simplified scenario (‘cause that’s what we do in physics). There are plenty of solar customers whose systems do not generate more energy than they use. So let’s imagine that they have a small array that offsets 20% of their electrical consumption. Now let’s imagine that their neighbor decides to invest in a high-efficiency air conditioner instead of solar panels, and that their energy consumption is also reduced by 20% (an amount that is entirely feasible, particularly in a climate like that of Las Vegas). Do we now consider both of these homes to be subsidized by the greater population of energy consumers?
The number I’ve heard thrown around for residential solar installations in Nevada is 17,000. If we assume an average size of 3 kW (mine is 5 kW), that would be an aggregate output of 50 MW. A typical coal power plant can generate 10 times that, so no, they don’t need the help from solar panels.
While they’re not providing a significant benefit, several studies agreed residential solar wasn’t a significant burden either (though the PUCN dismissed them as being outdated since they were from 2014).
“If NV energy can meet peak demand, and can produce it at a cost lower than wholesale, then it may be losing money by buying power from individual solar panels.”
In the previous net metering agreement, I was never paid for the excess energy I produced, I was just given credits. There’s a reason retailers are more willing to give store credit than cash payments, because they’re not the same thing. Plus, whatever excess I produce goes right to my neighbors where NV Energy charges the full retail price.
This is an argument for why we shouldn’t rework the cost structure for all consumers, but it’s also an argument for not increasing the rates on solar customers.
It is common wisdom that oil and gas have subsidies, too, in the form of tax breaks, but I'm not sure that is actually true. I looked into it at one point, and the argument was basically that some wells that do not produce can be deducted from taxes immediately, instead of capitalized. But, remembering from my tax class, I think that is neutral principle of tax law. Anyway, I'm not sure on this point. I just have a vague memory that I looked into it at one point and could not find a direct subsidy to oil and gas.
I'm missing your point on fuel efficient cars being subsidized by gas guzzlers.
I'll have some other comments, later.
Re: fuel efficient cars. Solar panel owners buy less energy just like owners of fuel efficient cars buy less gasoline. Yet they are still relying on and benefiting from the entire gasoline delivery infrastructure. I find the situation incredibly similar to rooftop solar. What the PUCN is saying is that a Prius needs to pay an additional $10 surcharge every time they fill up to make up for not paying "their fair share" of the entire cost of having a gasoline industry.
So, I think there's a decent argument for charging solar panel users higher rates than those who simply reduce their consumption because they make more use of the grid. Thus, the solar panel situation is different from your example of a efficient AC unit, because, even if net usage is the same, the solar panel user makes much more use of the grid by pulling from the grid in the dark and putting energy back into the grid during the day.
The fuel efficient car case is basically, the same situation as the AC unit. If the fuel efficient car pulled more gas out of the pump, but generated gas when it wasn't driving, putting it back into the gas station, that would be a better analogy in my opinion. the net gas use would be lower, but the car would be making considerable use of the infrastructure.
Admittedly, you know more about this than me, so I may be missing something.
“I think there's a decent argument for charging solar panel users higher rates than those who simply reduce their consumption because they make more use of the grid.”
Maybe. Yet “using” the grid isn’t the same as using a pair of shoes. Electrons flowing through a wire don’t exactly wear it out. Exposure to the elements would do a lot more to age power lines than running electricity through them. So if you take the grid to be the means of power delivery, it would seem to make sense to divide fixed costs on a head-count basis since the costs are much more linked to installing the infrastructure than to actually using it. Even if that weren’t true, the portion of the grid that a solar panel owner uses more than other people is the 50 feet of wire to their neighbor’s house. If, on the other hand, you take the grid to be the means of power production, then solar customers obviously reduce the peak production capacity needed so they shouldn’t be charged additional fees on that score either.
For those with small arrays who consume most of their production themselves and put very little back into the grid, I think that both the efficient A/C and efficient car analogies are extremely fitting. But I’ll grant that a gas producing car might be a more accurate analogy for many solar panel users who put a significant portion of their production into the grid.
Where this example gets interesting is where you say that the car puts the gas “back into the gas station.” I would say that a more apt description would be that the gas producing car has a gas pump in the trunk for distributing the gas in the owner's own neighborhood and that they open for business at the very time that gas stations are the busiest. The gas producing car (GPC) owner sells to their neighbors at the same price that the gas station charges, and then hands the money over to the gas station in exchange for credits toward future fill-ups at the gas station.
Now the gas station might not like that the GPC owner is going to get a lot of free fill-ups by cashing out their credits, but it would be hard to argue that the GPC owner is imposing an outsized burden on the gasoline delivery infrastructure. They will be filling up less frequently than the average driver (since they consume themselves at least some of the gas they produce) and easing the number of pumps needed at the station by adding an additional pump when pumps are most needed (granted this might be akin to adding one pump in a market with 100,000 pumps).
What the PUCN effectively did was impose a monthly fee to be a GPC owner and decide to make your credits worth only a portion of the amount of gas you distribute to your neighbors (despite the fact that your neighbors are still paying full price for it). Now that might not be the worst business arrangement in the world, similar to paying a monthly franchising fee as well as passing along a portion of your revenue back to the parent company. The main problem lies in the bait-and-switch and the rationale for it.
The gas station offered one arrangement that led to 17,000 people investing in GPCs, then after a few years decided to change the deal such that most GPC owners would never be able to recoup the cost of their car, let alone make a profit from it. Then the gas station claims the decision has nothing to do with the GPCs’ potential to cut into their bottom line, but that they are merely ending a subsidy that was allowing the GPC owners to benefit from gas stations without paying their fair share. That’s some jiggery-pokery if I’ve ever seen any.