Schwarzenegger: Solar Panels on 1M Roofs in Calif. That Win Is Now Under Threat
nytimes.com
nytimes.com
This is a crazy proposal
Net-metering with no grid connection fees were a subsidy put in place in the 70’s to encourage solar adoption but it will soon hit a tipping point where electrical rates will need to rise as more people “opt-in” to the subsidy. As rates rise more people will opt-in to the subsidy causing rates to rise further eventually entering a death spiral.
More installed solar means that the demand curve in a region is going to be more volatile which means that more peaker plants will need to be built operating at lower capacity. This will mean higher electricity costs during high demand times when the sun doesn’t shine. Homeowners are currently getting paid retail rates for power during times when the market rate for power is zero.
To counter this rooftop solar owners are going to need to pay for the cost of their backup power and/or receive market rates for their power.
Yes, as more and more power is generated by solar there will naturally be a shift from baseload to peaker plants, and peakers have higher costs per kwh than baseload, but you are generating a lot fewer kwh with those peaker plants, so overall cost is still low. Net-metering also has benefits like reducing the strain on the distribution system and decreased losses due to transmission, which actually makes the system a net gain for all parties.
Power companies complaining about net-metering is just nefarious accounting. If they stop net-metering, they still get all the benefits - they can still sell your excess electricity to your neighbors, their maintenance costs still go down - but they don't have to compensate rooftop solar owners with account credits anymore, so they can have their cake and eat it too. It's wealth transfer from middle class households to monopolistic corporations that directly discourages emission reduction.
From the neighbor’s perspective who is paying for the grid the rooftop solar is just another power company. A commercial solar provider is offering to sell solar power at average costs of $0.06 per KWH while the solar rooftop owner is offering to sell it at multiples of wholesale. In addition the rooftop solar owner wants long term guaranteed price contracts to deliver power to the grid whenever it is convenient. Nobody would agree to that arrangement.
Rooftop solar owners are currently heavily subsidized and if they weren’t they’d just disconnect from the grid and it wouldn’t be a debate.
The rooftop owner is offering to sell electricity for exactly the same rate that their neighbors are purchasing it at. When you buy electricity from the electric company, they are doing the work of going to the wholesaler, making the contract to get some basic amount of capacity, setting up all the distribution infrastructure to get it from the wholesaler to you, etc. That is value added, and the retail rate is marked up accordingly. When rooftop owners pump electricity into the grid, the electric company isn't doing any work, they're not adding any value, they don't profit directly from the affair but they have no reason to. They do, nevertheless, save money on reduced maintenance expenses.
Everyone in this scenario is coming out ahead, but no one is subsidizing anyone else. Everyone is better off simply for the more efficient utilization of resources. The rooftop owners aren't paying to burn gas during the day, the electric company isn't paying to pump large amounts of power where they don't need to, and non-rooftop owners are buying power that is in lower demand. Win-win-win.
A rooftop solar owner under net metering has zero costs or risks outside of capital depreciation but still sells electricity to the grid at full retail price.
There is no obligation to provide the neighbor with power during high demand times when power is more expensive. No costs to build or maintain the grid. No costs to bill your neighbor. No risk if he doesn’t pay. No obligation to extend power to distant communities over rocky terrain.
These costs and risks are non-trivial and in California represent more than two-thirds of retail cost of electricity. Costs for solar installations are dropping while other cost are rising. What the grid needs now is not more solar installations but very capital intensive investments in energy storage and more robust distribution systems. Renewables aren’t going to decrease the cost of the grid but likely increase it as power will need to be able to be distributed across states to compensate for a rainy day in So-Cal. The rooftop solar installations in So-Cal with excess power doesn’t compensate for the more power demand from No-Cal is there is no way to move power between them.
Net-metering is paying a rooftop solar owner well in excess of the value of the electricity produced. No free agent in the market would ever buy power at retail rates. There is nothing special about the electrons coming from a rooftop solar installation versus a commercial solar installation a mile away but the rooftop solar owner gets paid 5x the price for those electrons. If there is anything special about them is it the commercial solar plant because it can distribute its power beyond the step down transformer at the end of the block which is as far as the rooftop solar owners power can be distributed.
Paying the rooftop solar owner in excess of market rates is a subsidy. Win for rooftop solar and lose for every other participant.
For the electric company, a rooftop solar panel is a source of electricity with no capital cost of generation, no fuel costs, no depreciation, no maintenance, no variable pricing, and no new billing and collections, no additional risk of non-payment, and no additional compliance burdens - it's free.
> A rooftop solar owner under net metering has zero costs or risks outside of capital depreciation but still sells electricity to the grid at full retail price
A rooftop solar owner gets a credit on their own account for what they would have paid for the electricity they provide, so it looks like they are getting paid retail rate, but this is fictitious. Let's say I buy 10 bottles of water wholesale for a dollar a piece ($10 total), then I retail them to you for 2 dollars a piece ($20 total); I'm currently up $10. You sell me back 5 water bottles at 2 dollars a piece ($10 total); I now have $0 in cash, but I have 5 perfectly good water bottles. I am in exactly the same position I would be in if I had only sold you 5 water bottles to begin with. Now I retail my remaining 5 water bottles to someone else for $2 each; overall I'm still up $10. I haven't subsidized you nor has anybody lost anything. Every customer has paid the same price for what they actually consumed, and I have made the same profit off of my wares.
Likewise, ff the electricity company purchases a kwh for 5 cents and retails it to you for 11 cents, then credits you back 11 cents if you give them a kwh, that kwh only cost them the initial 5 cents, and is ready to be retailed.
No one has ever claimed that rooftop solar is the be all end all silver bullet to fix every issue with power generation. It doesn't need to be. More rooftop installations which the electricity company isn't paying for don't inhibit investment in energy storage and robust distribution systems. But rooftop solar decreases emissions, reduces grid demand in turn reducing stress on the grid, locates power generation much closer to power consumption reducing transmission losses, and overall increases the available supply of electricity. If you live in the environment or have an electric bill, all of those things are beneficial to you.
Except that the price of water varies based on the season and you are obligated to sell water at a fixed price when it is convenient for the buyer and buy water back at the same time when it is also convenient for the buyer (duck curve).
Over the course of a season the buyer has stated that his intention is to buy as much as he sells and be net-zero every season but refuses to store even a single bottle of water (e.g. batteries). The buyer would be very upset if water always be available at any time of the day or night in reasonable quantities. The buyer doesn't want to pay any costs for bottling (peaker plants, hydro), storage (batteries, pumped hydro) or water distribution (grid).
The buyer has a habit of buying water when there is a drought and it is expensive and sell it back to you when there is a flood and water is cheap. The buyer doesn't want to change his lifestyle so that his water usage was more in-line with with the seasons (e.g. smart thermostats, lifestyle changes). The buyer has zero incentive to reduce his overall usage below current levels.
You are expected to sell water on credit and track and collect from buyers every month (billing) but the buyer doesn't believe that he should have to pay for that for that because you have to do it anyway. Sometimes you don't get paid but the buyer wants to be guaranteed he will be paid even when you don't get paid (credit risk).
Your suppliers are being mandated to reduce the amount of waters being pulled from aquifers (fossil fuels) and are saying that the cost of water during droughts will likely rise over the next 20 years. In addition we'll likely see more floods and expect that prices of water during a flood may go negative so you expect based on his habits that your buyer will lose you more money then in the past.
The trucks you use to move water around are old and have caused accidents due to poor maintenance (fires) and need to be replaced with more expensive models (buried cable). Nobody wants you to build warehouses since the 50's (hydro) because they are ugly and all good land for warehouse has been used but you are running out of warehouse space. This is leading to scenarios where entire communities haven't been able to get water and people have died.
The relationship with this buyer is massively one-sided and a money losing proposition. You have been sued because of the accidents and have gone into bankruptcy. Your buyer is a middle-class home owner and when you talk to him about the challenges he doesn't want the relationship to change and he expects that he won't pay more over the next 20 years. Costs for other buyers have roughly doubled in the last 10 years and are on average poorer then your homeowner.
Everything happens instantaneously. The same moment the buyer returns 5 water bottles, they are purchased by another. The credit that one receives receives is for exactly the amount the other buyer pays, and they cancel out. It is as if the sale was always to the second buyer to begin with.
> Over the course of a season the buyer has stated that his intention is to buy as much as he sells and be net-zero every season but refuses to store even a single bottle of water (e.g. batteries). The buyer would be very upset if water always be available at any time of the day or night in reasonable quantities. The buyer doesn't want to pay any costs for bottling (peaker plants, hydro), storage (batteries, pumped hydro) or water distribution (grid).
There is nothing to bottle, the water is still in the same bottle it was purchased in. There is nothing to store, the water is produced and consumed instantaneously. The distribution is paid for by the second buyer who purchases it.
> The buyer has a habit of buying water when there is a drought and it is expensive and sell it back to you when there is a flood and water is cheap. The buyer doesn't want to change his lifestyle so that his water usage was more in-line with with the seasons (e.g. smart thermostats, lifestyle changes). The buyer has zero incentive to reduce his overall usage below current levels.
When the buyer's well dries up they go into town to purchase water from someone else. They are paying the same price as everyone else purchasing water during the drought.
> You are expected to sell water on credit and track and collect from buyers every month (billing) but the buyer doesn't believe that he should have to pay for that for that because you have to do it anyway. Sometimes you don't get paid but the buyer wants to be guaranteed he will be paid even when you don't get paid (credit risk).
The buyer does sell their water on credit, but to only one customer: you. They accept the credit risk that they may not be paid, but the odds of the water salesman defaulting are much lower than a random water buyer. Should you go under, the credits you gave them to their account become worthless.
> Your suppliers are being mandated to reduce the amount of waters being pulled from aquifers (fossil fuels) and are saying that the cost of water during droughts will likely rise over the next 20 years. In addition we'll likely see more floods and expect that prices of water during a flood may go negative so you expect based on his habits that your buyer will lose you more money then in the past.
Your buyer provides you with a source of water that doesn't come from the aquifers, and you're the one who hasn't invested in any way to store water from the flood
> The trucks you use to move water around are old and have caused accidents due to poor maintenance (fires) and need to be replaced with more expensive models (buried cable). Nobody wants you to build warehouses since the 50's (hydro) because they are ugly and all good land for warehouse has been used but you are running out of warehouse space. This is leading to scenarios where entire communities haven't been able to get water and people have died.
Luckily since there are more sources of water and they are closer to the buyers, the water trucks don't have to be driven as far, and don't need to carry as much water.
> The relationship with this buyer is massively one-sided and a money losing proposition. You have been sued because of the accidents and have gone into bankruptcy. Your buyer is a middle-class home owner and when you talk to him about the challenges he doesn't want the relationship to change and he expects that he won't pay more over the next 20 years. Costs for other buyers have roughly doubled in the last 10 years and are on average poorer then your homeowner.
The relationship with the buyer is indeed massively one sided. You determine the water prices, they can only sell to you, the can only sell water in exchange for the possibility of purchasing water in the future, you can afford as many lawyers as you like, the king has decreed that you are entitled to a guaranteed profit on your water, and no matter what you do the people need a water supply so you will not be allowed to fail. If the water buyer with his little well has to pay the same rising prices as everyone else for the water he purchases, and if he doesn't like it he can die in the desert.