Tuesday, October 8, 2013

Regressive Energy policies

Parker Gallant recently asked"Has our electricity system turned into nothing more than a form of wealth transfer or, perhaps, a regressive tax?"

Ontario isn't the only jurisdiction where the wisdom of programs that transfer wealth from the poorer to the wealthier are being questioned

CA rooftop solar will cost other customers $1 billion per year | CalWatchdog.com
Wealthy rooftop solar homeowners will shift $1.1 billion per year in extra costs onto other electric ratepayers by the year 2020, according to a new study just released by the California Public Utilities Commission...
Net-metered electric customers had 78 percent higher median income than the median California household income.
The CPUC study, “California Net Energy Metering (NEM) Draft Cost Effectiveness Evaluation,” was released Sept. 26.   Net metering is where excess electricity from rooftop solar panels result in rolling a customer’s electric meter backwards. In this case, “net” means what remains after deductions. In a net metering system, property owners received a credit on their electric bill for all the electricity they generate. If they produce more electricity than they consume, they get a credit for excess production.
The CPUC study reports about two-thirds of the transfer of costs onto other customers comes from residential solar customers
The referenced study also notes that residential solar customers in California were, prior to solar panels on Net Energy Metering (NEM) plans, much larger than average users of electricity - California's utilities feature steeply tiered rates by consumption levels

Residential NEM customers who install renewable DG [distributed generation] are larger than the average residential customer.
Because of the utility tiered rate structures, residential NEM customer bills were 54% greater than their cost of service, on average, before the installation of NEM generation
The concerns of utilities, and economists, regarding net metering issues is that the cost of service (COS ...the infrastructure to deliver electricity) has been buried in the electricity rates, which have been set to recover a greater share of the COS from wealthier customers in larger homes.
These customers are the ones grabbing solar panels, so now they are not paying that disproportionate share, and may become subsidized under net metering.

In Ontario, tiered rates were replaced by time-of-use pricing, and that is a regressive pricing policy change.  
In Ontario we don't have net metering but doled out feed-in tariff contracts that were far more blatantly regressive than NEM in transferring wealth from ratepayers without solar panels to far wealthier ratepayers with solar panels.

But hey, we were just copying the Germans

Should Other Nations Follow Germany's Lead On Promoting Solar Power? | Forbes
... this is little more than a forced cash transfer scheme. It’s taking from utilities (who are losing money hand over fist on grid management and pre-existing conventional generation capacity) and from everyone who doesn’t have rooftop panels, and shoveling it into the pockets of everyone who owns or installs panels. Which means it’s both a massive market distortion and a regressive tax on the poor.
This explains why per-capita solar uptake is so high in Germany. The government has engineered a well-intentioned but harmful redistribution system where everyone without solar panels is giving money to people who have them. This is a tax on anyone who doesn’t have a south-facing roof, or who can’t afford the up-front cost, or rents their residence, etc. People on fixed incomes (eg welfare recipients and the elderly) have been hardest hit because the government has made a negligible effort to increase payments to compensate for skyrocketing energy prices.

1 comment:

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