Tuesday, November 12, 2013

Rate design wars are the sound of utilities taking residential PV seriously

"Imagine walking into your supermarket with a bag of zucchini"

So begins an article by Severin Borenstein on the challenges of integrating residential solar PV output in California's context - with lessons applicable to many other jurisdictions.

Rate design wars are the sound of utilities taking residential PV seriously | Energy Economics Exchange:
...real panic in the industry has set in this year as the net-of-subsidy cost of PV has dropped below even the average retail price. Even if increasing-block pricing were eliminated and the big IOUs sold all residential power for their average price of about $0.17/kWh, solar PV could beat that for many customers. According to a recent report from Lawrence Berkeley Lab (and confirmed by other industry studies and media reports), the full cost of a typical residential system has fallen below $6/watt and may be below $5/watt by now, which corresponds to $0.25-$0.30/kWh. The 30% federal tax credit and what’s left of the California Solar Initiative subsidies cuts that by about a third. A less well-known tax effect – accelerated depreciation for leased systems – transfers another 15%-20% of the cost from the end-user to the federal government. The net cost to the consumer can now be $0.15/kWh or less.
This is why we are hearing more often the phrase “death spiral” from the utilities. If many customers act on the attractive economics of PV at home, the utility sells less energy and earns less above marginal cost to cover those costs of past sunk mistakes and ongoing fixed costs. To make up the revenue, they would have to raise rates, which makes the economics of PV even better.

So, the utilities are now desperately pushing for tariff changes that a few years ago they saw as only a distant dream. Not only do they want to eliminate increasing-block pricing, they want to further reduce the incremental energy price by implementing a fixed monthly charge on each customer, aimed at covering some of the costs of retail distribution, metering and billing. Most economists support such changes as they move electricity pricing towards a more cost-based system. In fact, the large publicly-owned utilities – Sacramento (SMUD) and Los Angeles (LADWP) – already have the tariff design the IOUs are now fighting for. SMUD’s fixed monthly charge is $13, going up to $20 in a few years.
Not surprisingly, solar advocates love IBP and hate fixed monthly charges. 
For Ontarians, it should be disturbing that they have such a feeble level of discourse on the important issues being raised, especially as various reports have Ontario as the third or fourth highest solar capacity jurisdiction in North America (behind far sunnier climates with far lower costs).
In Germany, they’ve gone with feed-in tariffs for solar PV instead – a direct subsidy for every kWh of energy coming from your PV system. Much simpler, and allows a reasoned debate on tariff design apart from solar PV policy. But also makes it easier to see how much they are paying people to eat zucchini, and how that is driving up the bills of the people who prefer carrots (as made clear in a recent article in the center/left magazine Spiegel).
It is only recently material appeared in Ontario to provide any real indication of how much Ontario's ratepayers were burdened by the wealth transfer that is Ontario's feed-in tariff program.


Blame solar for sky-high Ontario power bills by Bruce Sharp

Sun-burned: Winter Electricity Rate Hike likely a record

I do show some estimates on the Supply Costs page of my data site (see first, "data", tab of embedded Monthly_LUEC spreadsheet)

1 comment:

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