Sides Sizzling Over Fair Value of Solar Energy
PUC Grapples To Determine Fair Value
As rooftop solar panels become more practical and economical, three organizations are struggling to determine the fair value of electricity produced by those panels.
In most cases, residential solar panels produce more power than needed. Excess electricity is routed back into the main network, known as the grid. Since Colorado voters were the first in the country to approve a Renewable Energy Standard Act (RESA) in 2004, utility customers can be paid for the power they produce with home solar systems. The credit to customers is a principle called “net metering.”
The Sierra Club is resisting a proposal by Xcel Energy to significantly reduce the credit solar producers. The Colorado Public Utilities Commission (PUC) has called for an independent review of net metering.
“This is a battle over the right of individuals to produce their own electricity,” says James Liudl of the Rocky Mountain Chapter of the Sierra Club. “Xcel proposes cutting net metering credit in half, while using ratepayer money to support those payments, and asking the PUC to redefine what the utility pays a supplier.”
In a statement, Minneapolis-based Xcel Energy claims there is a “hidden subsidy” in rooftop solar. According to the utility, “net metering shifts the costs to maintain the grid away from solar panel owners to non-solar customers, even though solar panel owners still regularly use the grid.”
Terry Bote of the PUC says the commission has no position yet, and is in the “information gathering” stage of establishing rules on net metering. The commission set up a series of workshops involving solar industry and utility representatives.
After a third meeting on Dec. 1 to find out how other states deal with net metering, commissioners will see how they want to proceed. Bote says net metering could either go through rulemaking or litigated procedures. The commission is still accepting written comment from the general public.
30,000 customers submitted comments
The PUC is examining an Xcel proposal consisting of three elements:
• Cut the credit paid to its customers for net-metered solar from 10.5 cents per Kilowatt Hour to 4.6-cents per KwH
• Take half of a ratepayer funded account – established by the RESA to develop renewable energy – and use the fund to recover credits to customers for net-metered solar
• Change the definition of a “credit” to an “incentive”
Liudl says Xcel proposed the credit reduction after an “internal study,” the methodology of which “was neither reviewed by the Colorado Public Utility Commission or any independent source.” He says 30,000 Colorado Xcel customers submitted comments rejecting the utility’s proposal. After the first two PUC workshops, the power company revised its net metering credit to 8.0 cents per KwH.
Residential customers in Colorado pay an average of 12.3 cents per KwH, regardless of source.
“Proponents of net metering, putting forth a study by energy consultant Crossborder Energy, determined the (solar) value at 18-cents per KwH,” says Liudl. “Using a method developed by the National Renewable Energy Laboratory, Crossborder shows Xcel either undervalues or does not value at all, 11 of 14 factors of grid-connected solar value. The process shows a need to accurately determine that value.”
In its statement, Xcel maintains the utility “believes solar panel users should be fairly compensated … but we also believe solar users should pay their fair share of the grid when the sun doesn’t shine or they use the grid to distribute the energy they sell back.”
Xcel goes on to say, “The criticism is coming from those in the (solar) industry who have marketed their offerings based on net metering. If net metering changes they (critics) worry they will lose revenue.”
Saving $13.6 million a year
Sierra Club’s Luidl says it’s inaccurate for utilities to claim that net metering customers are taking advantage of the grid.
“(This argument) ignores the fact that net metering customers aren’t using the grid while they use their own power—even though Xcel included those KwH as a cost in their calculations,” he said. “Also, when not using solar, these same customers pay for electricity just like everyone else. When electricity is put back onto the system, it doesn’t go to a power plant for redistribution. It flows to the nearest household and is resold at the full retail rate.”
Luidl also counters the claim that economically disadvantaged customers can’t afford rooftop solar, and the grid cost unfairly burdens lower income communities.
“Crossborder’s study points out that solar actually saves Colorado ratepayers $13.6 million per year,” he said. “Solar companies such as SunRun and Solar City offer financing and leasing to offset the up front cost. Non-profit groups such as GRID Alternatives have been helping thousands of low-income families to afford solar.”
According to Xcel, “we need to consider the impact on all energy customers … and we will serve customers most effectively with large-scale systems that can offer solar to the greatest number of people at a far more affordable price.”
‘The process must be transparent’
Forty-three states currently have net-metering programs. At least 10 states are examining those programs. Nevada recently adopted rules to double the number of homes that can participate.
Solar advocates point out that the Nevada Public Utilities Commission identified three factors in valuing net metering fairly:
• The process must be transparent, with all stake holders aware of all factors and methodology used to determine value;
• There must be a cost/benefit analysis of the value; and,
• The analysis must be reviewed by an independent third party, and the utility is not considered one of them.
“Because Xcel is a public utility, the public has the right to determine how and at what price energy is delivered,” Luidl said. “Systems such as rooftop solar provide cheap, clean energy. Public utilities must adapt their business models to the changing needs of the customers, not the other way around.”
The Sierra Club does have a direct stake in the outcome of net metering policy. The environmental organization partners with Sungevity to promote solar panel usage across the country. For every Sierra Club member who buys solar panels through Sungevity, the environmental group gets $750 for a local chapter.
More information on Xcel Energy’s net metering position is at: https://www.xcelenergy.com/Environment/Renewable_Energy/Solar/Q&A/Net_Metering_Q&A
Solar/Q&A/Net_Metering_Q&A