Saturday, October 8, 2016

Solar Thoughts

For a few days now I've been trying to express my thoughts on the 4-3 decision by the Provo City Council to implement a new fee on rooftop solar customers. I've responded to a couple of email and talked with several people in person, but I felt overwhelmed each time I sat down and stared at a blank screen to write this blog post.

A "closed" neighborhood Facebook group began discussing this issue and asked me to join in. I found it much easier to respond to specific questions and statement and by the end of the night I found that I touched on most of the aspects that I've wanted to write about. Afterwards, as this topic has come up, I've wanted to point back to what I wrote in that group. So I'm going to highlight some of that conversation here, removing others' identity and editing for clarity: (Actually I did a lot of editing and rearranging to make it flow more logically.)

Resident A Is there something that says how much solar users can expect to pay when this goes in effect?
David Harding $3 per month for each kW of system capacity. This will be waved on the first 2 kW of existing systems and applied to the whole system of new installations. The motion that passed calls for the fee will go into effect on January 1st.
LikeReply2October 5 at 10:48pm


Resident B How are solar customers not participating in the infrastructure fees? My fees have not changed since I've has solar other than a decrease in kw used....
David Harding The sizing of power distribution infrastructure (which determines the cost) is not based on the total energy used (which is measured in kWh), it is based on the peak flow of energy (measured in kW). Peak demand is what determines the capacity of the infrastructure that must be provided.
David Harding Customers with high demand spikes and low overall usage cost a lot to serve and don't generate a lot of revenue to cover those costs. Customers with lower demand (flatter usage, minimal spikes) and high usage don't cost much to serve and generate a lot of revenue. But our current meters can't tell the difference between a high demand and a low demand customer.
David Harding Unless it is coupled with a battery, roof top solar generally doesn't decrease a customers peak demand very much, if at all, but significantly reduces their power usage. If you can follow my poor description, it should become obvious why net metering creates subsidization. The base charge is not sufficient to cover all of the fixed infrastructure costs.
Resident A David Harding Thank you for the information. I'm starting to get a better picture of what's happening. I'm more than happy to pay my share, I just want to be sure that I'm being charged in a sensible, thought-out way.
David Harding Oh, it's definitely thought out. But it doesn't address whether solar has value to the community outside of the power equation. It also doesn't take into account the Council's obligation to customers who made long term investments depending on policies that the Council previously put into place.
Resident A It seems to me that the easy solution is to charge people a flat rate across all customers for infrastructure, and then a separate line item for actual power usage. It sounds like Provo Power doesn't actually know their own infrastructure costs, so this may not be possible.

This fee sounds like this fee is a greedy shot in the dark. Maybe it will help, but at this point it just sounds like they are actively discouraging new solar installs, and punishing people that are trying to be responsible power users.
Resident C Provo Power does not allow people to disconnect from the grid and charges a $600 hook-up fee. Non-solar customers do not pick up that cost. The city buys the power produced at full price and charges full price to the neighbors who use the power produced by solar customers. The credits given to solar customers covering the Google fiber and transportation fees is a flaw in the billing system that can easily be fixed. That inequity is not a product of solar customers but of a poor billing system within the city. If the city council was struggling about balancing fairness they would not target solar customers but change the rate structure so that all of the 24% of Provo power users who don't pay their infrastructure costs would pay their fair share. Mr. Walter laid out a fair rate change in the work session meeting on Tuesday. Looking only at solar customers to make up their infrastructure costs, I believe, was a very unfair thing for the council to do.

Resident A I agree that solar customers should be paying for infrastructure. Absolutely. But if the council is looking for equity, that charge needs to be split evenly. Targeting solar customers doesn't seem equitable.
Resident D As I understand it....solar customers are not participating in the infrastructure costs...yet they are utilizing the infrastructure.
Resident A Resident D So, I'm back to my original proposal: A flat infrastructure charge for all customers. Whether you use solar or not. Whether your solar covers all your usage or not. Then, after that line item, a separate charge for the actual power used. That would be my idea of equitable.
Resident D I think that would be most transparent. And I think Solar should pay separately for the Transportation Utility Fee and Fiber infrastructure.
Resident A Resident D Yeah. I agree with that totally.
Resident E A *huge* step in the right direction here would be to address the larger iniquities in the system. It's the fact that solar is being singled out that is most upsetting. Fix the structural problem in how infrastructure costs are split between users *first*; then address the unique challenges of solar.
Resident F Maybe it should be transparent in the bills and delineate the infrastructure.
David Harding Raising the base charge is an option. Currently the base charge that everyone pays covers only a third of the infrastructure costs, and less than a quarter of all fixed costs (which include infrastructure). Raising the base charge to cover more of the fixed costs would be matched with a reduction in the electrical usage rate ($/kWh) to make it revenue neutral. It is estimated that raising the base charge to even cover just the infrastructure costs would raise the bills on 15,000 customers (others would see their bills reduced).

The 24% number assumes that the fixed costs are split equally across all users. Some users place more demand on the system than others (based on peak demand, not total energy used) and are more costly to serve than those who put less demand on the system. A demand-based distribution of fixed costs is much more reflective of the cost to provide power to that customer. We just don't have the ability to measure demand at individual residences...yet.

It should be noted that such a change would also make roof-top solar less financially attractive to the solar customer, probably much more so than the $3/kW-mo capacity fee.

Resident E The fee will scale based on the size of their array, despite this supposedly being put in place to account for fixed infrastructure costs.
David Harding The intent was to address more than the fixed costs, part of our power bill goes to fund the general operations of the city. Larger solar systems avoid more of these charges, but with the solar capacity charge more is recouped. Keep in mind that the $3/mo-kWh fee doesn't remove all of the subsidy (but it may be enough to remove all of the potential return on investment).
Resident D I also don't think that Solar customer should be exempt from paying the Fiber and the Road fees as a separate line item.
UnlikeReply2October 5 at 9:59pmEdited
David Harding In the name of transparency, I like Larry Walter's idea to pull the "General Fund Transfer" portion out into it's own line. This would open up a new option, once we have the smart meters in place, to calculate the general fund transfer portion for all customers based on their gross usage rather than net usage.
Resident B  Can you help explain to those of us who have solar, who were under the impression that we could have solar for free of a fee penalty living in Provo, are now subject to a monthly fee? It takes about 10 years to pay off the panels without any type of usage fee. This fee rate week destroy any type of solar progression in Provo and seems to contradict the $2000 state incentive for solar purchase. The city of Provo is now working against our awesome governor's pro-clean energy push.
Resident B The biggest frustration is in that when i called Provo City power last fall it was made clear to me that Provo city was not planning on placing any fee. I would have never purchased solar in a city with a grid fee, the savings do not add up.
LikeReplyOctober 5 at 10:11pm


Resident D I may just be guessing here...but what IF Solar is the unknown and they just wrapped their heads around recent data and are now trying to address the problem...then they wouldn't actually be singling out Solar. It certainly seems like there is a lot more to discuss surrounding this issue.
David Harding I appreciate your calm approach, Resident D, seeking for understanding. But I think we should have addressed the problem going forward, not retroactively.













Resident G I feel like those that already have solar power should be grandfathered out or at a minimum be phased in. I know I made my decision to go solar based on numbers that did not include the city adding additional fees. This has only made more of us want to go completely off grid as soon as possible. Won't the city lose more money if they no longer have us tied into the grid or are they hoping this pushes more people to go off grid?
Resident H I will seriously be considering batteries now and might also completely get off the grid. Unfortunately batteries aren't quite there yet. But with the Gigafactory coming online soon things will change very soon and I think it will be much easier to get fully off the grid.
Resident D I absolutely understand that perspective.
Resident E I'm not even sure that it's legal to be off grid. Will new construction pass inspection without an electrical hookup?
David Harding I have high hopes for what becomes possible when we align our electrical rate structure with the cost to provide electrical service. We will need to wait until we have the smart meters in place, but that will be coming very soon. With things like demand-based fees (this is how commercial customers are currently charged) and time-of-day pricing, technologies like batteries (with and without attached solar) can become very financially advantageous -- for both the customer and the publicly owned power utility!
David Harding

Write a reply...
Resident H I still don't understand why this solar tax got put in place before the smart meters. Cart before the horse here. We know the smart meters will provide some very good detailed data on usage. Could we really not have waited to get some good data from the smart meters before throwing new taxes out? Once that data is out there and can be analytically instead of emotionally driven then I think more people could get behind change. They did spend time talking about how the Smart meters that have already been budgeted for will be installed soon so that they can monitor actual usage. Could we not have waited to get good solid data before pulling the trigger on this decision?
David Harding The urgency that I felt on this issue is due to the drop in solar installation costs and the related increasing rate in solar adoption. Net metering was put in place when solar was so expensive that only people willing to lose a significant amount of money would install solar, and net metering was a way to take the edge off. Now new solar installation (*may*) pay for themselves over their lifetime and even provide a return on the investment (but only because of a subsidization that is far greater than the ROI for the customer). People are upset (myself included) that solar customers who already have their systems, were not grandfathered. The number of current solar customers is small and grandfathering would not have been a significant cost (relatively speaking). But if we waited another 18 months the number of solar customers could have quadrupled, making it much more difficult to grandfather.

My preference would have been to grandfather current solar customers and place a moratorium on new net-metering contracts. After the new meters are installed and we have a coherent rate structure, new potential solar customers would be able to make an informed decision.
Resident D I wish they would have studied for a couple more weeks.
Resident E Solar users are very cost conscious individuals. Remember these are people that are investing thousands in technologies with a rough payoff of 10 years or more in the future. They are committed, stable, responsible members of the community. They are al...See More
Resident H I cannot like this comment enough.
Resident D I totally know these solar users and they are the cream of the crop...and my beloved neighbors. So how would you create equity?
Resident E At the magnitude of the deficit under question, equity shouldn't be the first priority. Build trust and dialog first. The city can afford a few more years to work this out, study other cities, and find good solutions.

I don't have solar now, but I'm building a new home soon and Provo's solar-friendly policy had encouraged me to consider installing solar. Now I'm nervous about the prospect - not because of this specific fee, but because of the apparent knee-jerk implementation of it. What other fees are going to come down the line?

At the very least, existing solar users should have been grandfathered in. Now all of a sudden there is a lot of uncertainty about how the city will act in the future.
David Harding

Resident H It was a sad day that Provo implemented this tax on solar customers. Such a step backwards for this great area. It really hurts.

Resident A The City Council doesn't seem to think there's more to discuss. If they did, they would be talking, not creating fees that don't make sense.
Resident D Well there are options.
Resident D The Council moves by 4 votes.
David Harding And we lost the vote to grandfather current solar customers by a 3-4 margin.
David Harding

Write a reply...
Resident H It's time for me to tap out of this conversation. The council made a choice that I and many others disagree with. It's done, move on. Just remember next time it's time to vote.
David Harding I'm not yet ready to move-on on this one.
Resident C I think that if the discussion continues, in the end we can work out a good and balanced ordinance that most people can agree upon
David Harding Resident C, but all sides need to be willing to learn, understand, and seek for the best interests of everyone involved.

9 comments:

  1. All this conversation assumes that solar is a net cost. Why didn't the council insist on a cost/benefit analysis instead of just a cost analysis? I can find 8 studies from states across the country that conclude the opposite of what Provo has been claiming - solar adds value. What say you?

    For instance, a review of 11 net metering studies by Environment America Research and Policy Center has found that distributed solar offers net benefits to the entire electric grid through reduced capital investment costs, avoided energy costs, and reduced environmental compliance costs. Eight of the 11 studies found the value of solar energy to be higher than the average local residential retail electricity rate: The median value of solar power across all 11 studies was nearly 17 cents per unit, compared to the nation’s average retail electricity rate of about 12 cents per unit.

    A 2015 cost-benefit study of net metering in Missouri by the Missouri Energy Initiative found that even accounting for increased utility administrative costs and the shifting of some fixed expenses, net metering is a net benefit for all customers regardless of whether they have rooftop solar. The study used values for two kinds of costs and two benefits and concluded that net metering’s “net effect” is positive. The typical solar owner pays only 20 percent less in fixed grid costs and costs the utility an estimated $187 per interconnection. Meanwhile, solar owners benefit the system through reduced emissions and energy costs.

    Likewise, a study by Acadia Center found the value of solar to exceed 22 cents per kWh of value for Massachusetts ratepayers through reduced energy and infrastructure costs, lower fuel prices, and lowering the cost of compliance with the Commonwealth’s greenhouse gas requirements. This value was estimated to exceed the retail rate provided through net metering.

    In yet another study, researchers at the University at Albany, George Washington University, and Clean Power Research have found that solar installations in New York deliver between 15 and 40 cents per kWh to ratepayers. The study noted that these numbers provide economic justification for the existence of incentives that transfer value from those who benefit from solar electric generation to those who invest in solar electric generation.

    Regulators and utilities need to engage in a broader and more honest conversation about how to integrate distributed-generation technologies into the grid nationwide, with an eye toward instituting a fair utility-cost recovery strategy that does not pose significant challenges to solar adoption.

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    1. What say I? Two things: First, you can find studies finding anything you want to find on any hot topic. Second, this is due, in part, to the difficulty in quantifying the value of non-monetary things. What is the value of clean air (in 2016, non-inflation adjusted dollars)? How much is reducing our fossil-fuel carbon emissions worth? It is difficult to convert values into monetary value, and the number selected will have a large impact on "findings" of these studies. It's easy to say that clean air is priceless, but when applied to these studies, that statement would justify the cessation of nearly all human activity.

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    2. Thanks for your interest in the topic. I did not get an answer to the question however. Let me try again: When so many studies show value of Solar as a community investment, why do you think the UMPA consultant only talked about how to set rates to maintain a profit?

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    3. Here is my study of the value of a hamburger: If I was starving in the middle of the ocean and needed to hold on for one more day to be rescued, I would be willing to pay at least $12 for one. Therefore, hamburgers are worth $12, even though I can buy one for $2 from a fast food joint.


      Many studies show a large value for roof-top solar because they are looking for a large value. They find that value by assigning a value to non-monetary, external benefits of solar (see my previous reply).

      Finding the "value of solar" was outside the scope of the Cost of Service study. If you dive deeply into the report you will see that the consultant was very clear that rates and rate structures are set based on public policy, which should be informed by the cost of service, but also by the community values.

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  2. Demand usage may not be here yet, but size of service is. The infrastructure cost line item could be based on size of service until demand usage meters are installed.

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    1. Interesting idea. So people would be charged based on the size of the meter that they are connected to? Or the capacity of their electrical panel? We recently changed the sewer base rates on commercial customers to be based on the size of their water line going into their facility.

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  3. Would this 'infrastructure cost line item' be assigned to all users? Non- solar customers might need a higher charge because they 'demand' all the time. Solar customers do not demand all the time, they add back much of the time. If you think about how much each type of customer is 'on the grid', maybe attention should be paid to the customer group who is 'putting wear and tear' on the infrastructure 100% of the time....I am hoping you see this as a ridiculous idea, since it is. To focus on this idea of COST all the time masks the value that solar customers ADD BACK. I cannot wrap my arms around why solar generation is not seen as a positive, as adding to the amount of clean power that is available, of reducing loads or rolling brown outs. Are the utilities throwing so much COST info out there that they are training us not to keep our eye on the ball? (Solar customers invested money that the utility does not have to. I could go on...)

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    1. Let me keep to the water analogy from the last comment. Imagine a small farm that uses drip irrigation that runs 24/7 and a fire hose manufacturer who randomly tests one hose a month for quality assurance. Imagine that they both use the same amount of water each month, but the farm can be served by a 1" water line whereas the manufacturer needs an 8" water line to provide enough flow to test the hose. The overall water usage is the same, but the demand of the manufacturer is much greater. It should be obvious that the manufacturer costs much more in infrastructure to serve. The wear and tear on the 1" water lines from continual usage really doesn't compare to the cost of providing the infrastructure to deliever a large flow of water to the manurfacturer when it is needed.

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  4. The weakness in the analogy is that the manufacturer adds value to the system when there is a fire and the hoses full of water are needed. The investment pays off when there is a fire. A calculation to consider the value should be part of the computation. Admittedly complex, it can not be ignored. Similarly, the value of added electricity by Distributed Solar Producers should not be left out of the conversation as it is in Berg's 'study'. It is the difference between a 'cost analysis' (Berg's one sided approach) and a 'cost/benefit study' (a more balanced approach which would take into consideration the complication presented by many distributed solar generators.)

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