Why electricity utilities are running scared of residential solar.

The Edison Electric Institute (IEE) recently published a report discussing the Financial Implications and Strategic Response to a Changing Retail Electric Business.  It highlights the industries concerns with renewable residential energy impacting their ability to sustain current business and financial models.

From a utility’s point of view, every generated kilowatt of rooftop solar power is a kilowatt of reduced demand for the utility’s product.

Initially Arizona utilities went along with the governments target energy reduction programs by supporting large rebates to customers who wanted to place solar generators on their roofs.  In 2010 they were providing rebates of $3000 per kilowatt, but in 2013 those rebates are now down to $100 per kilowatt a 97% reduction and a system price increase to the homeowner of over 50% even though solar panel costs have dropped significantly.

They still capture your utility bills “environmental benefits charge” of around $220M a year, but are using this money to build solar and wind central generating projects and not residential distributed solar resources; however, they still meet government guidelines.

Energy efficiency or green building poses many of the same threats to utilities.  If energy use declines, rates rise to cover the difference. Recently APS justified a price increase based on limited solar adoption they claim had reduced energy volume and revenue and they needed a price increase to sustain current infrastructure.  This will continue if more people adopt solar believing that their energy costs will go down.

As homeowners adopt solar, it raises utility costs on other ratepayers. This increases the attractiveness of solar, so more adopt it.  Not surprisingly, the EEI short-term recommendations mostly amount to making rooftop solar customers pay more. First, EEI wants all power bills to include a flat charge for fixed costs, which would apply to all grid-connected customers. That would insure a minimum contribution from everyone. Second, they want solar customers charged for the services the grid provides them: “off-peak service, back-up interruptible service, and the pathway to sell [distributed energy resources] to the utility or other energy supply providers.” And third, it wants net-metering programs revised to pay solar customers only the going market rate, not a higher subsidized rate.

All these measures would have the same effect: reduce the economic incentives for rooftop solar and thus slow its adoption. One other issue that needs considering is that the Arizona electrical bill tax revenues approach $450M a year and I am sure they don’t want that to go down.

For more information contact Paul Scrivens www.greenhomeenergyadvisors.com

The EEI report: http://www.eei.org/ourissues/finance/Documents/disruptivechallenges.pdf

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