There has been quite a bit of discussion about rooftop solar [and net energy metering -- Ed.] lately in this journal, as well as in other news outlets. Unfortunately, not all of the discussions have set the right context around this important issue, and as a result there seems to be a fair amount of confusion. I’d like to set the record straight.
First, some facts:
- Pacific Gas and Electric (PG&E) already delivers some of the nation’s cleanest electric power. More than half of the electricity we provide to our customers comes from sources that are renewable and/or emit no greenhouse gases. PG&E has the honor of serving 5 percent of the U.S. population, but emits less than one percent of the greenhouse gas emissions associated with the electricity sector. We are a partner with many of the state’s environmental organizations in fighting climate change (PG&E was the first investor-owned utility to support California’s Global Warming Solutions Act -- AB 32).
- Our mix is getting even cleaner, as PG&E is well positioned to meet the state’s renewable energy goal of 33 percent by 2020 -- one of the most ambitious in the U.S. Currently, we have more than 4,500 megawatts of solar power under contract. We project that two-fifths of our renewable power mix will come from solar power by the end of the decade. That will represent about 13 percent of our total power supply.
- That doesn’t count the significant penetration of rooftop solar installed by our customers to meet their energy needs. These projects don’t count toward the state’s renewable energy goal, and they are quite a bit more expensive than the ones that do. But they represent an important form of choice for our customers who are in a position to take advantage of it. In fact, PG&E has more rooftop solar customer installations than any utility in the nation. More than 68,000 PG&E customers now have solar, representing about 30 percent of all rooftop solar units in the country. And the amount is growing at a rate of more than 1,000 systems per month.
- As part of our ongoing commitment to delivering more clean energy, we are dedicated to managing the increased costs to our customers. The state’s investor-owned utilities, including PG&E, do not earn higher profits by selling more electricity. Through a process called “decoupling,” the return on the capital that we invest in system infrastructure is separated from the amount of gas and electricity we sell. The costs of service are passed on directly to customers, which means that all customers should share equally in the costs of maintaining the grid and other elements of the electric system that allow it to do its job, as well as in the significant costs of the various programs and/or energy sources that contribute to our clean energy mix.
It is against this background that PG&E evaluates issues such as incentives for rooftop solar, including net energy metering (NEM).
While the growth of the rooftop solar market is exciting to be a part of, PG&E is concerned that the direct and indirect incentives for rooftop solar included in PG&E’s rates provide an unfair financial advantage to solar customers – at the expense of all our other customers.
In short, solar customers are able to substantially reduce, or in many cases, to essentially zero out their bills, even though they use the grid more intensively than non-solar customers, as they both import and export power over the course of the day.
Furthermore, intermittent supplies like solar that can be 'on' one moment and 'off' the next require PG&E to maintain additional infrastructure to ensure that the entire system can remain in balance.
A zero bill from a solar customer means that the costs to maintain a safe and reliable electric grid and to support PG&E’s renewable supplies, energy efficiency programs, rate discounts for low-income customers -- as well as the very subsidies that help pay for rooftop solar – have to be shouldered by non-solar customers.
This unfortunate set of circumstances is driven by a 'policy trifecta' consisting of:
- Outdated rates for residential customers composed of all-volumetric charges, with very high prices for increased usage
- Net energy metering, which allows solar or other renewable generating systems to receive a full retail rate credit when their systems export power back to the grid
- Limits on rate changes to certain customer segments, which concentrate the cost shifts from the first two issues within a smaller customer base, further adding to the imbalance in spreading the costs not paid by solar customers
These policies may have made sense when rooftop solar was in its infancy. However, the maturation of the industry, combined with significant reductions in the costs of solar, means the time is right for the state’s policymakers to implement changes to the current structure that result in a rooftop solar program that is sustainable and fair to all customers.
This includes addressing the structural problems with rates paid -- or avoided -- by solar customers, and replacing full retail NEM with a compensation-basis model that reflects the value that all of our other customers receive from exports. Rather than being characterized as 'anti-solar,' these initiatives should be viewed as a best-practice means of restoring the balance of costs and interests among all customers.
For example, SMUD -- a solar-friendly neighbor of PG&E’s -- is moving from a $10 per month residential customer charge to a $20 charge in a matter of a few years. PG&E’s residential customer charge is currently…$0.
PG&E believes that solar energy in California is currently in a healthy state and could have an even healthier future. We wholeheartedly support that. But in fairness to all customers, it is important to solar’s long-term sustainability that the costs for providing energy and maintaining a robust grid are shared equitably. Working together with elected officials, regulators, consumer groups and others in the energy industry, we are confident we can reach good, smart and sensible solutions.
David Rubin is Director of Service Analysis at Pacific Gas and Electric.