No net metering without grid connection, no net metering controversy where wires and energy products are unbundled

Around the country lobbyists for utilities and solar power companies are fighting over public policy, mostly for and against reform of net metering policies.* Today, The Alliance for Solar Choice (TASC) trumpeted in a press release recent victories in the states of Utah and Washington over net metering reforms urged by utilities. TASC highlighted the involvement of conservative policy group the American Legislative Exchange Council (ALEC), which joined the battle over net metering via a January 2014 resolution calling for “policies to require that everyone who uses the grid helps pay to maintain it and to keep it operating reliably at all times.”

In the TASC press release the group makes the odd and laughable claim:

Net metering allows rooftop solar customers to … receive full retail credit for any excess electricity sent back to the grid. Utilities turn around and sell this energy at the full retail rate to the neighbors, even though they paid nothing to generate, transmit or distribute that cleaner power.

I wonder how TASC thinks the net-metered customers’ excess electrical power actually flows to the neighbor’s property?

On the other hand, I take the next sentence in the TASC press release as obviously true: “Utilities attacking net metering want to eliminate the policy to stifle energy choice and protect their monopolies.” Evidence for the point is contained in the Washington state bill which, in addition to reforming net metering would have banned third party financing of rooftop solar if the utility itself offered a leasing program.

But one can oppose net metering and still favor “energy choice.” In fact, net metering is in the end incompatible with energy choice since net metering requires a grid connection and a cross-subsidy from grid-connected, non-net metered customers to survive. Giving energy choice to the customers subsidizing their solar-paneled neighbors will, if the burden grows large enough, push unsubsidized customers off the grid.

Currently, the burden is rather small most places. The utility industry is worried, though, about the possible rapid spread of net metering as the economics of rooftop solar improve and the consequent rate “death spiral” as fewer and fewer customers remain who actually pay for the costs of local distribution systems. See the report Disruptive Challenges, distributed by EEI in early 2013, and now the Economics of Grid Defection, published by the Rocky Mountain Institute this year.

The fight over net metering and other rooftop solar policies has broken out in a number of states, from Georgia to Massachusetts to Wisconsin to the solar-rich states of California and Arizona. Perhaps most interesting, however, is to note one solar-rich state lacking a battle over net metering: Texas. As Lynne noted here last summer, with generation and retailing already divorced from the monopoly wires business (in most of the state), Texas’s wires utilities are not nearly as threatened by distributed generation resources.

Power retailers in Texas are free (within limits) to offer a variety of contract to customers with distributed generation capability, and at least one offers a net metered-style product. Reliant’s e-Sense Sell-back plans credit customers for the full retail energy rate for the first 500 kwh of power put onto the grid (about $0.17 kwh at peak prices, and any additional power at $0.05 per kwh). Notice that as Reliant is an unregulated retail power provider, not a regulated utility, there is no forced cross-subsidization of distributed energy resources in the offering.

No subsidy, no undermining of grid finances, supports energy choice without promoting energy poverty. What is not to like?

 

 

*Net metering policies allow consumers capable of self-generation to be credited for any generation put onto the local distribution grid at the full retail price of electricity. Because the full retail price of electricity covers both energy and grid costs, utilities object that net metered customers are overpaid for the power they inject into the distribution grid.

Chu’s solar power regrets

Michael Giberson

From The Onion:

WASHINGTON—Sources have reported that following a long night of carousing at a series of D.C. watering holes, Energy Secretary Steven Chu awoke Thursday morning to find himself sleeping next to a giant solar panel he had met the previous evening. “Oh, Christ, what the hell did I do last night?” Chu is said to have muttered to himself while clutching his aching head and grimacing at the partially blanketed 18-square-foot photovoltaic solar module whose manufacturer he was reportedly unable to recall… According to sources, Chu’s encounter with the crystalline-silicon solar receptor was his most regrettable dalliance since 2009, when an extended fling with a 90-foot wind turbine nearly ended his marriage.

What, no Solyndra jokes?

Secretary Chu responded on Facebook:

I just want everyone to know that my decision not to serve a second term as Energy Secretary has absolutely nothing to do with the allegations made in this week’s edition of the Onion. While I’m not going to confirm or deny the charges specifically, I will say that clean, renewable solar power is a growing source of U.S. jobs and is becoming more and more affordable, so it’s no surprise that lots of Americans are falling in love with solar.

Reading between the lines here, in particular, the claim “renewable solar power is a growing source of U.S. jobs,” I think we can conclude that the solar panel’s manufacturer has even more damning photos in a vault somewhere.

The Onion:

The Onion: “Hungover Energy Secretary Wakes Up Next To Solar Panel”

New Jersey politicians poised to pour more ratepayer money into solar power developer pockets

Michael Giberson

The bill isn’t signed into law yet, but New Jersey solar installers are probably breathing a little easier given reports that New Jersey Governor Chris Christie is expected to sign a law that would boost the state’s electric utility’s solar power purchase obligation from about one-half of one percent to over two percent of the utilities’ electric power sales. (See related.)

Meanwhile, a New Jersey-based unit of an Italian solar panel maker is calling it quits, saying it couldn’t compete with Chinese solar panel manufacturers. The company, MX Solar USA, LLC, had taken $3.3 million in loans and grants from the state of New Jersey, but apparently it wasn’t enough to enable the solar panel maker located in the countries hottest solar PV market to out compete international solar panel manufacturers. MX Solar was among the U.S. companies that filed the anti-dumping complaint against China that resulted in significant tariffs being imposed on several Chinese manufacturers. The company complains that Chinese manufacturers are evading the tariffs by partnering with companies in other countries.

In an amusing tidbit tossed in right at the end of the article on MX Solar, reportedly the company purchased at least some of the solar cells it used in its solar panels from Chinese solar cell manufacturers. It claimed Chinese solar panels were unfairly subsidized, but when it went shopping for parts, it found Chinese solar cells at prices hard to beat!

Pat Wood: The Texas Tribune Interview

Michael Giberson

Pat Wood, the former FERC chairman and former Texas PUC chairman, was interviewed recently by The Texas Tribune. Wood is surely one of KP‘s favorite ex-regulators, so of course we’re linking to the interview. Here’s just one bit:

Wood: … There is also a lot that can be done, particularly on the energy demand side. By that I mean more aggressive conservation programs where you let market signals encourage customers that have the ability to shut down for a certain small amount of hours in the day to get paid to do so.

TT: Do you mean even individual consumers can potentially do more — or be helped to do more — to save energy?

Wood: They could, but if you went from the current penetration we have today, which is focused on the largest customers, to then focus on the medium-sized customers  — and by that I mean grocery stores, shopping centers, Target, customers like that — you can pick up a whole lot more responsive load before you need to get to the residential customer. The residential customers comprise about 40 percent of the [electrical] load at peak. Industrial and commercial are each about 30 percent. That’s a lot of lower-hanging fruit to pick before you get to residential.

And in discussing this, I’m not saying that Target would have to bid to shut down a store to get paid; it would maybe curtail 20 percent of its demand from 4 to 6 pm [when electricity usage peaks].

This capacity tightening may force that day to come sooner rather than later, which I think is a great thing for Texas, to latch onto this smart-grid investment that we’ve been making statewide over the past couple of years into a level of demand responsiveness that really moves our grid to 21st century capability well ahead of the other states.

Wood also addresses the lack of incentives to build new plants in Texas, the prospects for wind and solar in the state, energy storage, and among other things the role of the Public Utility Commission after the state “moved the dial from 10 to 4 in terms of regulation.”

Wherein the jobs jobs jobs rhetoric hampers solar power development

Michael Giberson

If you believed what politicians say about green energy and jobs, you probably think they fit together like peanut butter and jelly squished between layers of bread. Has there been a renewable power subsidy announcement or ribbon-cutting ceremony where the word “jobs” was not featured in the first two or three sentences uttered by politicians? When it comes to public policy, job counting is the new measure of policy.

So in the outer suburbs of Phoenix, Queen Creek town officials counted up the jobs associated with a couple of solar power projects proposed to occupy a large bit of their industrially-zoned property with the help of some town economic development funds. Turns out it doesn’t take a lot of people to maintain a large-scale PV power system, and they’re mostly low level maintenance workers. The jobs-counting is giving the town second thoughts about the projects.

Now, in some big-picture, overall costs-and-benefits, thorough and balanced look at energy technologies, that it doesn’t take a lot of highly paid professionals to operate a PV solar power facility is a good thing. It is one of the reason that PV power has such a low marginal cost of operation. But in the kookier world where local economic development, renewable power rhetoric, and taxpayer subsidies collide, jobs are counted as benefits and then the analysis stops.

Two comments: First, PV power remains more expensive than alternative sources of power even admitting the presence of larger external costs for fossil-fueled power plants. We likely would be better off if money currently being used to build solar projects now were spent on additional research instead. Queen Creek may be on the right track, even if for the wrong reason. Solar advocates are promising that grid-parity is just around the corner, so why are we wasting money building inefficient projects now instead of spending that money on getting us around that corner?

Second, the number of jobs a policy is expected to create has very little relevance to the evaluation of public policy proposals. Mostly what matters is whether the benefits of a policy proposal exceed the projected costs (plus, you know, those old-fashioned ideas about the proper scope of government and trying not to infringe on people’s rights).

Environmental economist John Whitehead is right to hope that environmental policy creates few jobs, because, as he explains, it would mean that businesses have found lower cost ways to get cleaner air and water.

Massachusetts wants $22.5 million in tax breaks back from Evergreen Solar, company in dire financial condition

Michael Giberson

Happier Days, from The Boston Globe: "Evergreen Solar's CEO, Richard M. Feldt (right), says Governor Deval Patrick's commitment to solar power played a key role in the company's decision to expand in Massachusetts. (Photo by Ellen Harasimowicz for The Boston Globe/File 2007)"

Politicians show up, grinning for the cameras at groundbreaking, they come applauding the expansion announcement (and why not, public tax breaks and other policy support for solar power manufacturers were chief among the reasons the plants were built in the first place), but where are the toothy smiles of supporting public officials when the company closes the manufacturing plant down? Evergreen Solar, a prized clean-energy/green jobs catch of the state of Massachusetts thanks to some creative economic development work by state and local governments, is closing its manufacturing plant in Devens, MA.

According to one summary, “Among the incentives the state offered Evergreen Solar were a $15 million property tax break, a $7.5 million in state tax break, $2.7 million through a subsidized lease and $21 million in cash grants. Not to mention that the state spent $13 million in construction on roads and other infrastructure to support the plant.” Another report put the figure at “at least $43m in state aid.”

Massachusetts politicians no longer swarm the gates of Evergreen Solar; instead they send notice that they want the tax breaks back, seeking $22.5 million from a company that has been losing money so quickly that it may not survive to the end of 2011. And perhaps Massachusetts should not feel especially foolish, Evergreen managed to squeak out significant support from government entities in Germany (“grants totaling approximately $34 million at current exchange rates”) and China, too  ($33 million in state-owned company loans to Evergreen and a similar amount to its Chinese partner).

Just another warning sign that the business of promoting business with tax breaks and other local subsidies is fraught with difficulty.

New Jersey is not exactly the sunshine state, but solar panels spring up with help of state government

Michael Giberson

Casually scanning a solar resource map wouldn’t naturally lead you to think that New Jersey would be a good candidate for solar power, but state government policies have resulted in it leaping into second place in PV installations (after California) in 2010.

NREL PV Solar Resources Map

NREL PV Solar Resources Map

More PV was installed in New Jersey last year than in Nevada, Arizona, Florida, Colorado, New Mexico, Texas, or Utah. Much more than Oregon, which has a lot better quality resource for PV solar, is about 12 times larger, and no slouch when it comes to flashing its environmental credentials.

The New York Times reports that not all residents of the state are happy with the solar panels popping up on utility poles and other places. Guess you can’t make everyone happy, right? Whether they like it or not, electric ratepayers throughout the state have been helping to fund the project.

Some highlights from the Times:

ORADELL, N.J. — Nancy and Eric Olsen could not pinpoint exactly when it happened or how. All they knew was one moment they had a pastoral view of a soccer field and the woods from their 1920s colonial-style house; the next all they could see were three solar panels.

“I hate them,” Mr. Olsen, 40, said of the row of panels attached to electrical poles across the street. “It’s just an eyesore.”

Like a massive Christo project but without the advance publicity, installations have been popping up across New Jersey for about a year now, courtesy of New Jersey’s largest utility, the Public Service Electric and Gas Company. Unlike other solar projects tucked away on roofs or in industrial areas, the utility is mounting 200,000 individual panels in neighborhoods throughout its service area, covering nearly three-quarters of the state.

The solar installations, the first and most extensive of their kind in the country, are part of a $515 million investment in solar projects by PSE&G under a state mandate that by 2021 power providers get 23 percent of their electricity from renewable sources. If they were laid out like quilt pieces, the 5-by-2.5-foot panels would blanket 170 acres.

New Jersey is second only to California in solar power capacity thanks to financial incentives and a public policy commitment to renewable energy industries seeded during Gov. Jon S. Corzine’s administration.

But his neighbor Tony Christofi, a 47-year-old contractor, wondered aloud whether Fair Lawn, by not fighting, was getting more than its fair share.

“I’m fine with green energy,” he said, “but are the savings going to be passed on to consumers?”

PSE&G officials said solar energy was still more expensive to produce than more traditional power sources and acknowledged that bills were going up 29 cents a month. Each panel produces 220 watts of power, enough to brighten about four 60-watt light bulbs for about six weeks. When complete, this project is expected to provide half of the 80 megawatts of electricity needed to power 6,500 homes.

The article notes a shift in priorities that came in with the state’s new governor: “Although he supports renewable energy, Gov. Chris Christie, through a spokesman, characterized the mandates that spawned the panel project as ‘extremely aggressive.’ He has already asked that they be re-evaluated.”

In February, a New Jersey newspaper reported, “The state will move away from subsidizing residential solar projects to emphasize commercial installations and encourage the construction of more gas power plants in a revised energy master plan….”

Integrating variable energy resources to the electric power grid

Michael Giberson

Are their barriers impeding integration of variable energy resources to the electric grid? FERC wants to know:

The Federal Energy Regulatory Commission (Commission) seeks comment on the extent to which barriers may exist that impede the reliable and efficient integration of variable energy resources (VERs) into the electric grid, and whether reforms are needed to eliminate those barriers. In order to meet the challenges posed by the integration of increasing numbers of VERs, ensure that jurisdictional rates are just and reasonable, eliminate impediments to open access transmission service for all resources, facilitate the efficient development of infrastructure, and ensure that the reliability of the grid is maintained, the Commission seeks to explore whether reforms are necessary to ensure that wholesale electricity tariffs are just, reasonable and not unduly discriminatory. This Notice will enable the Commission to determine whether wholesale electricity tariff reforms are necessary.

Hmmm, “variable energy resources”?  Does that mean things like steam generation units that can be adjusted up and down over some range (but not things like a gas turbine that is either on or off, but not adjustable in between)? No, they mean “variable but not very controllable energy resources” such as wind and solar power.  They write: “For purposes of this proceeding, the term variable energy resource (VER) refers to renewable energy resources that are characterized by variability in the fuel source that is beyond the control of the resource operator.”

I wonder why they didn’t just use the term “renewable energy resources”? Were they afraid of offending hydro and geothermal interests?  Are they hoping to ease the taint of not-very-controllable from renewable energy resources?

The proceeding is “Integration of Variable Energy Resources” (FERC RM10-11-000). In paragraph 10, FERC states:

Our goal is not to adopt rules that favor one type of supply source over another. Instead, the Commission’s purpose in this proceeding is to investigate market and operational reforms necessary to achieve two goals: first, to ensure that rates for jurisdictional service are just and reasonable, reflecting the implementation of practices that increase the efficiency of providing service; and second, to prevent VERs from facing undue discrimination. These goals are consistent with the requirements of sections 205 and 206 of the FPA.

The challenge here is in separating the “due discrimination” from the “undue discrimination,” which is to say the charges and special terms and conditions applied to VERs that are reasonable given the character of the resource from the charges, terms and conditions which are unreasonable.

California’s solar hot water initiative

Michael Giberson

Yesterday the California Public Utilities Commission approved a program to subsidize installation of solar hot water heaters.  Green Inc. at nytimes.com provides a description of the solar hot water program.  The description emphasizes the goals of the program (reduce use of natural gas and electricity to heat water, primarily in order to reduce greenhouse gas emissions) and highlights the incentives offered to homeowners and owners of multifamily commercial buildings.  The description omits completely any description of who will fund the subsidy.  Fortunately, the story provided a link to the CPUC decision which provided the rest of the story.

Under the program, a Public Goods Charge will be added to the bills of natural gas consumers to collect $250 million fund for replacing gas water heaters with solar thermal water heaters.  An additional $100.8 million fund for replacing electric water heaters will come from California Solar Initiative money already being collected through a charge on electric consumers.

Analysis conducted for the CPUC determined the program was “cost effective for ratepayers and in the public interest,” as the state law requires, though that conclusion was disputed in regulatory proceeding. (Summarized here in the CPUC decision.)  In high gas cost scenarios the program was readily found cost effective, but the CPUC focused on the stable-gas-price “Business as Usual” scenario (as the worst-case or most conservative scenario from the point of view of cost-effectiveness).  Using a “society as a whole” perspective and the Business as Usual scenario, the program was determined to be cost effective if cost reductions of 16 percent relative to current costs can be achieved over the eight-year program duration.

Which kind of sounds like a conclusion that the program would not be cost effective.  However, the decision assures us, commission staff have examined the tools, materials and methods use to build and install solar hot water systems, and staff concludes “a 16% cost reduction is a reasonable expectation.”

I wonder if they considered the possibility of a low-priced natural gas scenario?

Does the Wall Street Journal employ anyone who understands energy markets? Three rejoinders

Michael Giberson

In Grist, Adam Browing asks, “Does the Wall Street Journal employ anyone who understands energy markets?”  Browning’s question and his answer seem just a little off, as I’ll discuss below, but first an excerpt from Browning:

Actually, I think they do.  I think Keith Johnson knows quite a bit about energy markets.  Which makes this hit job on solar subsidies, published before the Senate considers national renewable energy legislation, so disturbing.

After chronicling the problems of the Spanish solar industry, the article goes on to say:

“Clean-energy skeptics, however, point to Spain as a cautionary tale of a government policy … with disastrous consequences.  … California and New Jersey, which lead the U.S. in solar power, are among states that have used subsidies similar to the ones in Spain to make solar power more attractive”

This is in fact incorrect.

Spain used a singular policy, a fixed price, standard offer contract known as a feed-in tariff.

California, on the other hand, has several different policy mechanisms, and each one is market-based.  They look nothing like Spain at all.

My first reaction: Browning isn’t asking about energy markets, per se, but the design of energy subsidies.  Really he complains about the WSJ‘s characterization of public policy tools.  Browning is director of The Vote Solar Initiative and a former EPA official, so I’d expect him to be aware of various environmental policy tools.  Energy markets – maybe not so much.

My second reaction: Does he really say that California’s policies look nothing at all like Spain’s feed-in tariffs, even though one of California’s policies is a feed-in tariff?  He describes it as a market-based feed-in tariff later in this very post, and in another post at Grist he says it is “kind of like a feed-in tariff, but different.”  So I guess that is it: it is “kind of like a feed-in tariff,” but nothing at all like Spain’s feed-in tariff.

Huh?

Then he trumpets the fact that “most” of the recent utility contracts signed by California utilities with solar power providers (with the aim of complying with the state’s Renewable Portfolio Standard mandate) have been “under the price of natural gas.” He repeats this claim again –  “clean energy, cheaper than natural gas” — and again — “Solar is getting cheap—cheaper than fossil fuel alternatives—and Congress has nothing to fear by getting aggressive on clean energy.”

But the contract he offers a helpful link to, between PG&E and First Solar, clearly describes that part of the project plan is to cash in on Federal subsidies for solar power projects.  In addition, the contract clearly states that the project is eligible for “above-market funds (‘AMFs’)”, which is California regulatory-speak for a pool of money available to help utilities meet RPS mandates when proposed projects are more expensive than other alternatives in the market. In fact, the reference point isn’t actual fossil fuel project proposals presented in actual market competition but rather a “Market Price Referent” established in regulatory processes.

My third reaction: This is “cheaper” only if we ignore the subsidies.

[Separately, on The Vote Solar Initiatives' "four key buttons that must be pushed in order to make the [solar power] market work”, I’d say only “(2.) Standardized interconnection procedures” is a clear winner.  The Spain example discussed by the WSJ shows some limits of policy (1.), a kind of demand-push-assume-economies-of-scale-follow approach.  “3. Net Metering” and “4. Fair Rate Design” are just attempts at providing distributed, small subsidizes through regulated rate structures.

In my view we can’t subsidize the market into becoming more efficient.  Yes, their are problems associated with fossil fuel use.  Better to identify the externalities associated with generating technologies actually causing third-party harm, and push for policies which get the parties responsible to pay for the harm.  Wasting resources will not save the earth.]

[HT to Keith Johnson of the WSJ's Environmental Capital]