Solar Power: Policies Should Encourage Thoughtful Development

Michael Giberson

Tom Konrad, writing at Alternative Energy Stocks, notes that “current incentives for Solar photovoltaics are good for encouraging more solar, but they are less effective at encouraging better solar.” (Emphasis added.)

His quick review of policy options touches on renewable energy credits, feed-in tariffs, net metering, time-of-use rates, carbon pricing and other tools. Some policies subsidize construction of solar power capacity without much regard for the resulting solar power production. Other policies encourage maximizing the MWh output rather than the value of the power produced. If you want to be an informed analyst of solar power policy, you will want to know which policies do what.

(Konrad’s post is based on his presentation at Solar 2009: “Solar Incentives: Be Careful What You Wish For.”)

10 thoughts on “Solar Power: Policies Should Encourage Thoughtful Development

  1. I’m not sure net metering works out very well for distributed solar system owners; certainly not as well as for distributed wind system owners.

    Is there a realtime net meter available for application? That would likely put a stake through the heart of distributed wind installations.

  2. Ed, are you suggesting flat rates + net metering = hidden subsidy for distributed wind power? I’m shocked that regulators would countenance such a thing.

    And on the other hand distributed solar is likely penalized by flat rates + net metering.

  3. Mike,

    I trust you have been able to extract your tongue from your cheek since you posted the above comment. (I am a Claude Raines fan too.) šŸ™‚

    In general, the utility is disadvantaged by net metering in almost all cases, since it is paying a price for the net metered power which includes its return on investment, its profit and its operating expenses. Therefore, to the extent that it takes net metered power, it under-recovers its costs and under-earns on its investment.

    That situation is aggravated when it takes and pays for power which it does not need during periods when its purchased power costs are at their lowest. This is especially true, in the case of wind, as your several posts regarding wind in ERCOT West confirm.

    However, even with solar, the typical distributed generator sends power to the grid only when local demand is satisfied and local storage is full; ie, in times of low power demand on the part of the generator and likely also on the grid.

    Regulators have essentially forced net metering on utilities on the basis that it is a relatively minor issue. However, it cannot be allowed to persist if distributed renewable generation becomes a significant contributor to the generation mix. I believe the utilities erred when they agreed to it; and, that their agreement will make it more difficult to terminate in the future.

  4. Ed,

    Konrad, in the post linked above, does provide some (very restrained) criticism of net metering. As you explain, as long as the net-metered resources are few and small, it is only a modest annoyance.

    As for the future, surely a more sensible (which IMHO = “economically sound”) pricing structure will be needed to accommodate any significant growth. But the solution isn’t to reform regulated utility rate structures, but rather to allow competitive retail energy companies to devise their best offers. (Distribution wires companies may want a small additional fee for handling a two-way circuit, and even in the best current competitive retail electric power markets, that rate issue is still regulated.)

    A month or two ago I saw online an argument for considering net metering as the “civil rights movement for distributed energy resource providers” (you know, “equal access to the grid” and all of that). I struck me as so idiotic as to be worthy of serious ridicule, but I decided I couldn’t spend my life ridiculing all of the idiots in the world. (I wouldn’t be able to keep up with them all. My intention is to limit myself to the ones that have been elected to office.)

    But electric power retailers should take notice of the rhetoric and think a bit about the future. At the least they may find themselves with a handful of net metered customers who want to be grandfathered in at existing net metered flat rates for the life of their investment.

    At worst they get stuck with a significant increase in customers on net metered flat rates during a boom in distributed energy installations, and then face a significant public relations battle in state legislatures and state commissions in which the multi-billion dollar nationwide energy corporation has to explain why it is fighting to shut down a smattering of regular folks who are just trying to do something for the environment by putting up a solar panel on their roof. And then some idiot will show up saying “civil rights! civil rights!”

  5. A feed-in tariff is a clean way to get distributed solar without the obvious inequities of retail net metering. Of course FITs have their own potential for abuse and inequity, but like democracy it’s just better than everything else we’ve tried.

  6. Mike, Thanks for the reference. I also stromg;y agree with your comment #5 to Ed.

    Kevin- Regarding FITs, that’s a big catch-all for a lot of things. The great advantage of a FIT is the clarity: the energy producer knows what he’ll get paid for his investment. But even FIT’s should be approached cautiously… without some account being taken for time of use, we will probably be incentivizing suboptimal installations.

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