About ten years ago Redding Electric Utility in Northern California attempted to divide the cost of energy from delivery. Delivery infrastructure was to be a fixed monthly fee, and energy was of course the energy used. Large customers the bill was partly based on demand charges for delivery. This meant a solar customer with a near zero kwh reading still paid close to $100 a month for the privilege of connecting to the system. This caused absolute panic in the solar suppliers and they launched this massive smear campaign threatening all the City Council in the upcoming election. It worked, they killed it.
As I tried to explain to Doomberg a couple of weeks ago, California isn't real. It's a satire demo project made by the guys who later created South Park. It wasn't supposed to leave the lab!
Thank you Energy Bad Boys for ‘shining the light’ on this issue. If you think it’s bad in sunny California, imagine how criminal it is to push for the same failed policies in Washington state. I will be posting an article about this soon.
The economics of solar power in California are surely interesting. I didn't put panels on my house to "be green". I did so because on NEM 2.0, my system pays out in 6-9 years and power sure isn't getting any cheaper around here. Under 3.0, I likely would not have installed it.
Not a bad move if you can afford it - it made a lot of sense in a state with such high electricity costs - but it's a shame it was allowed to continue for so long. $3.4 billion saddled on non-participants in one year alone is incredible.
Thanks for the detailed research! At the ugly underbelly of the duck curve, daytime prices for solar are heading to zero, while electricity cost at sunset spikes further due to underinvestment in reliable power. This must imply that even at a 75% reduction, solar panel owners can currently still extract more value than their power is actually worth. Expect the incentive to fully disappear in NEM 4.0.
Nice article Mitch and Isaac. I stumble through this issue in Juice…this is far superior. I followed this issue at the CPUC because it was clearly going to be supercharged with equity BS. It didn’t disappoint! It was a hell of a fight. On one side the rich, the powerful, and the solar snake oil salesmen and their slick lawyers. On the other side the poor, the orphans, the disadvantaged and their public employee and non profit people with halting speech and bad haircuts. The rich trying to save the planet, the poor just trying to afford hot water. Epic! Loved the outcome.
Not only did the rich lose this one, California is going to institute power rates that depend on your income. Residential rates in San Diego are now 66 cents per kWh. Both SCE and PG&E have 20% rate increases coming. The poor will get poorer.
Are any solar panels made in the U.S.? China is building more coal plants to provide power to make solar panels for the rest of the world. So when you buy solar panels from China, you are worsening carbon dioxide emissions. Then, of course, there's the strip mining for rare earth minerals in solar panels and their lithium-ion batteries. Most strip mining for rare earths is done, of course, by China.
In Saskatchewan in Canada they came up with a slightly better addition where anyone can invest into utility wind and solar through the power utility and recieve money off their bills
It will still cost more than your average investment but be worth more than making a consumption buy with the same money
Hopefully this will fully replace net metering at some point
It can only continue for so long. If California can see the truth, I'm sure others will eventually, too. Just a matter of when it reaches the point of unsustainable.
It’s the old story, regulated utilities and consumers, non utility generators, (NUG’s) avoided costs, PURPA, if you hang around long enough you will see history repeat itself so many times one can come to think of it as all new. Deregulation leads to re-regulation, leads to bifurcating the consumer’s individual electricity bill, leads to re-regulation. If a home owner is clever enough to build their own generation and island themselves off from the grid, and then be able to sell into the grid even at the fully avoided cost of a kilowatt then good for them. But that wasn’t what net metering did as this post aptly describes. Make the playing field level and suddenly the impact to a nearly fully subsidized industry is palpable. Peaking power is critical to grid stability and no one wants to pay for it, even the newer GE Frame 7 engines which can load follow to some extent need ancillary generation support. We operate at 60 hertz “unity”, not 59.5 or 60.5. Solar and wind and are no help there. Markets if left alone will determine what kind and how generation will be built and supported. Basically leveling the playing field in California is the tip of the iceberg, and the iceberg may actually be starting to invert. We can only hope.
Let's hope! It will likely take decades for any inversion to fully play out, and net-metering is only one of the fronts. Federal subsidies also need to end before any real change occurs.
ITC’s, PTC’s and Tax Equity shields for the likes of State Street Bank need to end as well. As mentioned level the playing field and let market forces determine the cost of generation and transmission/distribution and it will get interesting for sure!!
In Ohio delivery is separate from energy on my bill, it's actually two thirds of the charge. Unfortunately it is kwh based charge. My gas bill delivery is a flat rate charge, makes much more sense. This is all because of https://energychoice.ohio.gov/
As a homeowner in So Cal, and one who has put 2 separate solar “systems” on my roof since I’ve lived in my home (since 2017) I will say that the way some of this information is presented is not only clearly very BIASED, but also some of the “facts” as presented here are incredibly misleading in some crucial ways.
What is true: Californians as a whole pay wayyy too much for electricity. But yes, I know…if it bothers us THAT much, we do have alternative options for where we can live. I’m from the East Coast originally, and nearly all of my family are still over on the East Coast, so spare me the lesson about how we all get to make our own choices as to where we decide to live. I used to poo-poo folks that complained about the expenses of certain things in CA (like gas, water, electricity, property taxes, restaurants, I could go on for awhile here but won’t…) but the longer I’m here, the more it becomes apparent that our law makers in Sacramento are either complete imbeciles or they’re on the take…okay, most likely it’s both of those things if I’m being honest.
Thanks, Garth. Our point wasn't that people deserve it because they live in California or that they should move. We want electricity to be reliable and low cost for everyone. Unfortunately the policies in place out there don't make that possible. If you'd like to elaborate on ways that you believe we misrepresented the facts we are happy to hear them.
When you bring this up to climate alarmists they claim that it is ok because solar generation is clean and therefore the people who don’t have solar on their roofs are benefitting from those who do because we all have cleaner air.
This is any issue with many of government mandates, regulations, & schemes. Most products or services need early adopters to acquire the initial capital & establish demand, hoping for economic of scale-you know the trickily down economics that is hated so much. And like most government solutions the true cost of the program is never reported, however is supported by a minor of the population namely the wealthy and business class because the "cost" of socialize while the profits are privatize-the definition of fascism! In a sense support is because the cost is bared by the majority by force. We have no anti monopoly law when the government is the business partner.
Keep in mind the retail price of electricity is based on dispatchable base-load which is 24/7 grid accessibility, how on earth is Intermittent electricity, energy that is not continuously available due to external factors that cannot be controlled going to be able to fetch the same price or cost. Which is why where every renewables of dispatch, cost increase.
As the devil’s advocate I ask, shouldn’t the homeowners be allowed to recoup the cost of the infrastructure like the utilities do, especially in areas where solar is mandated? A large part of electricity cost is amortizing the cost of building the generating stations.
There is also the certificate of need process for utilities to demonstrate a plant is needed. Homeowners don’t have that same hurdle to clear so a rate of return compensation scheme would not be appropriate
That cost benefit comes in the form of zero cost electricity generated by you. The utility has no responsibility regarding the infrastructure cost of your personal power plant.
The voters who voted for the mandates do. The utility doesn’t pay for it. Those costs are always passed on to the consumer. It’s no longer a “personal power plant” if it provides power to the grid. Why isn’t it afforded the same benefits as any other utility that provides power to the grid?
I worked in the power industry so I can comment here. Power plants have to pay for the infrastructure to interconnect, the substation and line tap fees are not free. Once on line they market the energy into a wholesale market at a considerably lower price than the homeowner pays. They typically sell to an energy marketer, who will buy the transmission rights to move the energy to the point of delivery, called source and sink in the industry. The distribution company will recieve that energy at the point of delivery and send it over the wires of its distribution system to the customers. So it's not as simple as it may seem and there are a lot of fingers in the pot.
The utilities are allowed an “authorized rate of return” on capital investment. If you apply the same ratemaking methodology to roof top solar , you’d need to treat each case individually, amortize the investment over the life of the facility, apply a depreciation schedule, and determine the basis to apply a rate of return. It would not be nearly as lucrative for the home owner as NEM 2 or even NEM 3. They still have a much better deal than the utilities get.
About ten years ago Redding Electric Utility in Northern California attempted to divide the cost of energy from delivery. Delivery infrastructure was to be a fixed monthly fee, and energy was of course the energy used. Large customers the bill was partly based on demand charges for delivery. This meant a solar customer with a near zero kwh reading still paid close to $100 a month for the privilege of connecting to the system. This caused absolute panic in the solar suppliers and they launched this massive smear campaign threatening all the City Council in the upcoming election. It worked, they killed it.
Ultimately, this is where power billing has to end out.
Sell power at wholesale, buy it at retail, and with all the fixed system costs billed in a fixed connection charge.
Sorry, boys but you've been had.
As I tried to explain to Doomberg a couple of weeks ago, California isn't real. It's a satire demo project made by the guys who later created South Park. It wasn't supposed to leave the lab!
Duped again!
Lab rats will pay?
Thank you Energy Bad Boys for ‘shining the light’ on this issue. If you think it’s bad in sunny California, imagine how criminal it is to push for the same failed policies in Washington state. I will be posting an article about this soon.
Looking forward to it!
https://open.substack.com/pub/rickdunn/p/buyer-beware-uneconomic-rooftop-solar?r=kv2hx&utm_medium=ios&utm_campaign=post
The economics of solar power in California are surely interesting. I didn't put panels on my house to "be green". I did so because on NEM 2.0, my system pays out in 6-9 years and power sure isn't getting any cheaper around here. Under 3.0, I likely would not have installed it.
Not a bad move if you can afford it - it made a lot of sense in a state with such high electricity costs - but it's a shame it was allowed to continue for so long. $3.4 billion saddled on non-participants in one year alone is incredible.
You’d definitely need storage to make it pencil out with NEM 3
Thanks for the detailed research! At the ugly underbelly of the duck curve, daytime prices for solar are heading to zero, while electricity cost at sunset spikes further due to underinvestment in reliable power. This must imply that even at a 75% reduction, solar panel owners can currently still extract more value than their power is actually worth. Expect the incentive to fully disappear in NEM 4.0.
Nice article Mitch and Isaac. I stumble through this issue in Juice…this is far superior. I followed this issue at the CPUC because it was clearly going to be supercharged with equity BS. It didn’t disappoint! It was a hell of a fight. On one side the rich, the powerful, and the solar snake oil salesmen and their slick lawyers. On the other side the poor, the orphans, the disadvantaged and their public employee and non profit people with halting speech and bad haircuts. The rich trying to save the planet, the poor just trying to afford hot water. Epic! Loved the outcome.
Not only did the rich lose this one, California is going to institute power rates that depend on your income. Residential rates in San Diego are now 66 cents per kWh. Both SCE and PG&E have 20% rate increases coming. The poor will get poorer.
66 cents per kWh is rough and hard to fathom - and the state keeps doubling, tripling down on the same kind of "solutions" that led it to this point.
Thanks Lee! It was great to see you in the series!
Are any solar panels made in the U.S.? China is building more coal plants to provide power to make solar panels for the rest of the world. So when you buy solar panels from China, you are worsening carbon dioxide emissions. Then, of course, there's the strip mining for rare earth minerals in solar panels and their lithium-ion batteries. Most strip mining for rare earths is done, of course, by China.
Yes some are but something like 80 percent of solar capacity is in China and Southeast Asia
Thanks for confirming that.
In Saskatchewan in Canada they came up with a slightly better addition where anyone can invest into utility wind and solar through the power utility and recieve money off their bills
It will still cost more than your average investment but be worth more than making a consumption buy with the same money
Hopefully this will fully replace net metering at some point
It can only continue for so long. If California can see the truth, I'm sure others will eventually, too. Just a matter of when it reaches the point of unsustainable.
It’s the old story, regulated utilities and consumers, non utility generators, (NUG’s) avoided costs, PURPA, if you hang around long enough you will see history repeat itself so many times one can come to think of it as all new. Deregulation leads to re-regulation, leads to bifurcating the consumer’s individual electricity bill, leads to re-regulation. If a home owner is clever enough to build their own generation and island themselves off from the grid, and then be able to sell into the grid even at the fully avoided cost of a kilowatt then good for them. But that wasn’t what net metering did as this post aptly describes. Make the playing field level and suddenly the impact to a nearly fully subsidized industry is palpable. Peaking power is critical to grid stability and no one wants to pay for it, even the newer GE Frame 7 engines which can load follow to some extent need ancillary generation support. We operate at 60 hertz “unity”, not 59.5 or 60.5. Solar and wind and are no help there. Markets if left alone will determine what kind and how generation will be built and supported. Basically leveling the playing field in California is the tip of the iceberg, and the iceberg may actually be starting to invert. We can only hope.
Let's hope! It will likely take decades for any inversion to fully play out, and net-metering is only one of the fronts. Federal subsidies also need to end before any real change occurs.
ITC’s, PTC’s and Tax Equity shields for the likes of State Street Bank need to end as well. As mentioned level the playing field and let market forces determine the cost of generation and transmission/distribution and it will get interesting for sure!!
In Ohio delivery is separate from energy on my bill, it's actually two thirds of the charge. Unfortunately it is kwh based charge. My gas bill delivery is a flat rate charge, makes much more sense. This is all because of https://energychoice.ohio.gov/
Very interesting. I’ll be curious to see your thoughts on PJM resource adequacy in our post tomorrow
I will be looking for it, I always enjoy your stuff Isaac
As a homeowner in So Cal, and one who has put 2 separate solar “systems” on my roof since I’ve lived in my home (since 2017) I will say that the way some of this information is presented is not only clearly very BIASED, but also some of the “facts” as presented here are incredibly misleading in some crucial ways.
What is true: Californians as a whole pay wayyy too much for electricity. But yes, I know…if it bothers us THAT much, we do have alternative options for where we can live. I’m from the East Coast originally, and nearly all of my family are still over on the East Coast, so spare me the lesson about how we all get to make our own choices as to where we decide to live. I used to poo-poo folks that complained about the expenses of certain things in CA (like gas, water, electricity, property taxes, restaurants, I could go on for awhile here but won’t…) but the longer I’m here, the more it becomes apparent that our law makers in Sacramento are either complete imbeciles or they’re on the take…okay, most likely it’s both of those things if I’m being honest.
Thanks, Garth. Our point wasn't that people deserve it because they live in California or that they should move. We want electricity to be reliable and low cost for everyone. Unfortunately the policies in place out there don't make that possible. If you'd like to elaborate on ways that you believe we misrepresented the facts we are happy to hear them.
When you bring this up to climate alarmists they claim that it is ok because solar generation is clean and therefore the people who don’t have solar on their roofs are benefitting from those who do because we all have cleaner air.
That’s true so we need to reach people who are open to having their minds changed
So what do Idaho and Texas do differently? The map doesn't seem to explain it.
They have certain utilities that offer net metering but it’s not a state policy
Great piece. PUC policy design is such an important battle ground - everything from net metering to EV tariffs to capacity markets
Ps I’ve really been enjoying your articles. You’ve got Bad Boy vibes 😎
😎 Thanks!! The feeling is mutual
100 percent. And our side is out manned and out gunned
This is any issue with many of government mandates, regulations, & schemes. Most products or services need early adopters to acquire the initial capital & establish demand, hoping for economic of scale-you know the trickily down economics that is hated so much. And like most government solutions the true cost of the program is never reported, however is supported by a minor of the population namely the wealthy and business class because the "cost" of socialize while the profits are privatize-the definition of fascism! In a sense support is because the cost is bared by the majority by force. We have no anti monopoly law when the government is the business partner.
Keep in mind the retail price of electricity is based on dispatchable base-load which is 24/7 grid accessibility, how on earth is Intermittent electricity, energy that is not continuously available due to external factors that cannot be controlled going to be able to fetch the same price or cost. Which is why where every renewables of dispatch, cost increase.
As the devil’s advocate I ask, shouldn’t the homeowners be allowed to recoup the cost of the infrastructure like the utilities do, especially in areas where solar is mandated? A large part of electricity cost is amortizing the cost of building the generating stations.
There is also the certificate of need process for utilities to demonstrate a plant is needed. Homeowners don’t have that same hurdle to clear so a rate of return compensation scheme would not be appropriate
That cost benefit comes in the form of zero cost electricity generated by you. The utility has no responsibility regarding the infrastructure cost of your personal power plant.
The voters who voted for the mandates do. The utility doesn’t pay for it. Those costs are always passed on to the consumer. It’s no longer a “personal power plant” if it provides power to the grid. Why isn’t it afforded the same benefits as any other utility that provides power to the grid?
I worked in the power industry so I can comment here. Power plants have to pay for the infrastructure to interconnect, the substation and line tap fees are not free. Once on line they market the energy into a wholesale market at a considerably lower price than the homeowner pays. They typically sell to an energy marketer, who will buy the transmission rights to move the energy to the point of delivery, called source and sink in the industry. The distribution company will recieve that energy at the point of delivery and send it over the wires of its distribution system to the customers. So it's not as simple as it may seem and there are a lot of fingers in the pot.
The utilities are allowed an “authorized rate of return” on capital investment. If you apply the same ratemaking methodology to roof top solar , you’d need to treat each case individually, amortize the investment over the life of the facility, apply a depreciation schedule, and determine the basis to apply a rate of return. It would not be nearly as lucrative for the home owner as NEM 2 or even NEM 3. They still have a much better deal than the utilities get.
Well said Lee!
Right. Return on investment under NEM 2.0 was ridiculously high. NEM 3.0 is much closer to reality, but still pretty generous.