Commentary: In solar debate, something so obvious, we don’t even see it

Ever notice how sometimes you can stare at a puzzle for a long time and never notice the obvious piece that puts everything in perspective?

Well, that’s been happening with all the arguments about the value of consumer generated electricity, and especially rooftop solar.

David Strom is executive director of the Minnesota Conservative Clean Energy Forum.

David Strom is executive director of the Minnesota Conservative Energy Forum.

When consumer-owned solar started popping up on rooftops across the country, utilities were annoyed but not particularly worried. After all, so few people were using it that it was a tiny niche in the overall market and posed no real threat to their business model. And, it was objectively more expensive than the default — simply buying from your utility.

But as rooftop solar has become economical, consumers have taken a second look evaluating the costs and benefits, and there is little doubt that in the next few years solar will become a mainstream choice. Distributed generation and microgrids are the wave of the future, so much that the very concept is threatening the monopoly business model of a lot of utilities.

Just as the breakup of AT&T and the development of mobile phone technology disrupted telecommunications, distributed generation, storage and microgrid technologies threaten the current business model of regulated monopoly utilities, and they are fighting back. That disruption was painful for the phone company because their business model was blown up, but in the long run has been a boon for consumers as well as for the companies who were quick to adapt to where technology was headed.

Just as with ”Ma Bell,” utilities have some compelling arguments in their favor: as universal service providers they bear some costs and obligations that other businesses don’t have to. And, they argue, customers who generate their own power still impose costs upon the system (particularly system maintenance) and, because they purchase less power, pay disproportionately less than their neighbors to defray those costs.

So utilities have, sometimes successfully, argued that solar customers should pay a fee to stay on the system, and a real battle is taking place on whether they should and if so, how much. The utilities are arguing for big fees, naturally. The fee solves two problems – it helps recoup the utilities’ “lost revenue” from solar customers, but it also makes the project less attractive to the customer, serving to dissuade them from making the choice in the first place. A double win for the monopoly utility.

But in most of these public arguments a simple fact, so obvious as to be missed, is left out: consumers who generate their own power do it on their own dime — essentially paying the infrastructure costs that would otherwise be imposed on every other power customer.

That’s a really big deal, with huge ramifications for the economics of power generation over the coming decades.

Consumer participation in the generation market will drive innovation in a way that a few large purchasers never could: as consumers constantly chase the best deal and the newest technology, innovation is spurred in a way that never could happen with just a few large purchasers building plants at a glacial pace.

In this, distributed generation directly mirrors the revolution in telecommunications. For decades the phone company rented out the same model of phone to millions of customers. The great innovations were the Princess phone and touchtone, and that’s about it. Yet when the phone company was broken up and cell providers sprung up, we moved from the “revolutionary” touchtone phone to having supercomputers in our pockets in no time at all.

The same will happen with distributed generation. And it will all happen because consumers are using their own dollars to chase the best value and the newest technologies. Another obvious lesson — markets are the best way to allocate wealth, and to incentivize innovation.

So with all the talk about the potential costs of distributed generation, the biggest benefit is being left out: the distributed purchasing power of consumers, and the effect that will have on the pace of innovation and the costs to the system of developing new technologies.

Distributed generation pioneers — those consumers funding the growing market in home generation — are funding the research and development of revolutionary technologies that will change things for the better. Their investments aren’t primarily imposing costs on others, but rather picking up the R&D slack for the rest of us, while reducing the need for building additional generation.

What is the dollar value of that contribution? It’s obviously difficult to calculate. But if power generation technology moves at a fraction of the pace we have seen in telecommunications, it will literally be incalculable.

5 thoughts on “Commentary: In solar debate, something so obvious, we don’t even see it

  1. I agree with your statement but only when customers have storage and don’t tap the grid every time the sun is not shining. The typical billing structure works when everyone is getting all of their power from the grid. The structure becomes unfair when people make their own power and sell the excess back at retail rates. Then the cost of maintaining all of the infrastructure is not shared in an equitable manner.

    • This is what both the utility and the decepticons of established energy companies want you to think, but then you argue against yourself not solar owners, because the utility gets solar at wholesale rates, the cost of energy they do not have to create, and they still charge all customers the retail rate. Also, when the solar user uses the grid at night, they pay retail for that cheap energy which reduces, not increases the cost to the utility, because at night the grid dumps excess energy that otherwise is lost to line loss, and reduced demand. This puts more money into the utility’s pocket, not less, so how is that a disadvantage to the utility? Yep, there is none. A simple version of the strawman is created, not real, just believed.

  2. TOU rates seem to be the fair way to charge all users. By choice I chose a tariff using TOU rates. I pay and receive this on my Solar in east central Illinois. But when battery prices reach less than $10 per KWH most will disconnect from the grid and purchase batteries and a natural gas or propane generator as a secondary reserve. It will be a decade before we get there but time will pass fast.

    • Time of Use structures are changeable and definitely affect the cost of energy if they descriminate these time of use charges to fit the exclusive demographic of solar users. It is the utility’s way of upping the ante for solar owners. Then, instead of benefiting the solar user, which they should under the original 1978 fair energy act which established the net metering laws of the past, the utility convolutes it for only solar class consumers forcing them to pay double for power when not producing it, but still getting their peak production at a simple retail rate, which looks on the surface as fair, but overlooks infrastructure avoidance costs. These utility folks have long studied how to create these strawman arguments, but Corporation Commissions still believe them, because no one but solar people refute them. Even the pubic is too dense to grasp how that cost them in long term ways. Utilities catch on fast and put rate hikes on their agenda to force solar made bu customers out of reach economically until they get to charge them for it when they buy it for mass production and double charge to pay for producing it later. The solution is to fairly disabvantage investors in the utility by being fair to the rate payer and the solar owners. Tax can be a solution to the governmental side of this which has not been brought up.

  3. My comment on the article is that batttery based tesla wall units or panasonic or any brand of battery system does help the consumer and the rate payer, by offering a much more flexible distributed energy hub in the nodes where they are built. This reduces costs to the utility in several positive ways. That is a cost that most consumers do not understand, because of the cost, the size of these systems and the long term cost they incur on their family, since 7 to 10 years is the typical life time of these units. So in 7 to 10 years there is a major expense involved in changing them out. So is the utility going to offer rebates to encourage this effort? Clearly no, they won’t. It is the single biggest reason why this technology is not mainstream yet, due to cost and avoidance costs of TOS (Time of use). It makes a lot of sense in Oklahoma to consider simply going off the grid as an alternative, since power goes off often during spring and fall weather seasons depending where lightening is a major problem for exposed grid lines. If you can affort it, the value increases for the owner. All your costs are self contained and the utility is left to deal with their own mess. But most people can’t afford this scenario. So why not simply force the utility to do their job and offer fair net metering? It is because state to state very smart people are preventing standardized conclusions on what is fair and for whom. That is why policy has to change first, then innovation follows, just as with AT&T. So Warren Buffet, get out the pocket book and sue to get this done for the nation. Or, perhaps Congress will get super smart and do this from above? Naw, they are all dopes!