In the first part of this two-part blog series, I documented predictions that solar homeowners would combine batteries with solar panels to achieve autonomy and leave the power grid. If that were to happen on a widespread basis, it could lead to ruin for electric utilities. I then cited research that showed that such homeowners are unlikely to take that course of action. Instead, where they have access to both the grid and net metering, they are more likely to not buy any batteries at all and rely on the free storage and backup services provided by their utility.
Just because cheap batteries won’t be their undoing doesn’t mean utilities are out of the palm-tree forest. Like Hawaii Electric Co. (HECO), lots of utilities face a related problem that has the potential to ruin them. The utility industry isn’t threatened by a disruptive technology, but by a disruptive idea: that it’s incumbent on utilities to provide free storage and backup services to solar panel owners. The main manifestation of this idea is net metering, and it’s the law of the land in 44 states (PDF, p. 3), according to the National Renewable Energy Laboratory.
HECO says that providing these free services cost the company $53 million in 2014, and those costs continue to grow. Also, HECO and lots of other utilities claim that these costs aren’t really borne by the company. They’re shifted to other nonsolar customers, whose rates then go up, making it more attractive for them to buy solar panels and avail themselves of evermore free storage and backup services. No utility can stay solvent under such pressure, and this disruptive spiral is bound to spread to more utilities as solar panel prices drop. That’s why in Hawaii, and in most states with some form of net metering, utilities are actively challenging the rules.
Many solar advocates object to any effort to tamper with the terms of net metering. They claim that studies show that the benefits net-metered customers provide to utilities far exceed the imposed costs, and that even nonsolar customers come out ahead. Such benefits include decreased fuel costs, avoided expenses associated with more or bigger power plants, fewer line losses in the transmission and distribution system, and reduced investments in transmission and distribution facilities. For an example of such a study, see Evaluating the Benefits and Costs of Net Metering in California (PDF) from the Vote Solar Initiative, a nonprofit advocacy campaign organization. The report’s authors conclude that “the utilities’ concerns with the impacts of NEM [net energy metering] on non-participating ratepayers are unfounded.”
There are also plenty of other studies—such as the California Net Energy Metering Ratepayer Impacts Evaluation (PDF) from the California Public Utilities Commission—that show net metering does shift costs from solar homeowners to other utility customers. Another study—Net Energy Metering: Subsidy Issues and Regulatory Solutions (PDF) from utility think tank Edison Foundation Institute for Electric Innovation—minces no words when it characterizes net metering: “The net metering subsidy for residential rooftop solar is overly generous and not transparent. In California, the net metering subsidy is substantially larger than the 30-percent federal tax credit and far exceeds what is necessary to incent rooftop solar.” How do we get to the bottom of this argument? How do we calmly and rationally decide how to fairly split up the benefits and costs of grid-connected solar panels between utilities and customers?
I don’t see any prospect of a constructive resolution to these issues taking place anytime soon. For one thing, the two sides are highly polarized. For another, there’s a wide gulf between the two in the area of public support. I base that latter assertion on a couple of surveys from Gallup. The most recent one was conducted in March of this year and is described in the press release U.S. Support for Nuclear Energy at 51%. When asked, “Do you think that as a country, the United States should put more emphasis, less emphasis, or about the same emphasis as it does now on producing domestic energy from solar power?,” 79 percent of respondents selected “more emphasis.” In pollster-speak, that means that solar has a very high favorable rating. In the same survey, wind came in with a favorable rating of 70 percent, while natural gas received a favorable rating of 55 percent. The respondents’ least favorable form of energy was coal, which received a favorable rating of just 28 percent. That low level of public opinion undoubtedly contributed to the recent collapse of the coal industry in which the Dow Jones US Coal Index lost 85 percent of its value in just the past four years.
Consider that in another Gallup poll conducted in August 2012 (Americans Rate Computer Industry Best, Oil and Gas Worst), the electric and gas utility industry only polled at a favorable rating of 34 percent. Solar power has a 45 percent favorability advantage over the utility industry, which is huge. If solar power were running for elected office against the utility industry, solar power would spend most of her time tuning up her acceptance speech. As a result, in any conflict that can be framed as utilities versus solar power, solar power is going to win almost every time. Rare is the legislator or utility commissioner who could long stand up to such public pressure. Expect that net metering, in its present format, is going to be with us for a long time, regardless of its impact on the utility industry.
This stalemate is sadly ironic. Rooftop solar installers and advocates need the utilities and the grid they operate. Without the storage and backup services grid connections provide, we would not have the thriving solar rooftop industry that exists today. Yet few solar advocates seem to recognize how crucial a well-functioning grid is to decarbonizing the economy. They see the utilities as obstructionists. They yearn to “leave,” “escape,” or “defect from” the grid.
As for the utilities, they want to protect their lower-income nonsolar customers from subsidizing their higher-income solar customers. Accordingly, they also want to charge solar homeowners for access to the grid, but hardly anyone thinks that they’re entitled to what they assert is a fair price. When SRP recently enacted new charges that would add about $50 on average per month for solar installations, it was widely reviled. Buffeted by stagnant loads, technological change, the conflicting demands of numerous stakeholders, and attacks on their business model, electric utilities lack the public standing it would take to negotiate their way to a more stable position.
Meanwhile, back in Hawaii, the Public Utilities Commission has given HECO and the solar advocates until the end of June to work out their differences. If they can’t do so by then, the commission is going to step in and make a decision. It won’t be from a hammock on an Oahu beach, but I’ll be watching to see how this conflict turns out, and I’m sure I won’t be alone.