Not just California: Solar battles raging across U.S.
California has more rooftop solar installations than any other state, and it isn't particularly close. But the Golden State is far from the only place where the solar industry and utility companies are clashing over how much money solar customers should be allowed to save.
Officials in 24 states have recently changed or are debating changes to rate structures for solar customers, according to a report released by the N.C. Clean Energy Technology Center earlier this month. Many of those battles mirror the one taking place in California, where utilities like Southern California Edison say homes and businesses with solar panels need to pay more.
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There's a reason all these battles are happening now: As rooftop solar prices fall, the industry is growing more quickly than ever. That growth has reduced planet-warming carbon emissions, but it's also thrown the utility industry into a panic about its long-term ability to make money, clean energy advocates say.
"Utilities are playing defense in a lot of states, and seeing solar as a threat," said Ben Inskeep, a policy analyst at the N.C. Clean Energy Technology Center at North Carolina State University and lead author of the report. "Distributed solar is a threat to the current utility business model."
Utility officials say they don't see rooftop solar as a threat and aren't trying to raise costs to kill the industry. Rather, they argue, they simply want homes and businesses with solar panels to pay their fair share to maintain the electric grid, so those costs aren't unfairly dumped on non-solar customers.
“Solar customers remain connected to the power network, which provides them energy when the sun is not shining, when bad weather blocks its rays or when the home uses more power than the rooftop system produces,” Caroline Choi, Edison’s vice president for energy and environmental policy, said in a blog post on the company’s website earlier this year.
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Academic experts studying the "cost shift" from solar to non-solar customers have generally found that it exists, but that many more people need to go solar before the problem becomes serious. Regardless of who's right, utilities see the rapid growth of rooftop solar as an issue that needs to be addressed now. And they're the ones driving the national debate by seeking regulatory changes, state by state.
“Distributed solar has been the biggest issue, but in general utilities are facing flat or declining growth as efficiency improvements take place, and as more on-site renewable energy options become affordable," Inskeep said. "Even energy storage is becoming more and more affordable. I think all these trends are triggering a concern among utilities that they need to take this seriously."
California solar firms clash with ratepayer watchdogs
In California, the three major utilities — Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric — have proposed slashing the rates that solar customers are paid for the electricity they don't use themselves. Edison also wants to charge solar customers special monthly fees, based on the size of their systems
PG&E and SDG&E, meanwhile, have proposed "demand charges," which would be based on a homeowner’s highest demand at any given moment in a billing period. All three utilities say they expect solar to keep growing quickly under their plans.
The California Public Utilities Commission is expected to issue a preliminary ruling on those proposals in December. In the meantime, Californians can look to other states — including Arizona and Nevada — to see how similar battles are playing out elsewhere.
Arizona: Salt River Project
Ask anyone in the solar industry about the impact of new fees, and they'll probably bring up the Salt River Project.
The Salt River Project is a public utility that provides electricity to one million people in the Phoenix area. Earlier this year it imposed new costs on solar customers, adding a "demand charge" that it said would add $50 to the average solar customer's monthly bill.
The impact was immediate. According to the utility's most recent data, rooftop solar applications were down 95 percent from December 2014 through September 2015, relative to the same period the year before. Of the 214 customers who applied after the new fee took effect, just 98 actually installed solar panels during that time period — compared to nearly 4,200 the year before.
"Demand charges have little to do with cost equity and everything to do with killing rooftop solar," said Jeff Spies, senior director of policy for Quick Mount PV, a solar equipment manufacturer in Chandler, Arizona. "They are an extraordinarily efficient, effective way to minimize the consumer’s desire to install solar."
A Salt River Project spokesperson didn't respond to requests to comment for this story. A utility consultant said earlier this year that the new fees were needed because solar customers are shifting as much as $10 million per year in costs onto non-solar customers.
SolarCity, the country's largest residential solar company, is suing the Salt River Project over its demand charge, which it argues is an effort to maintain monopoly control over electricity delivery. A federal judge ruled last month that the lawsuit could go forward.
"The market wasn’t able to react or recover. To this day, Salt River Project only has a trickle of demand coming in," said Kim Sanders, a senior manager for public policy at Sunrun, a national solar installer.
Record year for solar, with California leading the pack
At the same time as it implemented the demand charge, the Salt River Project lowered electricity rates for homes and businesses with solar panels. But that also means those customers are paid less for the excess electricity they send onto the grid.
“I’ve got to give them credit — it was genius. It was diabolically intelligent," Spies said.
Arizona: Arizona Public Service
Arizona's largest utility, which provides electricity to 1.2 million people, hasn't moved as quickly as the Salt River Project to raise costs for solar customers. But clean energy advocates fear a repeat of what happened in Salt River Project territory.
Two years ago, the Arizona Corporation Commission — which regulates utilities — approved an Arizona Public Service request to add new fixed charges for solar customers. Those monthly charges amounted to 70 cents per kilowatt — nearly $60 per year for the average residential system.
Utility officials have been arguing ever since that 70 cents isn't enough. The utility's average solar customer is currently paying $67 per month less than it costs to serve them, said Greg Bernosky, director of state regulation and compliance at Arizona Public Service.
“We’ve been thinking about this for a while, and have done a lot of public discussion about this topic," Bernosky said. "We certainly have identified a cost shift.”
Earlier this year, the utility asked permission to impose a much higher monthly charge: $3 per kilowatt, which would come out to about $250 per year for the average residential system. But Arizona Public Service withdrew its request after an intense public backlash, agreeing to hold off further proposals until a regularly scheduled electricity rate proceeding before the state commission next year.
That proceeding is likely to cause controversy, especially because of concern that regulators are biased in the utility's favor. Members of the Arizona Corporation Commission are voted into office by the public, and Arizona Public Service is widely believed to have spent $3.2 million in "dark money" to help elect two commissioners last year. The utility has refused to acknowledge the spending.
For now, the commission has ordered a study to determine the costs and benefits of rooftop solar, the results of which it will use to help evaluate Arizona Public Service's proposals. Eleven other states are pursuing similar studies, according to the N.C. Clean Energy Technology Center report.
Nevada: NV Energy
When it comes to the current status of "net metering" programs to support rooftop solar, Nevada is probably the closest parallel to California. As in California, the state's Public Utilities Commission is supposed to determine a new cost structure by year's end.
NV Energy, which serves 2.4 million customers, has proposed demand charges like those levied by the Salt River Project. The utility also wants to lower rates for solar customers, which means they'd be paid less for the electricity they send onto the grid. As in California, those changes would only impact new solar customers, leaving the old structure locked in for homes and businesses that sign up before the new system takes effect.
Rick Gilliam, a program director for the national advocacy group Vote Solar, calculates that the average Nevada solar customer would see his or her monthly bill rise by $40 under NV Energy's proposal.
"Clearly, any time it costs more to do something, fewer people will do it," Gilliam said.
Utility companies have traditionally levied demand charges on businesses, which have much higher electricity demand than homes. The goal of these charges is to limit "peak demand" by penalizing customers for consuming huge amounts of energy at any one moment. If many consumers avoid those moments of high demand, the thinking goes, utilities can avoid the need for new power plants, while limiting the costs of maintaining the grid.
The problem with demand charges for residential customers, Gilliam said, is that it can be difficult for individual homes to manage their electricity consumption in the same way a business can.
"Customers don’t know when the peak is going to occur. They don’t understand how many appliances would be on at the same time for them to set a new peak, and how much each appliance uses," Gilliam said. "The whole issue is really unrelated to solar. The reason I think the company wants to do it is because it acts like a fixed charge."?
NV Energy officials didn't respond to a request for comment for this story.
New electricity rates could help businesses go solar
Whatever happens in Nevada and elsewhere, the ongoing debate in California is likely to have the biggest impact nationwide. About 50 percent of the country's rooftop solar systems have been installed in the Golden State, where abundant sunlight, robust incentive programs and a heightened environmental consciousness have driven the industry's growth.
The impact of higher costs in California and other states could be especially severe if a 30 percent federal investment tax credit for solar expires as scheduled in 2017. It's impossible to know if Congress will renew the tax credit.
"What happens with net metering in California could have a big impact on the overall market," Inskeep said. "It could be a very grim immediate outlook for solar in the United States."
Sammy Roth writes about energy and water for The Desert Sun. He can be reached at sammy.roth@desertsun.com, (760) 778-4622 and @Sammy_Roth.