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Thursday, July 11, 2013

RENEW's Michael Vickerman Examines Utility Arguments Against Third Party Solar Arrangements

To: Clean Energy Choice Supporters

From: Michael Vickerman

Date:   July 10, 2013

Our grassroots campaign is beginning to catch the attention of utilities. Shortly after one county board passed a resolution in support of Clean Energy Choice, a utility representative contacted a board member and expressed his company's dismay over the vote. This representative said that the reason utilities oppose Clean Energy Choice is that third party arrangements enable customers to use less utility-provided energy, which reduces revenues to utilities. The result is that the fixed costs associated with utility electric service are spread over a smaller rate base, which drives rates higher.

Let's examine this argument in greater depth.

First, the argument can be applied with equal force to customer-owned self-generation. The impact from a rooftop solar electric system to utility revenues is the same no matter who owns the system.  If the solar system results in a 50% reduction in electricity consumed by the customer, that reduction is based on the amount of energy produced by the system relative to the amount of grid-supplied electricity consumed by that customer. The question of who owns the system is immaterial to that calculation.

Of course, the same argument could be levied against energy efficiency. If a retrofit of a building’s lighting system results in a 40% reduction in electricity usage, that reduction would be the same whether the new lights are owned by the building owner or by a third party service provider like Johnson Controls, which is in the business of saving customers money by reducing their consumption of energy. It’s interesting, though, that utilities are careful not to complain about energy efficiency’s impact on their rates, even though a kilowatt-hour (kWh) not consumed as a result of efficiency has the same effect on utility revenues as a kWh produced behind the meter and consumed on site. As with self-generation, the question of who owns the efficient lighting system does not affect the outcome.

Now, if the utilities figure out a way to overcome their basic hang-ups about solar energy, and resolve instead to provide solar-generated kWh to their customers who desire such a service, we wouldn’t be having this argument. There is nothing to prevent a utility from offering a voluntary solar service to customers. This service could be provided to any customer who wants their electricity to come from sunshine, including those who don’t have any access to sunshine on their premises and thus cannot host PV systems themselves. This is one group of potential solar customers that only the local utility can serve in a rate-regulated environment. Remember, a utility can place solar systems anywhere in its distribution system to serve individual customers who are willing to pay for such a service. But they have decided, at least for the time being, to remain fully committed to a fossil fueled future, to the point of obstructing customer efforts to supply themselves with solar energy. In so doing they are walking away from a golden opportunity to serve large subset of customers with solar energy that, due to shading or suboptimal roof orientation or lack of space, cannot be produced on their premises.  

It should be remembered that customers who reduce their consumption of fossil generated electricity through efficiency and on-site renewables furnish fellow utility customers the health and sustainability benefits of clean, non-CO2 producing electricity free of charge. The economic reward to system hosts from these pathways comes from bill savings, nothing more.  If the utilities are willing to engage in a serious discussion on a fair allocation of costs and benefits, they must acknowledge the need to incorporate adverse health and environmental impacts into the cost of electrical service, and not leave that particular tab to taxpayers.    

Summary: the question of system ownership is irrelevant to utility rate impacts.  Energy conservation and on-site generation have the exact same impact on rates. If on-site generation is undesirable from a ratepayer perspective, then so is energy conservation, if we extend the utility argument to its logical end point. And, lest we not forget, third-party contracts for renewable energy fill a void created by utility unwillingness to serve their own customers with clean resources that have demonstrated market appeal.

With each passing day, the battle lines between the solar community and utilities resistant to solar continue to sharpen, as evidenced by the four dispatches below.

Utilities Battle the Inevitable: Rooftop Solar

Beyond the Keystone Pipeline 

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