“Solar power is an obvious solution to California’s energy and environmental
problems and all barriers to solar power must be immediately removed,” said
Bernadette Del Chiaro, clean energy advocate for Environment California. “We
urge the state Legislature and the governor to immediately fix this limited but
problematic glitch and, meanwhile, urge most Californians to continue to invest
in solar power as a way to save money and the environment.”
Today’s article in the Los
Angeles Times, “Rebate rule chills sales of solar,” brings to light an
unforeseen glitch in the with SB 1, the Million Solar Roofs bill, which was signed
into law by Gov. Schwarzenegger last year and which took effect January 1,
2007. The glitch has caused some consumers,
though not all, to see an increase in their electric bills after purchasing
a solar energy system instead of the expected decrease in energy costs.
“While this situation does not impact every homeowner or
business wishing to invest in solar power it must be immediately corrected by
the legislature and governor,” said Del Chiaro. “In the meantime, Californians
throughout the state should continue to invest in solar power as a way to save
money and save the environment since for the majority of consumers the state’s
new solar rebate program still works.”
The Problem
SB 1 requires all new solar customers to sign up for what are
called “Time-of-Use-Rates” or “TOU”. TOU rates are structured to charge a
higher amount for electricity consumed during peak hours when electricity is
the most expensive to purchase, e.g, summer afternoons where a TOU rate could
be as high as 29 cents/kilowatt hour (kWh), and a lower rate for electricity
consumed during off-peak hours, e.g, during the middle of the night where a TOU
rate could be as low as 8 cents/kWh. Time-of-Use rates are not a problem in and
of themselves, or throughout California.
Rather, the problem arises in two areas. First, where TOU rates are not applied
to all ratepayers, solar and non-solar, such as in Southern California Edison territory,
and, second, where a consumer in such a territory wishes to install a solar
energy system that is too small to cover all of their peak energy needs.
Example
A homeowner in Southern California Edison territory wishes to
install a solar system on their roof. Prior to going solar, this homeowner
would pay a flat rate of 11 cents/kWh for all of the electricity consumed
during the course of a day. Say, for
purpose of example, this homeowner wished to install a solar energy system but didn’t,
for whatever reason, economic, space availability, etc., install a 4 kW system (large
enough to cover all of their peak energy needs) and instead went with a 2 kW
system (covering only half of their peak energy needs). Under a non- mandatory
TOU rate structure, where the homeowner prior to going solar paid a flat rate
for all electricity consumed throughout the day, this homeowner would still
save money on their electric bill since their solar system would cut their peak
demands in half, and similarly their electric bill.
Under a mandatory TOU rate structure, however, where TOU
rates were not charged prior to installing a solar system, the homeowner would
likely see an increase in their energy bill. This is because while before they
were paying 11 cents/kWh for all their electricity needs regardless of time of
day, now they are paying 29 cents/kWh for afternoon demands and while their
solar system cuts their peak demand in half, it doesn’t make up for the fact
that they are now paying more for the remaining electricity demands not covered
by their solar system.
It is important to repeat that were this homeowner to be
charged TOU rates prior to investing in solar power, such as is often the case
in PG&E territory, then this problem would not arise and their electric
bills would be reduced regardless of the size of the solar system. Or, if the
homeowner were to invest in a solar system that was equal to or larger than
their peak energy demands, then they would be essentially protected from the
higher rates. And, in fact, they might benefit from a TOU rate structure if
they reduced their peak energy demands and instead received a higher credit,
via net metering, for all the electricity sent back to the grid.
The Value of TOU Rates
The idea of TOU rates is a sound one as it encourages
conservation during peak demand times by charging a higher rate for more
expensive electricity. When TOU rates
are not limited to solar customers, but rather are applied to all ratepayers,
they can be a powerful tool to encourage conservation and efficiency during
summer months when the California’s
electricity grid is highly stressed and air pollution also at its worst. Further,
when TOU rates are applied across the board they can actually provide an
economic benefit to solar consumers since it places a higher value for all the
electricity sent back to the grid and credited via net metering.
The Solution
In the short term, the solution to this problem is to amend
SB 1 to allow TOU rates, but not require them for all new solar customers.
The decision should be up to the individual consumer. In the long term,
however, the solution is for California to apply TOU rates to all ratepayers,
regardless of whether they invest directly in their own solar system or not. This
policy would not only encourage more conservation and efficiency during
California’s peak energy demand time periods but it would further incentivize
solar power as the value of energy saved and energy generated by the solar
system goes up.
“Environment California
strongly urges the legislature and the governor to immediately pass an
emergency bill to restore optional
TOU rates to California’s
solar consumers,” urged Del Chiaro. “Such a bill would require a 2/3rds vote
in both the assembly and senate, and thus strong support among both Democrats
and Republicans, but would take effect in a few months. In the meantime, most Californians
should continue to invest in solar power as this particular does not impact
everyone.
