Editor’s note: This commentary is by Bob Amelang, who is retired after working 26 years as an electric power engineer for Central Vermont Public Service/Green Mountain Power. He lives in Rutland.
[S]olar opponents can be cast as self-centered not-in-my-backyard people, who value their own scenic views more than saving the planet. Thus their arguments appear selfish, even if understandable.
But there is another reason for Vermonters, regardless of their proximity to new solar projects, to be concerned. Vermont’s rapid growth of solar power has a considerable financial cost. Since there are many ways to limit carbon emissions, we must consider the cost of solar in comparison to other alternatives. Instead of “Not in My Back Yard,” we might say: “Not Out of My Back Pocket.”
We must ask: how much will electric customers pay for future solar generation? And how does it compare to limiting carbon in other ways? Also, we must get answers from unbiased sources, which would exclude the politically influenced Vermont Department of Public Service.
Solar power projects can be divided into two types: customer owner net-metered projects and larger projects owned by investors or utilities. “Net-metered” means that solar energy generation offsets energy formerly purchased by electric customers. Net-metered solar projects effectively sell energy at retail rates while the other type projects sell solar energy at wholesale. While both solar types cause upward pressure on electric rates, I will focus here on net-metered solar, in response to a new DPS report.
The DPS report, “Evaluation of Net Metering in Vermont Conducted Pursuant to Act 99 of 2014,” states that the net cost to non-participating customers (those that do not install solar) due to net metering is close to zero.
I disagree. Net metered solar projects shift costs from solar owners to non-participating customers.
The DPS report states that Vermont’s net metered solar capacity is experiencing rapid growth. If such growth continues, there will be noticeable rate impacts.
To understand the cost shifts, consider a sample 100 kilowatt solar project, which generates 120,000 kilowatt-hours annually. Let’s assume the power generated is equal to the customer’s annual usage. (I chose 100 kw for simplicity.)
At a typical energy rate of 15 cents per kilowatt-hour the customer had been paying the utility $18,000 annually for energy. This rate compensates the utility for fixed costs like employee salaries and infrastructure-related costs like poles and wires, as well as for variable energy costs.
After installing the solar project, the customer pays the utility nothing for energy because his solar array is generating as much energy as he formerly used, on an annual basis. In addition, the customer receives a solar credit of $7,200 a year (120,000 kilowatt-hours times 6 cents per kilowatt-hour).
The solar generation reduces costs for the utility, but not by $18,000. Why do I say that? Because some of the utility’s costs for serving the customer (when the sun is down, for example) remain even though the customer is generating as much energy as he formerly purchased. Many of the costs of maintaining the electric grid remain even after the solar project is installed. If fact, the grid must operate for the solar project to function.
My calculations show roughly a third of the customer’s previous annual bill of $18,000 supports the fixed costs of maintaining the grid. In other words, when the customer generates his own energy, he is only saving the utility $12,000 — the cost savings due to the solar project.
Yet he receives credit for the full $18,000. He has done nothing to relieve the utility of infrastructure costs that remain after the solar project is installed!
In this example, the solar generation results in a net cost to the utility of $13,200. The utility has $7,200 of payments (required for 10 years) and continues to have $6,000 of fixed infrastructure costs that the customer no longer pays. Does the utility ask its stockholders to make up this difference? No, it increases rates to cover the shortfall. The solar owner does not pay any energy charges, because his solar generation supplies his electric use. Thus non-participating customers pay all these costs.
So far, such rate increases have not been noticeable, because net metered solar generation and its resultant cost impact has been small relative to other utility costs. But the DPS report states that Vermont’s net metered solar capacity is experiencing rapid growth. If such growth continues, there will be noticeable rate impacts. My calculations show annual cost impacts to non-participating customers of $25 million-$33 million by 2017.
Vermonters should be concerned about these cost impacts from continued rapid growth in net metered solar generation. Another concern is that utilities may reduce grid maintenance spending to offset solar cost impacts, thus reducing reliability.
