I just moved into a new construction house in Colorado with a substantial (23kW) solar installation. It’s been interesting to see how much, in the words of the author, ‘feeding bread to pigs’ I have ended up doing.
The solar installation (which is probably larger than optimal) is dictated by the policy for the house to be “net zero”, which in turn is dictated by a policy based on the size of the house. (In practice, solar is the cheapest way for the builder to get all the way to ‘net zero’ after the usual decent insulation, windows, etc.)
So that’s how I got solar, but now I want to turn it on. Well, this is not in the interest of the utility at all (they lose money), but they still by policy get to ‘approve it’. This required a many-month (and many phone call) process of reviews, approvals, etc. which concluded in the utility activating (installing a meter for) the installation. In total it was maybe 9 months from when the solar was all wired up and sitting in the sun until it was producing any electricity for the world!
Now the utility gives me a choice of two billing options. At the end of each month, excess energy I’ve generated can either be put in a kWh bank and rolled over as credit, or it can be paid out. However, the payout is hilariously low (like $0.01/kWh) so of course everyone chooses the bank.
But now incentives are all screwed up! Since I easily generate more electricity that I will ever use (see above for why policies drove us to an installation larger that necessary) my household has no incentive to conserve at all. E.g. I am heating my garage with an electric heater because it costs me zero.
So the net effect of all of these policies intended to promote conservation are:
1) To drive up the price of housing in an area where that is already one of the big challenges the community is fighting
2) To completely disincentivize any actual conservation
3) To have new solar installations laying fallow for 6-9 months
I don’t know what the solution is, but the problems are pretty easy to see.
> Since I easily generate more electricity that I will ever use (see above for why policies drove us to an installation larger that necessary) my household has no incentive to conserve at all.
... so? You're generating energy from the sun. Feel free to use it all. We don't conserve energy for fun, we conserve it to protect the environment.
You comment makes sense if I was not hooked up to the grid. But I am. So, if my family conserves, that energy we save offsets someone else’s coal-generated energy and helps the environment. But I have zero incentive to so do because of layers of bad policies.
Yeah, in the current market you're correct, but we should be concentrating on creating an excess of cheap power (carbon free of course) rather than conserving.
Yes, exactly this. Iff there is more than enough free solar (or nuclear) energy, then our goal should be to maximize energy used per capita and minimize energy only for specific activities, because energy is a proxy for utility.
But isn’t that extremely far from current reality? I mean is there really free energy? And even solar, wind and nuclear is not without environmental and economical impact. Shouldn’t we focus on trying to optimize our energy use and to try to do as much utility as possible with as little energy as possible?
That's not just a problem with being hooked up to the grid so you can altruistically use less of your own energy and donate the rest to other people.
It's also a problem for billing Dave Rosenthal appropriately. Assuming he turns on lights at night, he's not using his own energy. No amount of solar generation will let you use power when the sun isn't shining. So he's not reducing the demand for (say) coal at night.
But because he's being billed wrong, rolling over daytime power he doesn't use as if it were the nighttime power he does use, people still think he is.
It'd be interesting to know the "true" price of that energy. That is, what the utility would pay you for what you feed back into the grid vs. acquiring that energy from another source. Essentially impossible to calculate given all the regulations and subsidies, but my guess is that it would be quite low relative to your metered rate, and thus the actual "offset" of carbon-based fuels is small.
In the UK, one company gives different buy and sell prices every half hour based on live market rates. [1] You can see that the 'buy back' rate is only about half of the sell rate most of the time.
This is still pretty distorted, because many taxes and distribution fees charged on electricity sold are not refunded on electricity bought back.
> E.g. I am heating my garage with an electric heater because it costs me zero.
There's very few situations in which pushing electrons through a resistor is the best use of the electrons. Why not build a BOINC farm for the winter or something? You put 1000W through a heater, you get 1000W thermal. You push 1000W through a collection of computers that are old and more or less free, you get... still 1000W thermal, plus compute.
If you ask in the right places, you can get some older computers that don't work for people anymore nearly free - think about 1st-5th gen Intel Core stuff, random spinning hard drives, inefficient old 80+ Bronze PSUs, etc. For heat, they all work just fine, and do something productive in the process.
If I have surplus electricity, I heat my (solar, off-grid) office in the winter exactly this way - on some random old 4th/5th/6th gen Intel stuff I got cheap to use in this way. I used to run climateprediction.net stuff, but they're out of work, so I mostly throw cycles at World Community Grid during daylight hours.
Heating is not just room temperature. For who prefer radiant heating, resistor heater is easier option. Possibly heat pump based radiant heater is available but temperature is not high as resistor.
The first is that if he weren't frivolously moving electrons through his heater, there would be more to feed to the grid for other people. So there is an opportunity cost of reducing CO2-generating energy production elsewhere.
The second is that he installed a much bigger array than optimal, due to regulatory requirements, and that too has up-front environmental consequence. Since he's burning off that excess electricity rather than feeding it to the grid, there's really no redeeming value to an array that's too big.
I don’t understand this attitude at all. Your first “cost“ is like saying there’s an opportunity cost to my purchasing bubble gum and putting it on a shelf because other people can’t chew that bubble gum and I’m not chewing it yet.
Well one thing you can do is try to figure out the approx. carbon output of those extra panels and buy trees to help remove an equivalent amount from the atmosphere so you can offset the carbon output. Of course you are spending money doing this and one must consider the carbon emitted in the process of earning that money. Depending on his circumstances this could be very little or none.
The markets and incentives are pretty screwy right now, but overbuilding solar is probably one of our best strategies at preparing for the future in the current moment. There are a number of reasons for this, in no particular order:
Batteries still need to come down in cost before they are economical for residential energy storage. But once they become cost effective, they are fairly easy to add to existing installations, where as adding additional panels is much more difficult.
EV adoption is going to mean much more demand in the future. And the nice thing about EV's is they are great for flex demand, i.e. we can charge them when the sun is out.
Electrification of homes means we need to provide enough capacity to meet demand in both the summer and winter months. Due to solar output being much lower in winter, and because solar is so cheap, it makes sense to build a large enough system to cover winter demand (it might not be the most economical decision right now for the individual, but this is the best path forward for getting to a 100% carbon free grid).
Basically, our best strategy in the current moment, with current incentives is to just massively overbuild solar. As you have discovered, this is a bit wonky in practice, especially thanks to utilities pushing back heavily on residential solar (see PG&E). In the meantime, maybe consider taking the $0.01 payout, or get a bitcoin miner, or better yet use your excess electricity to power a DIY algae farm and help remove CO2 from the atmosphere.
Solar panels have a ~20 year life and are also getting cheaper as time goes on. Maybe building mounting capacity for them is smart, but it's not necessarily smart to more panels than you will properly use. You can buy more panels later if it actually becomes smart to use them and you have a use case.
The panels are dirt cheap compared to the other costs (installation, permitting, inverters, etc...). I suspect that the installation costs and any permit modifications required during the expansion would greatly extend the ROI timeline vs just including the panels in the initial install. If you were really trying to save costs, maybe you could significantly undersize the inverter, as those tend to only last 7-8 years, and you would only suffer losses during the peak hours in the summer months when you are likely to have way more energy than needed.
More generally, overbuilding is not really going to be economical right now. We do not have the proper incentives in place for that. But from what I can tell it is our quickest/cheapest path to a sustainable grid, and that likely means we will need to adjust our consumption patterns to account for the absurd amount of excessive power we will have in peak solar months (usually late spring). This means we will need to start developing power intensive applications that can take advantage of free (and possibly negatively priced) power. So if you want to get ahead of the curve, put a massive solar system on your roof and start thinking up interesting ways to use that excess power.
This frightful story reminds me of Dan Luu's recent piece on Cocktail Party Theories [1], among other things about the "error of taking a high-level view and incorrectly assuming that things are simple". As so often, the devil lies in the details.
Rather than wasting it and never consuming what you have in the kWh bank why not just feed it into the grid?
Feed in prices will change as the world moved to more solar.
If you are concerned you can buys a battery to ensure you never take from the grid.
> I don’t know what the solution is, but the problems are pretty easy to see.
In part, you should only be able to get net metering if you have a battery that the power company can control. Thus you benefit from cheaper electricity, and the power company benefits because they can control when the electricity enters the grid.
> I don’t know what the solution is, but the problems are pretty easy to see.
In theory, if you were dealing with one entity, it could be pretty easy.
But you are actually dealing with multiple entities:
- your utility’s transmission subsidiary
- your utility’s generation subsidiary
- your applicable regulatory entities
- your regional grid operator/planning organization
> Well, this is not in the interest of the utility at all (they lose money), but they still by policy get to ‘approve it’. This required a many-month (and many phone call) process of reviews, approvals, etc. which concluded in the utility activating (installing a meter for) the installation.
Your utility would much rather just say no and be done with it.
They similarly have no financial interests in operating a Kafka-esque bureaucracy that requires them to staff entire departments that are a net drain on their revenue.
But they are obligated by the state regulator to have a uniform framework and process for electricity generators (which you are now) to interconnect with their transmission network (you to their lines).
This pulls you into the category of safety, reliability, and financial requirements which are typically only applied to commercial generators.
The primary things the utility (both transmission and generation) wants to avoid is backfeeding and islanding — the former is dangerous to linemen, the latter is dangerous to your neighbors’ equipment.
> However, the payout is hilariously low (like $0.01/kWh) so of course everyone chooses the bank.
The payout for generation is negotiated by three entities: the regional grid operator which is committing to purchasing capacity, the utility’s transmission operator which charges to interconnect and deliver your power, and the state regulator who has the FINAL say on rates.
Additionally, your utility along with every other utility in America is engaged in demand management programs.
The TL;DR version is utilities pay tens to hundreds of millions of dollars to vendors over the span of a multi-year contract to REDUCE electric demand.
This typically manifests itself to retail customers the form of free Nest thermostats, time of use programs, and subsidized appliance efficiency upgrades (or rebates).
If they could redirect this money to small generators like yourself and have the same impact, they would drop their demand management programs in a heartbeat (and the regulatory obligations that come with it).
I wrote this on my phone, so I can’t easily list references, but I did use a number of searchable terms that will lead you in the right direction.
> This typically manifests itself to retail customers the form of free Nest thermostats, time of use programs, and subsidized appliance efficiency upgrades (or rebates).
> If they could redirect this money to small generators like yourself and have the same impact, they would drop their demand management programs in a heartbeat
The catch is that the power from small solar generators isn't as valuable as demand management loads, because solar generators aren't controllable - the grid has to just absorb the power they put out regardless of whether it needs it.
Now, if every solar installation had its own battery system that could provide power back to the grid on demand, that would be an equivalent service. And in fact in many places (Vermont [1], parts of California[2]) there are programs starting or in development to do exactly that: buy energy back from residential batteries.
Having recently installed a battery, I'd say they are definitely not cheaper. There is no way that residential battery storage can match the cost per kWh of utility scale storage.
At much less per house you can build massive utility scale storage, like pumped hydro.
However, these are complementary technologies, serving different time and scale of energy storage and duration. Home batteries aren't realistically going to solve storage on the weeks to season timeframe. They function on the order of hours to a couple days, and during local distribution outages.
Building grid scale storage still means grid itself needs to be updated for the increasing loads and spikes.
And I'm talking here smart batteries - controlled by grid owner. How it's not default (including solar, cars and other high load devices) it's a bit of a puzzler. Sure it's like 5 minutes of inconvenience for the owner, but saves trillions of dollars.
Maybe it's just me, but I don't get how any of that translates to a defense of the utilities' overall behavior. (Though I appreciate the context -- thanks!)
Why can't they like, suggest to the relevant authorities, that it be refactored along more logical lines, where solar power generators have the appropriate checks for safety (before feeding into the grid), and are paid a significant fraction of the value their power adds to the network?
I don't expect them to be Remy-Danton-grade workaholic lobbyist heroes. But if they recognize that there are perverse incentives, why aren't they pushing, however gently and tepidly, for natural fixes to the misalignment of incentives?
If you were in a startup that had fundamentally screwed up incentives that prevented the optimal solution, you (like most here) would probably at least start writing the document that outlines what the system should look like, and push a little towards its implementation.
So where is that document? Why is their first reaction to create this passive-aggressive Kafkaesque barrier to integrating solar, knowing that it slows down solar roll-out and our efforts to decarbonize?
Why can't they answer the criticisms as, "oh, yeah -- you're preaching to the choir here. This is how we'd prefer it work, but we can't get the others to agree."
If they actually do that, then I accept that they may be operating in the least bad option. If not, they are making the problem worse, and do merit the criticisms levied at them here.
> Maybe it's just me, but I don't get how any of that translates to a defense of the utilities' overall behavior.
It's not a defense of utilities, it's more about shining a light on regulatory actions.
I referenced the regulatory parts several times because that's the largest factor of what they can and cannot do. For example, in most states, an electric utility must first seek regulatory approval to raise prices even for emergency infrastructure repairs.
> Why can't they like, suggest to the relevant authorities, that it be refactored along more logical lines, where solar power generators have the appropriate checks for safety (before feeding into the grid), and are paid a significant fraction of the value their power adds to the network?
The resulting Kafka-esque bits were what regional grid operators and regulators jointly required _a long time ago_ as part of the transition to a "deregulated" electricity market (e.g. this was not enacted in response to solar).
Those bits effectively add up to "make sure your power source(s) meet these bullet points before connecting them to the grid because we don't want unreliable power... or we'll fine you heavily for non-compliance and/or revoke your authority to operate in our territory".
If you, as a private commercial entity wanted to build a large-scale solar farm (or what's more typical nowadays: a cogeneration plant), you would probably go through the exact same process you went through with maybe a handful of extra steps, but not many more.
> But if they recognize that there are perverse incentives, why aren't they pushing, however gently and tepidly, for natural fixes to the misalignment of incentives?
For a more detailed example that's relevant to your area, take a look at ERCOT's interconnection guide[1] and a review document from UT Law about the current status and legal barriers to greater adoption of renewable energy in ERCOT territory[2].
Yes, it would be ideal if the the regulators could make a carve out for non-commercial, small-scale generators and allow it at cost or a state fund to draw from (e.g. if you're the only one in your neighborhood doing net metering, then someone has to bear the cost of say, pole-mounted capacitor banks: you, the state, the utility, or some combination thereof).
> If you were in a startup that had fundamentally screwed up incentives that prevented the optimal solution, you (like most here) would probably at least start writing the document that outlines what the system should look like, and push a little towards its implementation.
There are a slew of investors who want things relaxed so they can enter these markets.
Currently, that battle is being fought (and won) by entities known as distributed generators. These tend to comprise of the folks who are selling PV systems to homeowners for $0 down in turn for you leasing it to them but the giant caveat is they keep 100% of the credits/revenue from net metering. (Think of SolarCity, etc)
And to address the primary hurdles with the startup approach are:
1. Regulators like large entities to deal with and enforce regulations, not several entities. They will push back to make their lives easier.
2. If you ask a large company (or group of investors) to fight on your behalf, they are going to fight for what benefits them not necessarily you.
There are consequences to going rogue in a regulated industry. Specifically, going against the grain is what caused Uber to be disallowed from operating its ride share services in Austin for some time.
> The resulting Kafka-esque bits were what regional grid operators and regulators jointly required _a long time ago_ as part of the transition to a "deregulated" electricity market (e.g. this was not enacted in response to solar).
That’s not the part I was referring to as Kafkaesque. I meant the part where the OP had to go though an obscured workflow and wait over months to receive slow replies just to get the process moving to be paid for their solar contribution.
If it was a long time because that was an inherent difficulty of complying with necessary safety regulations, I would not call it Kafkaesque. But here, it’s where there are obvious attempts to scare off all but the most diligent, just to get the super-watered-down version of being paid.
Ditto for stuff like “you can only trade energy within the same time bands because we have no concept of a conversion factor between different time bands”.
> I meant the part where the OP had to go though an obscured workflow and wait over months to receive slow replies just to get the process moving to be paid for their solar contribution.
This is the same workflow that commercial entities go through but employ an army of lawyers as expensive lubrication to keep the process moving.
> If it was a long time because that was an inherent difficulty of complying with necessary safety regulations...
Forgive me if I'm wrong here, but I think you're classifying regulations as primarily for safety reasons. The important part here is regulations determine not only safety, but who can participate, what are the required qualifications[1], who gets paid, and what they get paid[2].
> But here, it’s where there are obvious attempts to scare off all but the most diligent...
Yes, the regulations are fully meant to scare off anyone who isn't diligent (or the word they would prefer is "compliant").
> ...just to get the super-watered-down version of being paid.
This might be a bit of hyperbole, but it's probably because the end goal is to eliminate net metering[3].
The telecom industry went through the exact same thing in the late '90s, early '00s. Its version of net metering is called "reciprocal compensation" (based on call flows). Regulators and incumbent lawyers worked in tandem to chip away at this until the rates were so low it didn't matter.
> Ditto for stuff like “you can only trade energy within the same time bands because we have no concept of a conversion factor between different time bands”.
Hoo boy, look at page 4 and 5 of that TX PUC document[3] where the regulators make a decision to disallow the utilities from using meters that would allow for net metering due to time bands.
> This is the same workflow that commercial entities go through but employ an army of lawyers as expensive lubrication to keep the process moving.
And? How does that make it any more defensible in the context of the point I was making there? What is that replying to?
> Forgive me if I'm wrong here, but I think you're classifying regulations as primarily for safety reasons.
No, I was referring back to your own claim[1] that some of them are for that reason:
>>> The primary things the utility (both transmission and generation) wants to avoid is backfeeding and islanding — the former is dangerous to linemen, the latter is dangerous to your neighbors’ equipment.
And then using that in a hypothetical to clarify what I would vs would not count as Kafkaesque processes intended to scare off solar users (vs satisfy an inherent domain constraint).
I don’t know what, once read in context, would give a different impression.
> This might be a bit of hyperbole, but it's probably because the end goal is to eliminate net metering[3].
Yes? That was my point all along? That rather than make token efforts to get the incentives in alignment, they’re just stubbornly fighting things that would benefit solar because “sigh, more work [as things currently stand]”.
> Yes, the regulations are fully meant to scare off anyone who isn't diligent (or the word they would prefer is "compliant").
You’re mixing two separate issues there. Yes, we want people to comply with regulations. No, we don’t want to trick people into not selling their solar because they failed to keep calling and escalating their tickets to an agency that ghosts them. I was referring to the latter, and for some reason you’re redefining the point to refer to the former, and then acting like I don’t understand why we’d want people who can follow regulations.
> Hoo boy, look at page 4 and 5 of that TX PUC document[3] where the regulators make a decision to disallow the utilities from using meters that would allow for net metering due to time bands.
I’m not sure what that means since it’s not a coherent claim, as I understand the original issue, which was whether you can apply credit for power supplied in one time to power drawn at a different time *on your bill.
So “crediting you for your power contribution” is an accounting-level concept, not a hardware-level concept. You trade energy at one time for energy at another time via accounting; you don’t need special meters for it beyond their ability to know when the power passed through. (Unless you’re saying that they prohibited meters with any awareness of time, which is doubtful since they still would need to use billing periods.)
> And? How does that make it any more defensible in the context of the point I was making there? What is that replying to?
> Yes? That was my point all along? That rather than make token efforts to get the incentives in alignment, they’re just stubbornly fighting things that would benefit solar because “sigh, more work [as things currently stand]”.
It's not defensible. I'm stating what exists today and it's uniform for GiantPowerMegaco who wants to bring on megawatts of capacity or the Doe who just wants to light up a few panels on their roof.
My overall points have been a) this is entrenched for a long time and b) the utilities are not the primary ones making the rules. Regular people may be noticing the friction now due to increased touch points via solar, but it's not in response to solar.
They did not calcify overnight. No, that doesn't make it right but it does make it harder to change. So things that are long entrenched but need change usually get the "sigh, more work" response and lots of push back.
> No, I was referring back to your own claim[1] that some of them are for that reason
> ...you’re redefining the point to refer to the former, and then acting like I don’t understand why we’d want people who can follow regulations.
I'm not redefining the point but I should have referenced that I was reacting to the callout of safety but the other aspects play into it just as much.
It's not my intention to imply you don't want people who can follow regulations -- it's more about clarifying that if one has to play in a regulated space you accept the whole pie and all its hangups, literal or figurative. Or not participate until the pie becomes more palatable.
The reason I mention law firms that operate in this space is they are generally ranked for their experience and ability to navigate around these confusing, slow, or non-existent responses from these agencies.
> “Crediting you for your power contribution” is an accounting-level concept, not a hardware-level concept. you don’t need special meters for it beyond their ability to know when the power passed through.
I guess my personal hangup here is on not allowing meters to rollback or "reverse".
The portion of the document I referenced is where the PUC says you cannot use a rollback meter for net metering but must instead use a meters specifically capable of measuring in-flow and out-flow.
They go on to state the reason for measuring out-flow is to determine when the energy was made available to calculate the wholesale market price at that given point in time.
In Sweden there are 2 separate charges, one for infrastructure and one for consumption. The infrastructure bill scales with how big your breakers/fuses (English) are while consumption scales with how many KWh you've used. You often have a different infra provider and power provider.
For someone living in a condo/apt the infra cost is usually higher than consumption while in houses where heating often is powered by some heat-pump system(drill, air, ground) consumption is higher.
Houses with district heating can scale down their capacity to lower the infra price.
Basically, based on breaker size. If you have a 400A breaker you might pay $2,000 / month demand charge. Usage might be small (sometimes these loads are spikey). It's not uncommon for folks to then pay more attention to peak load if you pay based on breaker size effectively.
this is a form of two-part pricing[0], which is a compromise between simple (single) pricing and continuous pricing (aka perfect price discrimination) to maximize value capture with minimal complexity.
two-part pricing also tends to make markets (from the demand-side) more rational and efficient, but that's not often the reason it's employed, which is why regulation is often needed (particularly in monopoly markets).
It seems like what is getting lost here is that the reason PG&E only charges for usage and not a fixed connection fee is that that's what the state wanted. They wanted heavy users to pay a disproportionate share of costs to encourage lower usage. In fact, they even put in a "climate credit", which is a fixed rebate users get that effectively makes the connection fee be negative.
It's capacity pricing. If you want to buy same-day tickets for your whole family to board a full flight, the airline will sell the tickets to you, but it might be at a 5x or 10x mark up. The airline is betting that they'll be able to talk people into forfeiting their seats by giving them airline credits, and tickets on a later (less crowded) flight, then pocket the difference.
Expecting the airline to give you and your giant family a discount in the situation is obviously absurd. When you're at capacity, it's in your best interest to encourage people to shift their consumption to off-peak times, and to punitively charge the people that insist on consuming a disproportionate amount during full capacity.
It's a matter of tradeoffs. California electric companies – and PG&E in particular – desperately need to decrease load during fire season so that they have more flexibility in the grid. It's important for them to try and disincentivize power usage pretty much however they can.
Plus, using less power is better for the environment.
Is using less power really better? People are going to use energy and this is driving loads to other sources of energy, typically gas. Most (but not all) people I know are avoiding electrification on economic grounds.
It's a disservice to the high-usage customers, who want to offload their environmental costs onto their grandkids and/or countries less equipped to deal with climate change. Soak 'em, I say.
Yes, this model is common in other utilities in the US (both by water and gas bills are structured this way), with a large meter fee and a consumption charge in line with the resource cost.
Electricity could certainly be charged this way (and should), but it would be a huge change in how electricity is billed here, and the PUC would rather just make changes to just the net-metering system rather than open the can of worms of a full rate re-write.
But that's the problem! The cost of the grid is the same whether it delivers you 100kWh or 10,000kWh. The delivery charge should be a fixed monthly charge, based on the size of your meter, not scaled to the number of kWh you consume.
That's not true at all, as people use more electricity, aggregate usage gets higher and the grid eventually needs beefier interconnections, beefier transformers... The delivery charge would actually be fairer based on peak usage, as it has more relevance to the sizing of the grid.
> That's not true at all, as people use more electricity, aggregate usage gets higher and the grid eventually needs beefier interconnections, beefier transformers...
To a degree, but not in a linear fashion to the amount of power delivered, and certainly not on a unit-power delivery basis.
>The delivery charge would actually be fairer based on peak usage, as it has more relevance to the sizing of the grid.
Very true, and also very common in commercial power billing, usually called a "demand charge" where you pay a specific tariff based of that peak of usage. Unfortunately, it can create really spikey and hard to manage bills, so I accept the argument that it's not appropriate for residential use. Thus, a flat charge on your meter size. On many commercial bills, the demand charge can exceed 75% of the total bill!
Even demand charges often do a bad job of matching utility costs. If I run a church and my peak demand is consistently reached at 11 AM on Sunday morning, guess what, I'm way overpaying relative to my cost to the utility.
The problem with high meter charges (or charging based on panel amperage/etc.) is that it doesn't do a good job matching utility costs either. Let's say I have a 2-story house and split it into a duplex. I add a second panel on the top floor and live on the bottom. Did my second panel double costs for the utility? Absolutely not. If I build a carriage house in my backyard with a 200 amp panel, does it cost the same to the utility as if I put a 200 amp panel on my new house in my far-off exurb? Absolutely not.
That's not to get into the distributional effects of these kinds of changes. Any kind of base-rate increase will absolutely hammer the poor in order to save lots for suburb mcmansions. This may be economically more efficient, but good luck selling it.
If you'd want the transmission charges to match the cost to the utility you should have a base charge consisting of basically the cost to the utility of maintaining your customer relationship after the initial hookup cost, and another part to match the utility O&M cost of the grid distributed over all the customers. Then on top of that a time-varying per-kWh charge for the electricity transferred. This would probably in most cases be pretty cheap, except when the grid (either the utility grid as a whole or the local part that you're connected to) starts to become overloaded; in that case scarcity pricing would apply which would presumably be very high. This would incite customers to reduce usage during scarcity, or give the utility funds to invest in grid expansion.
Similarly for the energy price, that should match the wholesale price. Though see the $10k bills some people on a wholesale price plan got during last year's Texas freeze for why such an idea might not be so popular in practice, theoretically beautiful as it may be.
Encourages you in what way? Your bill is still higher the more energy you consume, just increasing more slowly than if the rates were higher.
Many believe (and I’m inclined to agree) that encouraging a switch from locally burned fossil fuels to electricity is better even if that electricity is currently* generated partially from fossil fuel. The theory is the electric plants could more easily become cleaner than if millions of home need to have their heating equipment upgraded.
The problem where I am is that natural gas is so cheap (though less than previously) that it’s hard to make electric heating competitive.
It encourages you in the sense that the marginal cost of turning your heat up to 75 in the winter instead of 70 is much lower, or that buying a 4000 sq. ft. house will not come with as big an increase on your monthly costs as it does now.
False; the heat pump is still more expensive. You need COP of >=4 with baseline rates, and it only gets worse from there (the baselines are tiny, and TOU is also bad). Heat pump water heaters only barely scratch 4 under ideal conditions, so you'll generally do worse with a HPWH than with a condensing gas one. Arithmetic is about the same for home heating systems.
Basically around here (PG&E) you should only electrify if you can also get your electrons from not-the-grid.
There are ways around that though; you could give a small rebate on the meter fee for low-use customers, to encourage conservation. (My water bill is that way, the full meter charge is around $50/month, but if you use less than 700 Cubic-feet of water a month, the meter fee drops to $30/mo.) Is a little less pure than just charging a fair rate, but seems a reasonable hybrid approach.
You also pay for power you don't even use, from other power providers, in the case of extreme crisis, it seems. I've never lived there but from the outside Texas's power situation seems broken at best.
That's accurate. We're in constant fear of losing power whenever there is a freeze warning (we're on that today and tomorrow at least), rain or heat. That's all thanks to the greedy for-profit system enabled by "conservative" politicians.
That's not really accurate. I've lost power 4 times total in 30 years here. Usually big Texas thunderstorms, never heat.
The 100 year winter freeze I lost power for two days, that was the longest ever.
Haven't lost power since then, didn't lose power for a couple years before that.
We have the cheapest rates because of the way distribution and providers are setup.
The problem with big user bills were SV companies like Griddy tricking people into buying variable rate electricity, something we made illegal since then.
That's great that your power has been mostly reliable, but it is not the case for a lot of the people here.
In my family alone, my brother and his wife lost power at the apartment they had then for 3 days during the ~2014 winter storm, during which our apartment lost power for around a day. My parents lost their power for all 4 days of the storm last year, and had to travel 15 miles or so to my brothers house after their inside temperature dropped below freezing on day 3. They just let us know their power is out again this afternoon. My wife and I are lucky enough to have since purchased a house close to some critical infrastructure so we've rarely lost power comparatively, but we still lose power several times throughout each summer during heat waves.
I also want to reiterate: this happened in 2011, again in 2014, again in 2021, and again in 2022. The storm in 2021 was objectively the worst of the bunch, but 2011 was similar. It is _not_ a 100 year freeze. It is happening more regularly, and our government has ignored recommendations to better prepare for it going on over a decade now.
EDIT: Just to round this out, a federal report was provided in the wake of the last "100 year" storm that occurred in 2011[1]. In it, there are several dozen recommendations, many of which were at least in part the cause of the 2021 outages as well.
This is one of those cases where annecdotes of power loss have a much higher informative value than annecdotes of stability. The former tell you there is a bad situation wheras the later just add a little bit of context about the severity.
I am not denying your experience, but I was talking about my own. I lost power for over 3 hours just 2 nights ago. And since the horrible experience we had in February 2021 we (me and everyone I know) have been living in fear it might happen again.
A quick look at Centerpoint's own outage tracker[1] shows outages everywhere in different parts of Texas.
I don't see why "fear" is necessary. Power has never been a constant. When I was a kid we had a box of candles under the sink and warm blankets stacked in the garage, and some emergency food/water to last a week. Now that I'm an adult, I still have the same. I don't understand this trust and expectation of flawless infrastructure, where "fear" would come into play. Inconvenience, sure. You should be able to easily remove the fear aspect, with minimal preparation.
"fear" is necessary because I was stuck at an apartment for 3 days and nowhere to go with no heat and no water when the weather outside was -17 degrees.
As my comment suggested, you could change that fear to inconvenience with minimal preparation: put some water jugs, canned/packaged food, and blankets+cheap snow outfit in your closet, and throw in a little campground propane burner for a nice warm meal. -17 outdoors is a warm ski day indoors. If you've known anyone that lives in a cold part of the country, having some preparation is an extremely common practice.
Or fix the damn infrastructure. Other states and other countries get worse cold waves and others get worse heat waves and they don't lose power. Stop putting the blame on people.
> Campground
You realize most people love in apartments right? Most apartments don't have fireplaces.
> You realize most people love in apartments right? Most apartments don't have fireplaces.
No, I mean the little burners you put on top of portable propane tanks, that are usually used for BBQ's or while camping. Searching "campground propane burner" in Amazon shows several hundred results of what I'm talking about. They don't require a campground to operate.
> Or fix the damn infrastructure.
You and your fear exists in the reality that is right now, which includes bad infrastructure, that will almost certainly take years to fix. If you desire to not live in fear, for the next few years, you can easily do it with minimal, extremely common in places where it's cold, preparation. If you desire to continue living in short term fear, when it's so easy to mitigate that fear, then well I guess you do you.
You have to be careful using these burners in in-building enclosed spaces---they can produce carbon monoxide. They are really designed for open air use.
Good advice for folks stuck in a place where corruption makes basic utility service unreliable, but doing a bunch of extra work to make getting through those times when you are without power a little less painful is no replacement for solving the problem. If I were in that situation I'd just move. There are plenty of states in the US that do not regularly have problems providing power, heat, and water to the folks who pay for them.
I'm having trouble believing that having a bit of extra food and water available is considered some large burden. It's universally suggested by all entities that deal with emergencies: https://www.fema.gov/pdf/library/f&web.pdf
> If I were in that situation I'd just move.
It's great that you have the freedom and resources to move around the country so easily, but I think that's a fairly rare privilege.
> is no replacement for solving the problem
I don't think I suggested it was. But it's not feasible that the problem will be solved in the next few weeks. For those next few weeks, fear and risk can be minimized with some "extra work".
In CA it's the same these days with the advent of community choice aggregators (CCA) [1].
If a CCA is available in your area, and you choose to use it, you pay the main utility for transmission/distribution, but the CCA for energy, both on per kWh basis. It all gets aggregated on the same (confusing) bill. Because they control the energy sourcing, CCAs can offer things like 100% carbon-free or 100% renewable plans. Some even subsidize batteries to add to homes in exchange for a portion of the stored energy capacity.
I've seen this model, but it seems counterproductive to any environmental goals. For instance, my water infrastructure bill absolutely dwarfs my usage. I could take an hourlong shower every day and barely notice the increase in my bill. It seems like it's sending the wrong message.
Is water scarcity a thing in your area? Perhaps your water is cheap because its readily available in your area. In Chicago, they have so much water in Lake Michigan, most homes don't even have water meters.
Where I live we have plentiful of clean water. However what constitutes a major part of the water bill is the sewage treatment. No separate metering for clean water vs sewage, they just assume that everything you use also goes out as sewage.
Living close to a water source or reservoir doesn’t make conservation less important.It is a intricate system with complex interconnects
A lot of places downstream will be using the water from your Lake /Dam /river as their only source. Same reason why in some states like Colarado it is illegal to rain water harvest. Riparian rights and ethics are complex
Maybe it does sometimes though? Speaking of the great lakes, if you live in the region it doesn’t take you very long to drive out of the watershed for your respective lake. That should be where the bounds of effect end, and that entire region will generally have plenty of water. For example, Ohio has two watersheds, one for the lake up north and another for the Ohio river which takes up 2/3 of the state. Excess water consumption in the lake erie watershed shouldn’t ever hurt the ohio river watershed. Issues with the rivers that feed the ohio river might cause issues, but the point is this: the degrees to which regions are linked in terms of water varies dramatically.
Fair. I still prefer an honest system that charges a fair, flat rate for the infrastructure, and then a usage charge for usage. If we want to disincentive usage, we can put a tax on the consumption rate; that's certainly better than wrapping up some/all of the infrastructure costs into the consumption rate just to make the latter higher.
It is not just about conservation and high consumption.
For example, it is lot easier to build infra when you charge people 4x their consumption cost as single item, than split into line items. When you need to build a new power plant the infra costs are going to shoot a lot and nobody would want to pay for that when they see an line item for infra.
Every SaaS company and all of Cloud is built on this human behavior . I would even go so far to say that even mortgage, insurance, any credit business depends on this behavior. Most people would pay extra for their server by hour or second rather than pay for consumption + infra.
Also infra costs split equally is unfair ? if you consume more, more of the infra costs have to be apportioned to that person right ? Basically if power plant producer 1000MW the person consuming 900MW has to pay 90% cost of building the plant in addition to paying 90% for consumables for generating that 1000MW .
The solution here is to have spread between buy / sell rates which account for distribution losses, maintenance, infra and storage and peak capacity planning etc
> I still prefer an honest system that charges a fair, flat rate for the infrastructure, and then a usage charge for usage.
There's a lot of things where the infrastructure costs are baked into the per-unit cost of stuff you buy. I'd say it's even vastly more common than separate infrastructure vs. per-unit charges. You don't pay a separate constant infrastructure fee for the petroleum refinery infrastructure when filling up your car, it's all baked into the per-liter (or per-gallon) cost. Nor do you pay a fixed cost for funding the astronomically expensive semiconductor fabs when you buy something containing electronics, it's all baked into the per-unit cost. Etc. etc.
>Living close to a water source or reservoir doesn’t make conservation less important.
It doesn't necessarily make conservation less important. But it certainly does in some places like Chicago. They pull water from the same water shed that it eventually flows back into after use. And they control how much water flows from Lake Michigan into the Chicago river (and eventually the Mississippi River) via a damn.
It's probably a bit more complex than that, and creating that system did change the water flow in the Great lakes (but that damage was done 130 years ago). But right now, its essentially free water. In Illinois, all roads (waterways) lead to Rome (the Mississippi).
I don't have detailed knowledge of Great lakes to give you specifics on why this is a problem
However generally no water system is closed or independent of each other. Precipitation, weather and other cycles (wind, heat, underground etc) make even small changes in distant places drastically impact outcomes anywhere ( the OG butterfly effect).
So I would still say conservation of use is independent of how abundant it seems locally and how disconnected it looks on the surface to other problems.
Thank you! I thought I was insane for being the only one who noticed this, though on my natural gas bill instead of water. I have a mandatory $16 base charge and $1.50 payment fee on every bill. That's huge relative to the variable part! [1] So, estimating from non-winter months, I could avoid all cooking, laundry, and hot water for showers, and it would save me ... $5/month.
They should amortize the cost of the infra over actual usage, so that incentives are properly aligned -- your bill should mainly depend on how much you use!
[1] Total bill is like $45 for winter, $22 otherwise.
The problem we've had where I live, is that when people do a good job reducing water/electricity consumption the utility companies have to either jack up their rates, do layoffs, or go broke because they aren't able to amortize their fixed costs as well.
Yeah, similarly in the UK we have a 'standing charge' (£/day) in addition to the 'unit charge' (£/kWh) - same provider though.
And I can't see why it wouldn't tie up with the reality of the costs. (Competitive downward pressure, and no silly anti-competitive cap as there is on variable £/kWh pricing.) From memory mine's about £6-7pcm.
The cap was never really intended to be a fixed price for electricity: the main purpose was to ensure people with an arbitrary supplier (chosen by previous tenants, or the landlord, say) and who weren't canny enough to notice they were being overcharged and shop around, didn't get ripped off too badly. Lots of people who stayed with the descendant of their old regional electricity board paid over the odds, for example, because consumer inertia meant it was profitable for them not to have competitive prices.
That all electricity prices are now essentially at the cap, so it's also acting as a floor, was not intended or particularly anticipated, I think.
Ha, in Germany it's called "Fernwärme", which corresponds nicely to "teleheating" (which Wikipedia lists as an alternative name). It's great, not only does electricity and water magically come from a wall in your basement, but also heat :-)
I thought they had abandoned the idea of using heat from a nuclear power plant for district heating in Russia, but apparently that is actually done [1, 2] extensively.
Having a pipe into your house directly (well, not directly, indirectly, but still) from the nuclear power plant next door... not sure how I'd feel about that.
District heating from nuclear used to be a no-no but has recently gained momentum in Finland (as an idea). Build an SMR near the city for electricity, and use the excess heat for district warming (which is needed during most of the year).
It really is a no-brainer when ~40% of the energy produced by a nuclear reactor is currently pumped out as warm water in the ocean (about 10-12ºC warmer than when it was pumped in).
It's a thing in the US. If you're ever walking around Manhattan and see steam coming out of a traffic cone, that's the side effect of district heating (groundwater hitting the very hot steam pipes and vaporizing).
This is the case at least in some parts of the US as well.
I believe in all of Texas (North Texas here), your costs are broken down by energy costs and delivery costs, the latter of which is paid to your TDU to maintain the infrastructure. For our plan the delivery charge is roughly 45% of the kWh price.
Why is it based on breaker/fuse size? Surely the cost should be based on cost of maintenance over the entire grid over the last year divided by the amount of customers using the grid?
One thing that's missing from this is that with current California net metering, for new solar customers, you can't dump a kWh on the grid at noon and then swap it for one at 7pm at the top of the duck curve.
New plans are all time-of-use rated, meaning that you can only swap kWh within the same time of use band. At least, that's how it's been explained to me, I have not yet been able to find any explicit rules on PG&E's site explaining how time of use and net metering interact. (And for that matter, PG&E goes to nearly excessive length to avoid describing how anything works, what the actual rates and charges are, or generally putting the most useless pablum on their website.)
I think that all of these market designs and pricing schemes need to be made with an eye on getting to the lowest cost zero-carbon grid. Current best models are coming from Christopher Clack at Vibrant Clean Energy, and all his modeling shows that if we deploy lots of distributed solar and storage at meters, and upgrade distribution, we end up saving massive amounts of money over the decades. The reason is that by having distributed solar and storage, you can massively reduce other fixed cost parts of the grid as they age out.
So really we need net metering policy that encourages that sort of capital investments today, and not just in the wealthiest neighborhoods that have good credit scores or $20k to spend on home improvement on homes occupied by owners, but all over the grid, including rentals.
That's going to take not only good net metering policy, but also new innovation in financing and entrepreneurship. Figuring out how to convince landlords to let you install solar and storage all over, and integrating that into a virtual power plant is a nut that somebody needs to crack. Maybe it won't be entrepreneurs, maybe it will be cities making municipal Virtual Power Plants to meet their own ambitious climate goals. But there are a few key pieces missing from the best possible, most economical efficient, energy transition. And if we just let the utilities dictate policy, we will not be getting anything like the most economically efficient grid, we will get grids where they can make maximum profit.
For each kwh you feed to the grid you get a credit for the value of that kWh during that time. Say off-peak is $.20 and peak is $.40 (this is an exaggeration but makes the math easy). You would need to feed 2 kWh to the grid during off peak to cover 1 kWh drawn from the grid during peak usage. On top of this there are non-by passable charges for every kWh drawn from the grid regardless of any credits on your account.
I see no reason why not do this in proper spot market way. Calculate it every 5 minutes, what you supply you get accounted for and what you use or that is withdraw you get accounted. At certain intervals these are matched and you pay the difference.
> I see no reason why not do this in proper spot market way.
The wholesale/spot electricity market is a scary place, as some people in Texas discovered last year [1]
Time of use pricing tranches are designed to insulate consumers from that sort of variability, while also incentivizing consumers to minimize consumption during peak demand times.
Time-of-use electricity pricing has been happening in California for a long time, but only now is it becoming mandatory (there are still many households out there on legacy flat-rate plans, although they are being moved).
Many parts of the country are just now introducing time-of-use pricing. As both the grid and loads become smarter and more resilient, we'll see consumer electricity rates reflect the underlying wholesale price variability even more, but probably never completely.
Those numbers are actually really close to reality for some of the electrical vehicle rates, which go down as low as $0.21 for off peak, around $0.40 for part-peak, and $0.53 for full peak. Other TOU rate plans only go as low as $0.31 during some seasons, and peak in the mid 40 cent range.
> I have not yet been able to find any explicit rules on PG&E's site explaining how time of use and net metering interact. (And for that matter, PG&E goes to nearly excessive length to avoid describing how anything works, what the actual rates and charges are, or generally putting the most useless pablum on their website.)
> All rates charged under this schedule will be in accordance with the eligible
customer-generator’s PG&E otherwise-applicable metered rate schedule (OAS).
So if you are a PGE customer on the E-TOU-C rate schedule, NEM2 (roughly) credits your excess generation under that schedule. Part of this should hopefully move new home-owners to either install batteries or if that is cost prohibitive, install west-facing panels.
> The reason is that by having distributed solar and storage, you can massively reduce other fixed cost parts of the grid as they age out.
The article also completely ignores the concept that distributed generation can actually reduce infrastructure needs. If you're generating the power at the "last mile" and sending it to your neighbor, that power doesn't travel through a substation, it doesn't travel through long transmission lines that need to be maintained, it's just generated (roughly) where it needs to be, saving you a lot of infrastructure. So it certainly seems "fair" to offset that infrastructure cost at least somewhat - you are providing value to the utility in terms of infrastructure they don't have to build themselves. And they sell that power that you feed back to customers paying for "green energy" at a premium as well.
(note that despite regular peaks occurring later in the day, annual peaks almost always occur during periods of high solar production - it is aircon during summer heatwaves that blows the grid, not cooking dinner. So you are delivering huge value in terms of peaker plants that don't have to be built to run a few days a year during those heatwaves.)
I don't live in California but in 2020 we had heat waves and my local power company blew up 2 substations in my area from the load. That wouldn't have happened with more distributed power generation, solar production is at its peak precisely during those heatwaves that strain the grid so badly, but the utilities were actually making a big push at the time for net metering to be abolished and solar production to be reduced.
And of course we still pay incredibly high transmission costs - we have 8-9c per kWh electricity but my transmission and delivery charges are approximately 12-14c, for a normal suburban area (I'm not out in the boonies), so obviously that money isn't making it into the infrastructure where it needs to be anyway.
(Compounding this issue, of course, is that there are plenty of people who are out in the middle of nowhere, and I'm sure a good chunk of that cost is going to subsidizing them. If we want to talk about market distortions and ignore the greater social good - how about we move away from these hidden subsidies to people living in the middle of nowhere? Make them pay the actual costs of their roads and electric and other services.)
Big picture it's hard to see the pushback against net metering as being anything other than rent-seeking by an entrenched industry. They're charging huge delivery fees and not maintaining the grid, and they're pushing back against remedies literally at the same time as their infrastructure is failing. They're paying you nothing for electricity fed back into the grid, while charging other customers a premium for "green" electricity. Pick a side, it's either valuable or it's not.
> If you're generating the power at the "last mile" and sending it to your neighbor, that power doesn't travel through a substation, it doesn't travel through long transmission lines that need to be maintained, it's just generated (roughly) where it needs to be, saving you a lot of infrastructure. So it certainly seems "fair" to offset that infrastructure cost at least somewhat - you are providing value to the utility in terms of infrastructure they don't have to build themselves.
This is true if you're not connected to the grid. However if you use power on those cold winter cloudy days you need all that infrastructure still. The difference is when you used the grid's power every day that cost was spread over the year. If you only use grid power 20 days a year that grid infrastructure is very inefficient and costly.
Net metering is an anachronism. You should pay and receive the current spot price which is near zero on Spring/Fall sunny days and super high in Summer evenings and Winter nights.
> This is true if you're not connected to the grid. However if you use power on those cold winter cloudy days you need all that infrastructure still.
Cold winter days don't represent peak consumption for the grid, there is no capacity being built specifically for cold winter days. In contrast there is capacity being built to offset everyone turning on the A/C during summer heatwaves, and solar has high power output during those periods.
Your argument is specifically called out as being a misuse of the "duck curve" concept.
> Common misconceptions
> One misconception related to the duck curve is that solar photovoltaic power does not help supply peak demand and therefore cannot replace other power plants. For example, in California, solar output is low at 7 pm when daily demand usually peaks.[19] This fact leads some to believe that solar power cannot reduce the need for other power plants, as they will still be needed at 7 pm when solar power output is low. However, California's annual demand peaks usually occur around 3 pm to 5 pm,[20] when solar power output is still substantial.[19] The reason that California's annual peak tends to be earlier than the daily peak is that California's annual peak usually occurs on hot days with large air conditioning loads, which tend to run more during midday.[21] As a result, solar power does in fact help supply peak demand and therefore can substitute for other sources of power.
Possibly, I can't find an easy source of spot price over time.
https://www.caiso.com/todaysoutlook/pages/supply.html is pretty good for total energy used and sources. In the Summer 3-5pm could be demand peak, but looks like the total energy used is high over a few hours, even after sun down.
> Cold winter days don't represent peak consumption for the grid, there is no capacity being built specifically for cold winter days.
That might be true in California, but in Europe that's where the peak demand was before AC got popular. And it can easily go back to that with the spread of heat pumps.
Europe runs from Siberia to Spain, there's lots of variation in winter heating systems. In colder quarters people mostly burn stuff instead of using electricity, but also houses are well insulated (because you need to heat all the time and you can't afford not to insulate).
Right, but that fixed cost of the grid is entirely determined by the peak capacity needed, not by average usage.
And actual usage of that capital often has peak usage much more extreme than a typical 90/10 rule, meaning that the vast majority of that fixed cost is mostly unused.
The key to decreasing that peak is the distributed storage that's paired with distributed solar. It allows massive amounts of cost savings, despite needing to beef up the distribution side of the grid for this to work.
Which - to go back to my "the utilities need to be paying fair rates for the infrastructure provided by clients" - if you're going to be putting extra cycles on my battery, you'd better be paying me a decent rate for it. I've always seen the idea thrown out as this abstract "we can use everyone's car as a peaker battery, it's gonna be great!" but if they are gonna pay distributed storage rates like the rates they pay for distributed generation, then fuck no, I'm not letting you wreck my battery for 50 cents a day.
Utilities are gonna charge you 25c a kWh extra for peak demand delivery, and then be paying the actual people delivering it like 1c a kWh, you can book it.
> The article also completely ignores the concept that distributed generation can actually reduce infrastructure needs. If you're generating the power at the "last mile" and sending it to your neighbor, that power doesn't travel through a substation, it doesn't travel through long transmission lines that need to be maintained, it's just generated (roughly) where it needs to be, saving you a lot of infrastructure.
I think that's kind of backwards of what we really need in the long run, though. With renewable energy, supply is variable and a large, well-connected grid is what you need to even out supply and demand. (An extreme form of this would be transcontinental HVCD lines so solar farms on the day side of the Earth can sell to customers on the night side.)
It's nice to have local power generation to keep some/most of the load off the grid in the average case, but I still think that it's important to have a grid that can handle high load during unusual circumstances. (And our use of electricity is just going to keep going up, especially as ICE vehicles are replaced by EVs. This is a good thing, but it requires more infrastructure.)
Good piece...putting on my econ hat here, it would definitely be more accurate to say that prices are signals that reflect the all-in cost of moving products and their dependencies through a supply chain and to the consumer. These signals can be disrupted by many factors, including competition or lack thereof, regulation or tax policy, etc, that often can make things inefficient. But in the examples the author uses, it's not that the price is divorced from cost, it's that the price of video tapes reflects the all-in cost of production, distribution, as well as the cost of fighting piracy. High medical prices reflect the incentives and constraints of the system that has been built around the service. High drug prices reflect the cost of R&D, not the cost of pouring cheap compounds into a plastic mold.
Which is not to say that prices are not truthful per se -- just that pricing signals can be easily disrupted by factors not normally in the consumer's direct field of vision, and can be exploited by "loopholes" (which are just another way to send a signal back to the firm that the price is incorrect).
From an information theory standpoint, prices are a very simple summarization of overall costs that throws a lot of information away.
This is useful to do because supply chains are complicated and understanding them would impose a burden on consumers. But it also means we remain ignorant of how goods and services get to us and what the system constraints are.
Also they aren't just about cost, but also about expected demand, and competition to capture that demand. This makes the information about costs a muddy approximation at best.
Product and service information is transmitted along with price, and insufficient information drives demand for methods to price more granularity without increasing transaction costs. Or to decrease transaction costs to allow research into purchases more difficult to understand.
I'm not sure I even understand what the point of this substack article is and it is oversimplified. Is it him just examining what net-metering is then realizing that the utility provides more value than just electricity generation and that is eye opening to him?
There's no conclusion and no cohesive argument just that the world is full of pricing distortions or that what you pay in prices isn't always exactly what you get (subsidizing some other development). Is it a take that NEM is flawed?
Is it him moralizing that the climate tech industry is taking advantage of subsidies? "Don't cling to a subsidy longer and harder than necessary" --> Please look at the on-going subsidies to Oil & Gas - its absurd.
If you really want to understand electricity generation pricing you should start looking at all the pricing nodes in real time and bring in energy storage, capacity payments, spinning reserves, non-spinning reserves, day ahead market, 5 minute market etc. On top of that you should start layering in how the federal government subsidizes different energy industries and add that layer on top of it. It's incredibly complex and certainly not clear what you are paying for.
The top layer of how retail get's comped for the generation (in California) is interesting and a long-term risk for the utility (if enough people/companies put solar on roof and use NEM) if solar generation truly takes off. Long way to go as someone who works in the industry.
I agree that the article is maybe not very clear in its conclusion. But one valuable thing I took from it is this pernicious tension I hadn't been aware of before between pricing electricity in accordance
- to actual production costs: large fixed "standing charge" (per unit of time), small consumption charge (per unit of energy)
- with environmental goals: small fixed standing charge, large consumption charge.
You could argue that you should just (that word is doing a lot of work here) internalise the external costs, and then price it as "undistorted" as possible. Does that lead to the right answer here?
You end up with a bunch of other challenges. The infrastructure costs of the grid are quite high to build and operationally expensive. That cost needs to be defrayed somehow.
The Time of Use (consumption charges) that aren't explained that well and differ quite significantly depending on the tariff structure you apply to. Consumption for commercial use is charged in two ways kwh that you require but also the peak kW that you need per month. This is in order to recoup the marginal cost of electricity produced at the "peak" of the month.
I'm not trying to just muddy up the waters but I think the underlying analysis is overly simplistic and inaccurate. I would hate for people to think that this substack article is an accurate portrayal of the complexities of the energy system and the pricing structures. Residential rates are only portion of the grid.
Honestly, this feels like a bit of a red herring. The net metering issue is getting more airtime lately, but it isn't nearly as big of an issue as the proposed connectivity fee that is only targeted at solar customers and based on the nameplate capacity of solar.
That fee is directly designed to capture the benefits of solar for the utility and has little to do with real costs to the grid.
This is exactly right. Now that PG&E has built a sizable solar installation base, the NEM3.0 move is to make sure they can capture more profit. Their plan for passing NEM3.0 seems to be to cry and moan about how they're being taken advantage of by individuals who paid $30k to install solar panels on their homes.
People need to be off the grid completely and when that happens what will these power companies do? If we ever get the affordable battery system that are always just around the corner that will allow this to happen. I look forward to the day. Our electric company has been raising rates and the system is not fair. It is tiered so the more you use the more you pay in hopes to reduce usage. Fair enough. But in my house we have 5 adults and 4 children. We have the same tier as someone with 1 adult and no children. So even though we are more environmentally friendly and our heat heats 9 people, our lights provide light for 9 people, because we use more electricity in other areas like showers we always end up at the higher tier paying a lot for electric even though on a per individual basis we use less electricity. I unfortunately am in Canada and the solar power just isn’t efficient enough here to make it worth while.
I thought that when I was 16. Now that I'm 58, there is no way in hell I am in favor of every household having energy storage systems sufficient to see them through every night and season of high energy use. I'm all for some level of distributed power generation, and some level of distributed energy storage, but "people need to be off the grid completely" is, IMO, a step too far.
I think a middleground is more realistic. Having solar and enough batteries to never need to send power back to the grid might ultimately similar in cost to selling it back. And on the plus column, you have backup power when the grid fails.
As I've described here (comment in thread: https://news.ycombinator.com/item?id=30195830 ), it would be essentially absurd to try to go fully offgrid in our home here near Santa Fe. Note that I define full offgrid as "not burning wood to supplement electricity usage for heat", which may differ from your view.
It's a lot easier for me than for you. I'm in the SF Bay Area, so my climate is milder on both extremes. Also I'm DIYing everything and scavenging discarded stuff where I can, so my costs are abnormally low. When all is said and done I'll have ~40-50 KWh of storage and a 20 KWp solar array for <$20k. And my cost of electricity is probably far higher than yours, so I have more incentive.
When I think of grid independence, I mean the electric grid. I'm keeping an existing gas-fired heating system in addition to installing a heat pump system. I also have a generator.
Have you checked to make sure you can actually disconnect from PG&E? Grid defection is not legal in almost all cities of any size. They make some exceptions for new construction that was never attached to the grid.
Luckily I'm not in a city of any size, and my remodel is extensive enough that my town has called in new construction even though it really isn't.
But I don't actually care if I disconnect from the grid. I just don't want to pull any watt*hours from it. That's why I call it grid independence rather than off grid.
Grid defection is illegal in almost every municipality in the country. Companies like PG&E have a legislated monopoly and there's no other option for you.
“In practice, it’s often politically difficult to argue for overt subsidies, and we resort to workarounds like net metering.“
The reason we have so many hidden subsidies (also: tax credits) is precisely the sentence above. It’s the difference between policy and politics. Few policies are designed well because the main force driving their creation is political support (or the lack of it).
The delivery fee being artificially low was a political decision to subsidize utility prices for the poor. Every single utility has step function of pricing for usage fees that works to capture the cost of providing the infrastructure. This is why net metering never made sense to utilities and why they were trying to reject it despite states and politicians seeking to force it on them. The utilities who did go all-in on net metering willingly did so at the generator rates which pissed off a ton of homeowners but that was actually a fair thing to do as that reflected the real price of the energy being provided.
This is why all subsidies should be in the form of cash. Give poor people cash rather than obfuscate prices, which then results in hampering of market mechanisms and results in inefficient allocation of resources.
Aside from the obvious problem (which poor people) it is a very interesting idea to remove all subsidies (explicit and implicit). Terrifying but interesting
The obvious problem is solved by making it universal. You do not need to choose which poor people, just make it everyone, and then collect a marginal income tax. Although, I would prefer marginal sales taxes, but that seems technically impossible with current technology.
The reason why it is not done is because it would lay bare all the inequities in the system, as well as require higher taxes due to not being able to hide the inequities in various forms of price discrimination/segmentation.
Keeping prices obfuscated means costs can be distributed across the population in an unfair manner / benefits reaped in an unfair manner, as well as ability to punt costs into the future.
It is a personal conjecture. Every time I come across price obfuscation, or not doing the straight forward thing, it is because the seller does not want the transaction to be as transparent as possible.
Tax deductions, credits, student loans, subsidized mortgages, taxpayer funded pensions, Medicaid reimbursing differently (lower) than Medicare reimbursing differently than Tricare, and so on and so forth.
It is always a political decision to reduce total costs, or drive the benefit to certain populations, or use liberal assumptions to present future costs as less than they really are and so on and so forth.
If we want people to have a house, give them money to buy a house. Or a house. Same with education, healthcare, everything. The big problem with this is cash has to be accounted for today, transparently, and cleanly. There is no option to muddy the waters.
Openness is a great default, and while I will say a lot of things are more complicated than I know, this will at least drive the discussion into the open.
IIRR Fannie Mae originally had explicit anti-Black lending policies. I do wonder how that would have been dealt with in a more open environment.
Even in a single example such as your electric bill, this is absolutely impossible (or, maybe with a team of statisticians and accountants working on each customer's bill each month, and of course their associated costs).
The fact is, the utility does not know how much money you cost them in a given month and it's impossible to say. Some of your electricity is being generated from a plant planned and built 40+ years ago, long since paid for. Is that electricity sold at the cost of fuel and maintenance? Electricity generated from a new plant then has a corresponding capital cost component but how's it portioned out at the customer level? What if they had to go change your transformer 20 years ago but your neighbor's still on their old 50-year-old transformer next door?
> The fact is, the utility does not know how much money you cost them in a given month and it's impossible to say. Some of your electricity is being generated from a plant planned and built 40+ years ago, long since paid for.
There are generators independent from utilities, yet they figured the pricing out somehow.
The pricing is sometimes based on negotiations which consider the cost of alternative sources of power, the operating cost of the plants, and refurbishments and maintenance it will need over the course of the contract term.
"carbon tax" is trouble to enact because you can't expect to rally support for something with the word tax in its name
Then people complain about where will that tax money go. It doesn't matter. The government could burn all the carbon tax money collected (& in fact, this would help against inflation). The purpose is to fix incentives, not find funding
Not only is the "tax" word problematic, but if you call it "carbon pricing" that irks the people who are reflexively anti-market. And no matter what you call it, the sanctimonious environmentalists will fight it because it minimizes the need for heroic personal sacrifice with respect to preserving the environment (frankly, these personal sacrifices probably aren't significant in the first place--the bulk of pollution is industry and transport, especially that which we outsource to China, etc).
> the sanctimonious environmentalists will fight it because it minimizes the need for heroic personal sacrifice with respect to preserving the environment
Any evidence for this? IMO "Sanctimonious environmentalists" only care that consumption reduces. Whether that's voluntary or due to being priced out by carbon taxes is irrelevant. If anything doing it voluntarily, before it was ever needed to make your household budget work, would make them feel even holier.
> Any evidence for this? IMO "Sanctimonious environmentalists" only care that consumption reduces. Whether that's voluntary or due to being priced out by carbon taxes is irrelevant.
The New York Times said that their article pointing out that (most) recycling has higher environmental costs than landfill attracted the most complaints of any article for at least 10 years.
My old professor doesn't get invited to climate conferences anymore because he ran some serious research into whether geoengineering approaches were feasible.
There is definitely a large constituency of hair-shirt environmentalism that cares more about how much you're suffering for the sacrifices you're making than about how big an actual effect you're having.
It's pretty much a tautology--I'm defining "sanctimonious environmentalist" as one who makes showy personal sacrifices for esteem. If emissions decrease because manufacturing processes become more efficient, then their sacrifices were for naught and the lifestyle they've been pushing on others becomes irrelevant (or decreases in relevance).
I agree that's the short-term effect (although a carbon tax will likely start out small and increase over time so as to minimize unpopular effects), but in my experience this analysis is too sophisticated for most of this "sanctimonious environmentalist" group. I.e., people who tend to believe that the environment hinges on converting people to vegan cyclists are not likely to understand economics well enough to understand a carbon tax. This is a big and unflattering generalization for expedience sake, so I'm trusting readers to understand the larger point and not get mired in "this is a generalization!" counterarguments.
I was specifically referring to the subset of environmentalists who believe that salvation lies in converting everyone to veganism and cycling. But there are a lot of people who style themselves as environmentalists who oppose carbon taxes:
* The "personal responsibility" environmentalists described above
* The "anti-market" environmentalists who assume without evidence that markets necessarily make things worse
* The Green New Deal environmentalists who largely want to use the threat of climate change as political cover for social spending ("climate justice").
The last bullet might be too broad--there might be some GND environmentalists who are sincere, but certainly the overwhelming majority of GND policy and rhetoric seem to be more concerned with social spending than decarbonizing the atmosphere. I think there's a lot of overlap between this group and the prior two groups as well.
> it minimizes the need for heroic personal sacrifice with respect to preserving the environment
The dirty secret is that plenty of technology exists that can actually increase your quality of life while lowering your energy consumption. I'm not just talking about EVs, but electric buses and trains, heat pumps, sealing up drafty houses. But these things require changing how we do things, not necessarily how much we consume of things.
Canada promised to do that and the proposal was still wildly unpopular and abandoned. If you've build your life around no carbon tax (e.g. you live far from work and need to drive) you will personally suffer from such a change and will vocally lobby against the change. We end up with things like the Yellow Vest movement in France or the political instability that happens when any government tries to reduce fuel subsidies. It seems that voters are more sensitive to the price of gas than any other issue and any political party that causes the price of gas to go up gets voted out of office. Paul Krugman wrote a post recently showing that US consumers' inflation expectation exactly tracks the price of gas. I've concluded that any consumer impacting carbon tax cannot work in a democratic system. We need subsidies (both explicit and hidden) to reduce our carbon emissions.
> Canada promised to do that and the proposal was still wildly unpopular and abandoned. <...> I've concluded that any consumer impacting carbon tax cannot work in a democratic system.
We have a carbon tax in Canada and it's probably not going away any time soon (it is, in fact, scheduled to continue going up), so I'm not sure what you mean here. The provinces can do a rebate/dividend if they want and/or run their own system designed that way but I'm not sure if any have.
I'm not sure if your first statement is just saying we abandoned a rebate, but your last statement implies you think any consumer carbon pricing is impossible regardless of that, while your example says otherwise.
In this kind of scheme, you don't get what you paid back as cash, you get something more like a dividend of the revenues (possibly just as a non-refundable income tax rebate or something, or as a dividend check given to all adults, depending on the particulars of your region's tax aversions).
So you're actually incentivized to consume less, because you get more out of it if your tax payments are less than your dividend.
Obviously there might be some perverse incentives to like.. causing a global increase in emissions while keeping your own small somehow but those are probably hard to significantly profit from.
The annoying thing about this is that, if the new California metering rules do end up passing, I will definitely not be installing solar on my roof, because it will end up either costing more in the long run, or the break-even point will be so far out that it's not worth it to me.
Now, as the article says (or at least hints at), maybe there are better things we can do as a society to reduce carbon emissions than have individuals install solar panels on their house, to the point that it doesn't make sense to subsidize it quite as much as we do today. I don't think I've heard regulators and utilities make that argument, though.
I do agree that the generation and transmission infra needs to be paid for, and if I'm giving the grid excess power instead of money, that reduces the utility's ability to maintain their infra (and PG&E is already lacking in that area). And if I do get much lower utility bills (from a solar installation), then that means that eventually utility rates will have to go up. And then essentially lower-income folks, who can't afford solar panels, will be subsidizing people like me who can... which is not remotely fair.
However, if we do believe that residential rooftop solar is something that we need to be promoting and incentivizing, then the current/old net metering rules need to stay. And to make up the difference on the infra side, one of two things needs to happen: 1) utility prices should go up, and the government should offer subsidies and credits to low-income folks, or 2) the government should just fund maintenance of the grid directly.
California requires[0] new construction to have solar now, so while you might not have to worry about installing it you very well may be stuck with a system if you move.
I'm not sure I agree with your assertion that increased solar installs will leave less money for grid infrastructure. With the moves away from gas for heating and cooking and the proliferation of electric cars, it seems that demand for residential power is only going to go up with solar offsetting it, so demand on the grid should stay fairly steady with increases in areas that solar doesn't work as well. Higher density housing will also increase energy demands with limited ability to offset the demand with solar. Overall, that should mean income to maintain the grid should hold steady or even go up, though I suppose only time will tell.
> With the moves away from gas for heating and cooking and the proliferation of electric cars, it seems that demand for residential power is only going to go up with solar offsetting it
I see your point with EVs, but the utility (at least here) that provides gas and electric is the same. So a shift from gas to electric for cooking and heating won't really change the amount of money or where it goes (unless electric costs more than gas). Hell, if heating/cooking shifts more toward electric, people could power those off solar, so that shift would be a net negative for the utility's revenue.
I don't think I could give up my gas stove, but if I did get solar at my current place, I would likely replace my hot water heater with an electric one the next time it needs replacing, and run it off the panels. Ditto for the furnace, though those tend to have longer replacement cycles than hot water heaters.
Certainly if everything moves from gas to electric, then the utility can just stop providing gas entirely, and start dismantling that infrastructure, so sure, over a long time, that would save them money. But I honestly can't see that happening, even in a place like CA, for... a century? More? I think any legislature that mandated people replace their gas appliances with electric would get voted out in a heartbeat. Then again, who knows how popular attitudes will change in the coming decades.
Yes, but the proposed interconnect rates include a monthly fee if you connect to the grid. The fee is approximately 100% the price of the panels, spread out over 30 years.
I'll hopefully be grandfathered in for 20 years, but after that, I plan to just stop paying my electric bill. I imagine such "cord cutting" for new installs will become more common.
As a middle ground, I might just opt out of net metering, and pay for gross usage and the line connection. That forces PG&E to take the electrons, which at least screws over the natural gas peaker plants they're building out.
However, if current equipment price trends continue it will only make sense to do that out of charity/spite.
I have no idea if you're allowed to push the energy back on the grid. You may be better off with batteries to store your excess and use it yourself later. I did that, but I got the batteries for free and did the install myself for less than a hundred dollars.
People have seen this net metering problem coming from far off. I wrote a very unpolished undergrad thesis on this a while ago. Some standout articles from back then showed how net metering leads to a positive feedback of solar adoption [1] because of how rates are structured throughout this country (and the world for that matter), and it was time to consider modifying the rate setting process [2]. My conclusion was that net metering ends up being a regressive tax on those who can't afford the upfront capital to install solar themselves.
It's been a while since I looked at residential solar tariffs, but there were a lot of ingenious solutions being proposed to deal with the downsides of net metering and poorly set feed-in tariff rates. Minnesota's Value of Solar tariff [3] is the one that comes to mind as being pretty clever.
>My conclusion was that net metering ends up being a regressive tax on those who can't afford the upfront capital to install solar themselves.
This is the traditional conclusion in the utility business, but I'd say it's also almost meaningless. By the exact same arguments, any kind of conservation winds up being a "regressive tax on those who can't afford the upfront capital", e.g. insulation, fancy windows, high efficiency HVAC.
If I can afford a $2400 upfront cost to go above code on my HVAC unit, but it saves 100 a month, that savings is being subsidized by the people who can't afford it. The utility loses 100 a month in revenue but much less than that in costs, and the difference is picked up by the broader customer base.
Hell, turning your thermostat settings up in the summer is a "regressive tax on those who can't handle the less comfortable temperature" by exactly the same argument.
It also ignores how R&D and tech markets work. That "regressive tax on those who can't afford upfront capital" is an "R&D subsidy to early customers who are providing the upfront capital to lower the cost of solar". As solar companies get more wealthy customers, they can spend more on technology to improve efficiency, they gain economies of scale, and they can attract more financial capital on equity markets.
All of this has actually played out - the cost per watt of a solar installation is now 1/3 of what it was 10 years ago:
Very interesting, and surprising conclusion. I hadn't seen this problem before. (Though, note regarding "coming from far off" - the articles you cite are from 2013, 2014.)
OP hints at this - but the problem seems to be net metering lumps capacity payments in with the cost of power.
Some markets run a separate capacity market that rewards power generators explicitly for their capacity - independently of whether they actually generate any electricity. (California's market (CAISO) doesn't do this)
A long time ago I was involved in setting capacity market prices if y'all have follow up questions.
My utility charges separate amounts for generation and for distribution. In theory (I don't have solar), the electricity generated by the rooftop panels should be compensated at the generation rate. The the utility would then charge the consuming customer the distribution rate.
SCE and PG&E both separate out delivery vs. generation costs, and net metering only compensates you for the generation costs, but (per other comments I see here) the delivery costs are laughably low.
He omits the biggest issue with net metering. He claims "the utility is acting like a giant battery." But it's not. Power plants don't turn off/on with demand, at least not that rapidly changing a demand. And the grid doesn't store electricity. The reason electricity prices have gone negative is that the grid needs to offload the power somehow. If everyone is producing tons of solar during the day, feeding back to the grid, and consuming at night, the utility is twice fucked over. They have to pay to dispose of daylight power, and then pay to generate and transmit night power, all while making no money.
This article carries way too much water for PG&E. Sad, but I guess since we're gearing up for a net-metering 3.0[1] fight we'll see more and more articles like this one.
Here's the places where I think it misses the mark:
* The energy generation costs listed by the author actually includes rooftop solar. PG&E paid exactly $0 for you to spend $30k installing the panels, so that number is low for PG&E for a reason.
* PG&E turns around and sells your solar power to people enrolled in "Solar Choice" plans who will pay 50% more for electricity than what PG&E net metered you.
* California has a green energy mandate and rooftop solar is one of the ways PG&E can meet the mandate while offloading the entire cost of the system onto the homeowners.
* Net metering last for 1 year and after that PG&E "credits" you the wholesale value of your excess electricity, which they value at approximately 1c/kWh even though they charged other people $0.40/kWh during peak time for that power you exported.
* The CA legislator mandated all new homes are installed with solar panels. Kind of makes sense why PG&E was favorable of this bill. PG&E again has offloaded the cost of installing green energy generation on someone else.
* The monthly non-bypassable fee that the author describes as "pretty low" is actually closer to $10/month and expected to rise with NEM 3.0 to $50 a month or more. Keep in mind that PG&E has 5.5 million customers, so this number is significant.
* Grid defection is illegal in most municipalities so even if someone wanted to install a battery and go off-grid they still have to pay the $10 a month non-bypassable PG&E fees.
Net Metering 3.0[1] "fixes" the problem the author attempts to describe, but really it's a rug-pull on everyone in CA who spent tens of thousands of dollars to install rooftop solar.
Customers installing solar panels at their expense is a subsidy FOR PG&E, not the other way around despite what this spin attempts to portray.
Where is this mythical $0.40/kWh price for electricity (not transmission) actually occurring?
Net metering does not expire after a year. You can continue to get any power you need matching the power you had put in on a 1:1 basis. The 1c/kWh is for the excess.
Most of PG&E's infrastructure is transmission infrastructure, not generation. They wouldn't be building power plants themselves, anyway. Net metering allows rooftop solar to effectively get paid for electricity at a much higher rate than PG&E or local electricity cooperatives than would be paying on the open market. It is designed as a subsidy to motivate people to install solar. Pretending that it's a subsidy for PG&E is missing the mark.
> Where is this mythical $0.40/kWh price for electricity (not transmission) actually occurring?
The standard residental TOU plan for PG&E peak usage ranges from $0.33 to $0.45 depending on the season. Have a look yourself[1]. But PG&E actually classes your solar power as green energy and sells it to "solar choice" customers at even HIGHER prices[2].
> Net metering does not expire after a year. You can continue to get any power you need matching the power you had put in on a 1:1 basis. The 1c/kWh is for the excess.
There's no roll over of any extra generated power. You use it or you lose it. If you have $300 in retail credits they'll cash you out for $15 which is the wholesale price of it and you'll start again for the next year.
> Net metering allows rooftop solar to effectively get paid for electricity at a much higher rate than PG&E or local electricity cooperatives than would be paying on the open market.
You're paid in credits. Kind of like getting a gift card that expires in a year or days depending on when it was generated. It's non-transferrable and for all intents and purposes disappears at the end of the year when they true you up. To think people paying $30k for rooftop solar are somehow taking advantage of PG&E is laughable, especially given PG&E has a green energy mandate and doesn't have to pay a dime for that $30k installation.
Oh, I guess it'd been a couple years since I viewed the rate tables. In my mind peak prices were closer to $0.30. My mistake.
The point is that the 1:1 ability to exchange power you generate for power to consume is a better deal than anyone else gets: Half of the per-kWh cost of electricity PG&E sells goes toward transmission (aka maintaining poles and cables) and half toward the actual generation. If you produce 1 kWh at noon, and consume one at 8 pm, you pay 0, so contribute nothing toward the poles that provided that electricity to you when you needed it. So in the end, you paid $0 for that net neutral exchange, while PG&E received $0.40 from the other customer. They paid ~0.15 for the kWh they provided to you. Overall that means that they delivered 2 kWh over their lines and got $0.25, which is half of what they would have otherwise gotten for delivering 2 kWh over their lines.
>> Greenhouse gas emissions are a classic instance: polluters don’t pay for the carbon they emit. This is the ultimate distorted price: emissions have a high cost, but the price we charge polluters is $0. That price is a colossal lie.
I always say if you want to make someone pay for carbon emissions, the easiest way is to tax its extraction from the ground. Tax coal, oil, and gas extraction (or import) and call it a day. No sense creating artificial markets for carbon credits or other such nonsense that just encourages gaming a system and feeding middlemen.
The author IMHO totally blew it by digressing from the net-metering thing. Its a really good example of how pricing doesn't match costs, but he offers absolutely nothing as a fix for that situation. Charging people a base rate for the infrastructure plus usage sounds nice, but that causes problems for poor people and kind of subsidizes large users. The current pricing scheme which increases costs with usage (progressive pricing?) seems more fair. Or what about splitting the bill into infra and usage portions, then solar installations would pay infra for power flowing in either direction. I'm sure there are plenty more ideas out there, but the author offers none.
That split bill thing is how it works here in Norway. The nettleie (infra part) is regulated like a utility, because it’s a monopoly in the area serviced, but the actual electricity is fully free market, because you can choose whoever you like to actually provide the electricity.
Actually though, now that I’ve typed this out, the nettleie is charged per kWh drawn (as well as peak demand), and I’m not sure how that changes if you have solar panels. Maybe another Norwegian can comment. In any case, splitting the infra and production makes sense to me, and definitely can be done.
The (privatized) power utility in Nova Scotia, Canada just this week proposed a fee of $8/kWh for solar power entering the grid. It was met with a pretty ferocious response to the point the government started re-writing the legislation that governs utility regulation.
A very large solar industry has been established around these pricing discrepancies. Not easy to undo (and I guess not obvious if it should be undone).
During the first dotcom bubble back in the 1990s, the colocation companies (predecessors to today's cloud companies) sold bandwith based on peak bandwidth usage. It was called the 95/5 plan. It worked like this. They measured my egress data and stored it for every five minutes in the month. At the end of the month they'd calculate the 95th percentile of all those five-minute measurements and then charge me for that.
In other words, I paid for peak egress. Now AWS just bills US$0.09 per gigabyte. Their billing algorithm doesn't care about my peak load. And I have to pay just as much for the rest of the year as I would pay on Cyber Monday, when Amazon's bandwidth is spoken for by their own servers. That's a dislocation.
Lots of stuff works that way. Electricity, water, sewer, highway tolls.
Regulated monopoly electric grid operators traditionally get their rates set as a percentage of the value of their accumulated capital physical plant: turbines, poles, cables, transformers, switches, the land they sit on, and all that. Part of that cost is fixed, but most of it varies with the amount of power they sell.
Net billing for domestic solar electric panels isn't fair to the electric grid operator. When I connect to them on a net-zero tariff, I basically get 100%-efficient power storage for free. They're my battery, and a fine battery they are.
The local grid has an excellent pumped-storage hydroelectric rig. It's about 70% efficient, and it's about 70 miles from here. Shouldn't I pay something for all that if I use it? (The Northfield Mountain storage facility was originally built to store the Vermont Yankee nuclear plant's overnight output for peak load, and it outlasted the nuclear plant.)
The solution to the problem is real time pricing based on the grid's requirements at any moment in time. The current model also disincentives battery installations.
If prices were adapted to grid requirements, we'd have negative energy prices during peak solar production hours so customers should be encouraged to charge their own batteries using their solar or even get paid for charging their batteries via the grid. During hours of high demand but little production, batteries should send energy to the grid.
Of course all of this requires infrastructure as well, which needs to be paid for somehow.
> The current model also disincentives battery installations.
Isn't this actually a good thing, at least right now? Wouldn't replacing more ICE vehicles with EVs help the environment more than installing more Powerwalls would, and don't EVs and Powerwalls both share the same currently-constrained battery supply?
>> For instance, pricey CDs prevented lots of people from listening to music.
Nope. Nobody I knew in the 90s had this issue. In fact, higher prices caused more people to listen to more music. Unable to afford CDs, the kids turned to Napster. After that they had access to more music than any generation in history. This in turn forced the music industry to change, to create online delivery platforms. Napster might be gone, but those 90s CD prices are why we have streaming services today.
There was a long period of purchasing music from stores before Napster was even an option. Having to spend $12-$16 on a CD you intended to listen to one, maybe two songs on absolutely stunted the amount of music people listened to for a very long time.
You didn't have radios wherever it was you lived? No friends or cassette tapes?
Heck I still have stacks of cassette tapes from the 80's and early 90's - waiting around to record your favorite song from the radio (and cursing DJs that talked over the intro's) and then creating custom mix tapes for friends that we then all passed around to each other was a right of passage.
There must have been a lot of people that had access to record stores but not to the internet, and not enough money for lots of CDs. And Napster launched in 1999.
Napster was the first big name, but there were other schemes for downloading music earlier. Mp3s had been around since the early nineties. Even without downloading, high CD prices saw kids copying and burning CDs for each other as soon as burners were available. So long as you had some social connections you knew someone with access to free music.
If some states weren't captured by utility monopolies, then solar users would be legally allowed to disconnect from the power grid, potentially solving the first issue. It's amazing to me that this is illegal anywhere.
As far as I can tell, only Florida makes it actually illegal to disconnect from the power grid[1]. It seems to be legal in every other state, subject to doing paperwork.
What if I just didn't pay my bill and the utility company disconnected me from the power grid? Would I be subject to fines and jail time? Absurd, but hey, that sure sounds like Florida.
Edit: If you follow the link in the article, it sounds like this was all because of disconnecting the water hookup and has nothing to do with solar power?
Purely speculation on my part, but I think the power company disconnecting you for nonpayment probably wouldn't count: they don't physically take the line down, which is the condition that Florida seems to be concerned about.
> This doesn't seem like an absurd amount of money to have power when your system inevitably goes down for a time.
It's an incredibly low amount of money to have 24x7x365 reliable power. The alternative (off-grid systems) cost tens-to-hundreds of thousands of dollars. $10/m is nothing, and is arguably too low. The solution should be to charge all customers a higher fixed monthly charge for grid access and distribution, and then charge less for the power consumed.
Yes, but by disconnecting you aren’t contributing to the tragedy of the commons sort of issue the author talks about.
wHaT iF eVeRyOnE dId It?!
Everyone isn’t doing it, and ideally more people would be taking advantage of net metering. Until such time that it is causing real issues with the utility companies being able to keep the lights on, this is all a moot point. If it encourages solar adoption, then it’s a good policy, for now. Revisit discussion when it’s actually close to being an issue.
California had proposed a rule (NEM 3.0) that would add a grid access charge for solar, which is reasonable. However, the cost for the average solar install would be $50+/month.
FWIW, there's already a $10/mo minimum monthly charge, and a $0.02-$0.03/kWh non-bypassable charge for all energy consumed from the grid in NEM 2.0. So even a net-zero solar customer always pays $10-15/mo or so.
The only reason why some solar customers pay zero is that they _significantly_ overproduce (export more than they use) and overproduction is compensated at the wholesale rate (typically $0.03-$0.04/kWh for PG&E), not the retail rate ($0.11-$0.45/kWh for PG&E).
Off-grid electricity used to be illegal in California under Title 24. The law required residential homes to have an “interconnection pathway.” However, the law has recently been updated and now specifically allows off-grid electricity.
Right, the claim that renewables are cheaper than nuclear and other alternatives are a half-truth.
It's true that renewables can be highly affordable when the sun is shining but when the wind is blowing but the reason why they work with the current grid is that natural gas is highly available and cheap and the capital cost of gas turbine generators (very similar to jet aircraft engines) is very low.
Hydroelectric can fill some of the gap but at an environmental expense: if you want to support a healthy ecosystem you need a relatively continuous flow in rivers. If it is starting and stopping a lot you are depriving the ecosystem of a valuable service.
The idea that consumers can match demand and supply is also limited in applicability. If you turn off power to an industrial facility like a microchip factory you can destroy days if not months worth of production. Wholesale electricity prices can range from negative to astronomical and it is outright cruel and unrealistic to expect ordinary consumers to be exposed to that.
Options for power storage have improved dramatically in the last decade thanks to the development of electric car batteries but they are still orders of magnitude too expensive. If they follow the same curve solar has they could come within reach but with any setbacks they could remain science fiction.
> they are still orders of magnitude too expensive
This isn't right as of today, stored energy charged by solar is about $0.20/kWh ($200/MWh) which is within spitting distance of the cost of new nuclear. And when you average this cost with the cost of solar/wind delivered directly, it's a huge cost winner.
This is just the cost today, batteries are dropping precipitously in cost. If storage dropped in cost multiple orders of magnitude, and there's reason to believe that it will drop at least an order of magnitude, then thermal cycle electricity will completely obsolete.
Yes, it gets better when you consider that homeowners that are putting solar on their roof are essentially providing large amounts of power to energy companies without these companies having to actually spend on infrastructure. It's home owners who bear the financial burden for that as well as the risk.
It gets even better if you consider many people are also installing batteries or plugging cars with vehicle to grid functionality (like the new Ford pickup truck is capable of as well as several other EVs).
A lot of houses with solar and batteries enables the creation of virtual power plants that can supply many GW of power to the grid during peak hours. So, when demand is highest, they can sell power at the most lucrative rates straight from batteries that were charged for free during the day. And they don't even have to buy the batteries or the panels. All they need to do is give a cut of the profits to the home owners.
Basically, the way the EV market is developing, there are going to be many millions of large capacity batteries on wheels plugged into the grid at any time. All power companies have to do is find a way to tap into all that power. Even discharging them a little bit collectively creates a lot of power.
E.g. supplying half a KWH over the course of an evening barely moves the needle on a car. Most EVs have something like 40-50KWH of battery. So we're talking a percent or so. They'd be trickling out electricity at a low rate of something like e.g. 500W or even less. Times a two million plugged in cars is about 1 GW of capacity. Do that for an hour and you get 1GWH of power at the cost of very slightly draining the batteries on a few million cars. That's just car batteries. Many home owners also have batteries installed into their houses, and solar on the roof to charge them. And many of those setups are net producers for large parts of the year.
A gas plant costs about 1000$/MWH to operate. Possibly a bit more lately due to the high gas prices lately. So, 1GWH of power is about 1M $ in cost. That's worth paying something to home owners. Most of them are happy to just have the KWH slashed from their monthly bills. The rest is basically pure profit. Any GWH of gas they don't have to burn adds to their profits. Power companies are spending billions on expensive grid batteries to lower that cost.
Thank you for saying this. I find in technical circles, like HN, it's often underappreciated how dramatically solar, wind and stored energy are becoming cheaper year by year while production capacity continues to grow
It's funny because the technical crowd should be best situated to understand the incredible tech curves of solar, wind, and storage, as they have experienced the advancement of computer tech. However, for other technical fields, such as civil engineering, they are not used to dramatic cost drops.
Nuclear has a surprising negative learning curve. This is obvious when comparing different reactor designs over time, with ever increasing costs. But the more surprising finding is that building the same reactor multiple times get more expensive, not less. This is true even during France's successful build in the 1970s, so regulatory changes can't be the sole reason for increasing costs:
Question is whether batteries are getting better fast enough. Cost per energy stored might be coming down relatively quickly, but energy density (energy per volume) or specific energy (energy per mass) are improving only very slowly. As a consequence, I think long-range electric passenger jets, for example, are many decades off.
By "very slowly" you mean double the capacity per kg in the last decade at a tenth of the cost? Because that is more or less what happened in the last decade.
If you don't believe me, the Nissan Leaf originally had 21KWH of capacity when it launched in 2010. The smallest variant of the latest model has 41 KWH. You can also get a 60KWH version. And you can actually install new batteries into an original Leaf and double the range while slightly lowering the weight. And of course those batteries are now a fraction of the cost that they were in 2010. Back then replacing the battery would have cost tens of thousands of dollars. People are getting that done for around 5K now for a battery that is literally twice the capacity.
The discarded batteries typically end up being part of some grid storage solution.
Another doubling in the coming decade is likely. As is further reductions in price per KWH. Maybe not 10x. But probably more than 2-3x.
It's profitable now to buy expensive storage solutions for grid providers. Ten years from now that will be a lot more attractive.
It's this, but it's also more direct and indirect regulation.
For example:
Natural gas compressors now need to be electrically powered instead of NG powered. Added cost, but doesn't reduce total gas burned.
Oil companies are forced to do things like build equipment that captures 100% of vented gasses (instead of burning them off), even when the embedded cost of manufacturing said equipment exceeds any gains. Ie, it creates more emissions than it will ever capture. But still raises the price of oil.
Some of the Texas power plants last year could only generate at the power levels that maximized efficiency (or minimized certain emissions) instead of at maximum output. Asking for an emergency authorization to produce at 100% was granted by the feds, but only at a minimum market price of $1500/MW. (Typically ~$30, with normal extremes ranging from maybe $20-150.)
CAFE standards are essentially quotas that increase the cost of regular ice vehicles in order to subsidize green, hybrid, and electric vehicles.
And perhaps the most direct influence on oil prices is preventing auctions for new federal mineral leases, limiting exploration and extraction of o&g offshore and on federal lands.
This is why your bill should separate your grid fee from your generation fee. Net metering could apply to the generation fee but not the grid fee, and your generation cost should be determined by the time you are using power (due to peaking) not just the amount.
Want to escape the grid fee? Then you have to actually disconnect with full battery backup. That would promote independence and community microgrids, which would be a good thing for robustness and overall system efficiency. Someday I can easily imagine suburban and rural areas with no "big" grid connection and the grid becoming primarily a thing for industrial and high density areas.
It seems to me if it's true that the cost of distribution is something like 77%, then it really argues in favor of more houses being off grid -- For the cost it may have been better to build self sufficiency, and/or micro community grids rather than a giant regional one. The economy of scale in generation is lost in the costs of distribution.
In practice local generation and storage has fewer possible customers. The grid has limits on how much can be exported from a residential substation. A generator connected to a big substation can send electricity to millions of potential customers. And a battery can receive energy from all over the grid. The local intermittency is easier to iron out when you can benefit from geographical separation, different modes of generation and different weather conditions.
That distribution cost is not at all related to solar. With rooftop solar your power travels across the powerline maybe 1 city block to your neighbor. It's not traveling thousands and thousands of miles.
Ok, how about here: there is no necessary connection between costs and prices, at all, and this is why some businesses go broke and others are worth a trillion dollars.
Starting completely over with the basic microeconomics correct, there's surely an interesting question about public utilities which are paying prices for electricity which no longer line up with amortization and other costs of provision to be answered.
Everything said about clubs was not-even-wrong, though.
But isn't the idea of a "utility" that it operates as a unique type of company that prices its services in sync with costs? In fact many utilities are explicitly cooperatives.
To me, "privatized utility" is an oxymoron and that point is just a company with a mandated or de facto monopoly.
That's a nice emergent feature that happens when you have plenty of competition, low transaction costs, perfect information and so on. Sometimes the real world is close enough to that one that you can pretend prices and costs are the same (although even then, just marginal costs, which doesn't include infrastructure that's already built).
But it shouldn't be even mildly surprising when they diverge; it's certainly not a lie.
The author here would do well to and understand and use terms like "fixed costs" and "variable costs". There are large fixed costs in the power grid and the author is complaining that the retail price of electricity doesn't reflect the variable costs, leading to distortions and perverse incentives.
But this doesn't make prices "lies".
> The current net metering system in California is pretty favorable to customers with rooftop solar; in effect, it’s a subsidy.
It's quite an overt and deliberate subsidy to foster solar power technology (which has been wildly successful), reduce demand on the grid and to shift the pattern of power usage. Electricity use spikes during daylight hours [1]. This happens to be when the Sun is shining and solar power works. Peak demand is really the only thing that matters in powering a grid. Solar is highly effective at reducing peak usage.
I honestly don't know why the author feels like any of this isn't "upfront".
> It's quite an overt and deliberate subsidy to foster solar power technology
I'd say that the issue the author is addressing is that it is not so overt. Sure, if you meditate on it it becomes clear it's a subsidy, but I think the vast majority of the people who take advantage of it simply think "I produce as much as a use, so of course my bill should be zero."
Well, if my net usage from the grid were to drop to zero, without solar (say because I used a gas generator or whatnot), I’d basically be paying the utility zero too (modulo some small connection fees). The utility still wouldn’t save on any of its fixed costs though. What net metering with solar does is simply make this option much more practical.
The straightforward solution would be to fund major infrastructure costs using something other than volumetric pricing. But it’s easier to just impose fees on solar.
Or to put in a smaller scale and not require adding your own generation, are you stealing from an electricity company's fixed costs if you turn all your applicances off when you go on holiday, or if you have a holiday home which is only occupied 25% of the year? I think the answer is clearly not.
But there's a huge difference between actual zero usage and net-zero usage. That's the whole point.
If you're using a generator (or, as another comment said, just use hardly any electricity) then you're not a burden on the system at all (or barely).
If you're "net zero" because you feed the grid your excess power during the day and take away power during the night, you're using all their infrastructure.
In your example, you don't need the grid, so it makes sense not to pay grid overhead (minus arguments about how we still pay for schools with taxes even if we're not using them).
In the solar example you absolutely need the grid. So net metering down to zero is definitely a subsidy. A subsidy I absolutely agree with, but a subsidy none-the-less.
The vast majority of people are unwilling/unable to think deeply enough about the system to understand it. Thus, the simplified rule of thumb that generating electricity reduces your power bill is needed for them to even understand the general direction of what needs to be done. Perhaps the power utility could include an explainer page at the back of the monthly statement for those with the interest and capacity to understand it. Maybe 2% of people will read and understand it. The other 98% can just be smug about their lowered power bill and blissfully unaware of their part in accelerating the market shift to solar.
Agreed that net metering was deliberately designed as a subsidy, and that there was nothing hidden or underhanded about this, it was (and remains) all quite overt.
And yet. The inspiration for this post was a discussion on my town's email list, where a lot of people were talking about net metering as if it were the natural and obvious way of doing things (and thus were very upset at the proposal to weaken it). They either never heard that it was designed as a subsidy, or have forgotten (whether through motivated reasoning or the simple passage of time).
I think this is a form of tech debt. You have an algorithm that's not adapting to new circumstances, the clean solution is too difficult / expensive, so you just hack some of the parameters of the existing algorithm to give good-enough answers in the current circumstances. Eventually everyone forgets the history and assumes those are the "correct" parameters, and resists changing them even if the system has moved out of the circumstance under which the parameters gave an OK result.
> the author is complaining that the retail price of electricity doesn't reflect the variable costs
I think you mean "doesn't reflect the fixed costs"? And yes, it might have been better if I'd taken the time to introduce the terms "fixed cost" and "variable cost".
I have a question since I am not in the US: is net metering based on paying for the difference between consumed and produced energy (kWh), or between the prices of consumed and produced energy?
Perhaps you and I are reading this differently. In my opinion, the author clearly delineates the two to be able to make this claim:
> In other words, the direct cost of providing an additional unit of electricity or natural gas is only 23% of overall operating expenses.
The way I read it, the author is not claiming the subsidy is the misleading part, just that, once there is mass adoption, the price of everything will actually go up to something very close to the current costs being paid by non-solar panel households. That is, at some point, homeowners who build solar panels right before this subsidy ends will get burnt very badly.
There's the marginal cost of electricity, and there's the marginal cost of electricity at peak time.
The second one is much higher, and solar hits precisely it. Yeah, there is still a subsidy and it will go away at some point, but it's not 77% of the costs like the article states.
A huge portion of electric bills are paying for wildfire damage/hardening and for expensive transmission lines. Rooftop solar reduces both, but is not being credited for it in NEM 3.0.
When electricity is generated and consumed locally, it doesn't need to be transmitted across huge distances using expensive transmission infrastructure. There's also less wires that can trigger fires. But infra is the only way regulated utilities are allowed to make a profit.
These increased costs being passed to California consumers could kill electric cars. We're paying $0.30-$0.40 / kwh to PG&E, which pencils out to over $9 / gallon.
> We're paying $0.30-$0.40 / kwh to PG&E, which pencils out to over $9 / gallon.
No way. An electric car (including charging inefficiency) uses about ~0.3 kWh per mile, so at $0.35/kWh each mile costs you ~$0.10 in electricity. If a gas car gets 35mpg, then for each mile to cost ~$0.10 in fuel, gas would need to cost $3.50 not $9.
If you have an electric car, you can get PG&E's EV time of use rate. Schedule charging during off-peak hours (past midnight) and it's on the order of $0.13/kWh.
Fantastic! Then I have no complaints. The grid is a great resource, IF you are using it, then you should pay for it. And mid-day solar (when PG&E curtails their own solar) does not have same value of power at 6PM - so they need to fix that for sure, which will result in more local battery demand (a good thing).
Listening to a big corp like PG&E whine about how they are going to need to spend billions to upgrade a grid I'm not using, and so will need to charge me to have solar and battery power is rediculous if part of the reason they need to spend all this money is they won't allow folks to be disconnected from the grid.
If the law is going to mandate staying connected to the grid (subject to any maintenance fees the utility company desires, independent of usage), then those grid maintenance fees should be moved to tax dollars.
> If a house on average generates as much as it uses, the electric bill will be zero. (In practice there’s a minimum monthly fee, but it’s pretty low.)
This was the case in the last house I lived in. The solar panels generated enough power that there was never an electric bill other than the $12 fee to be hooked into the grid. And this was in cloudy, rainy Oregon.
I did think about this scenario. If everyone had panels like that house, how could PGE make any money?
Note: we lived in that house for about 10 years before installing panels, so we knew the average monthly electric bill. We paid for the panels with a loan and the monthly loan payment was lower than any of our monthly payments during the previous 10 years. It was cheaper to get panels and pay the loan than to pay the monthly electric bill without panels.
If everyone had panels, the kWh price for daytime usage would be $0 or close to zero. Everybody would still pay almost fully for nighttime usage, while daytime usage and production would not have any impact on the bill. Either the fixed part of the bill or the nighttime price would grow as needed to cover the actual cost of the grid and the cost of energy on cloudy days.
Either way, the new pricing would stimulate the installation of solar-powered batteries, to arbitrage between expensive nighttime consumption and cheap selling of surplus production in the morning.
On cloudy days the grid would have to supply almost-free energy at noon, but then would also make more money at night because households batteries wouldn't have enough charge. I'm not sure if this is true in the summer, when even on a cloudy day there might be enough sunlight to charge the battery, but the actual balance would guide the utility company on how much to increase the fixed part of the bill vs the nighttime price.
I am not usually a fan of the efficient market hypothesis, but here it seems to work albeit with some serious simplifications.
> If everyone had panels, the kWh price for daytime usage would be $0 or close to zero. Everybody would still pay almost fully for nighttime usage, while daytime usage and production would not have any impact on the bill.
Right - but this is different that everyone expects it to work. People expect to sell power to the grid when the sun shines, then get the same power from the grid at night and offset them to be net zero cost. It is not sustainable pricing.
Sure, but nobody promised kWh offsetting would remain in place forever. $ offsetting can still save you money.
Also, because you entered the solar market first, you might have easier access to credit to upgrade it with batteries. So you'll benefit from price arbitrage more than the late-comers who have just taken a loan to install a solar roof and can't afford the batteries right now. Or you might buy a plugin car, charge it cheaply when the sun is high, and save on gas expenses (that's what I do since I work from home, :) and it's possible to both top up the car and charge the 4 kWh solar batteries in most sunny days with a very small 3 kW installation).
Which brings up another problem especially in Europe: taxes on gas are financing roads and the like in ways that sooner or later will have to be covered by increasing electricity prices. Right now, early buyers of electric cars are having their purchase subsidized because effectively they pay fewer[1] per-km taxes than owners of ICE cars.
Taxes on gas in Europe pay more than just the roads, they're regularly used for general govt expenses. You're right eventually the tax has to go somewhere else.
> The solar panels generated enough power that there was never an electric bill other than the $12 fee to be hooked into the grid. And this was in cloudy, rainy Oregon.
Yeah, this is it in a nutshell. You were only being charged $12/month for a grid connection, when a grid connection was clearly worth much much more than that. The usual cost of a full off-grid system can clear $100k if it's sized to cover HVAC.
> The usual cost of a full off-grid system can clear $100k if it's sized to cover HVAC.
Or is essentially absurd... my 6.6kW system generates about 3x more than we need for 8 months of the year, but about 1/3 of what we need for 4 months of the year (the period when our air-source heat pumps, aka minisplits, are in use).
To be able to go off-grid would require either:
- a systems 3x bigger than we have, generating 9x more power than we need for 8 months of the year
OR
- a gigantic (10MW?) battery system to store the excess power from the summer
Neither of these make any sense to me, and seem like well-intentioned but fundamentally ill-conceived designs.
This is a fair observation. Interestingly, what you describe (a system 3x larger than your average load) is essentially what the grid has to have. Looking at the California data, here in Winter, today's peak usage is about 28 Megawatts and the overnight low is about 20MW. However, the peak all time usage for California is over 50MW. Our entire electric grid has to handle that 100% delta in usage; it's not surprising that a personal grid would have to handle at least that much delta. That's just what is required to have 24x7x365 electricity; you can't hide from that reality.
It's not about hiding from the reality. It's about how energy storage (and generation) systems scale and can be activated/deactivated.
On the generation side: If I had put in a 21kW system to cover our winter needs, the extra power it generates during the summer would have been unconditionally generated. Do this broadly across the population and the power grid has a substantial management problem. Conversely, utility-run systems are likely to be built so as to be much more modulatable, to match demand.
On the storage side: yes, obviously the total storage required is the same, but for more or less all the technologies I'm aware of today, this would be much more efficiently done with large storage systems than per-household distributed ones.
Not usually. There are grid shutdowns in wildfire risk areas during high wind events, and there was a brief rolling blackout last year over two nights in a small area, but it's been almost 20 years since the broader blackouts that made national news:
The problem with Net Metering is that some politicians don't understand how electricity (and energy) works, but feel like they need to "do something" in order to tackle climate change.
Net Metering was a great way to subsidize solar when it was a niche market. Now it's not. IMO, we should stop subsidizing solar and start subsidizing home batteries. IE, only allow "Net Metering" if there is a battery, sized to match the panels, that the power company can control.
This way, we can make the system "win-win." The consumer benefits from cheaper electricity, and the power company benefits because they can tap the generated electricity when it's needed most.
Large commercial customers typically pay capacity costs -- i.e. if you need 1MW of power, you pay for that 1MW of capacity on top of your actual demand costs.
If they did this with residential customers, it would make residential energy storage (i.e. batteries, but maybe thermal or other storage) more attractive, so instead of paying for a 200A circuit to meet your peak demand, you pay for a 50A circuit to keep your home battery charged and that battery kicks in to meet your peak demand.
And once you have that battery, you may as well add solar as well.
Here in New Mexico, when I connected our 6.6kW PV array to the grid, I had the choice of net metering or not. But there was a wrinkle: if I chose net metering, the power company could use our installation to count towards its own state and federally mandated shift toward renewables.
Being a cantakerous old geezer, I said hell no, and opted for no net metering. Works out OK from my perspective: still pay small electricity bills for the excess that we need for 3-4 months a year, and just the $7.70 connection charge for the rest.
One of the most common "lies" is price windowing where you charge multiple prices for something that costs you the same. Like when Intel used to sell a 486SX at a lower price because the math co-processor was deactivated on the same chip as the more expensive 486 DX. This pricing "lie" allowed Intel to get more total revenue and sell more total units because they could charge more and less at the same time. Airline ticket prices also work like this sometimes.
Why I put "lie" in quotes is that prices always reflect more than cost. They also reflect the utility to the purchaser. Some people are always willing to pay more or less. Beyond cost, price also reflects utility. It's true the price of electricity is manipulated to shape behavior, but its also true that 200 kW hours is twice as useful as 100kW hours and the purchaser may be willing to pay twice as much for it.
> because the math co-processor was deactivated on the same chip
I don't know if this is true of your specific example but modern CPUs SKUs that are differentiated by core count do the same thing except they disable those extra cores because they are faulty but will disable a working core to make a quota.
As an ex-power trader active in the californian market, his analysis is incomplete.
The pricing of wholesale market depends on many factors, including
1) the amount of electricity consumed at time T (quantity)
2) the variation on that amount at time T (delta of your quantity)
3) the location (delivery fee for your quantity)
The problem with solar in californa is that electricity is produced when the market does not need it, and that it stops production when the demand increases. The current reality is that 'green' power generation increases the dependance on 'brown' power source for reliability reasons. Your can read more about this here : https://en.wikipedia.org/wiki/Duck_curve
That ''net metering'' thing is to electricity prices what Santa Claus is to christmas presents.
In NYC at least, electric supply charges are distinct line items from electric delivery charges. Consumers do have the option of choosing who supplies their electricity (e.g. namely if you want to buy your electricity from a green source). But the local monopoly is always entitled to charge you for the service of actually delivering said electricity to you.
Both charges fluctuate from month to month. When I still lived in Indiana, the local monopoly lumped together supply and delivery charges into a single line item which, interestingly enough, was significantly lower than what I pay for just delivery now.
The following prices are for roughly April.
NYC (ConEd) delivery charge is ~$18/month + ~$0.123/kWh. Supply is usually something like ~$0.115/kWh.
Indiana (Duke Energy) total cost (including both supply and delivery) was ~$9/month + ~$0.115/kWh.
It's the same in California. The problem is that the delivery charges are also calculated per kWh (so, the cost of delivering a single unit of electricity to your house). But what happens when the net electricity delivered is zero?
You could argue that customers should be charged for both the electricity delivered to their house and the electricity taken away from their house, since they are using the grid and other expensive infrastructure for both. However you are now disincentivising people from installing solar and giving back their excess power.
Thanks, this is the detail I was missing. Net billing for delivery makes zero sense. I think the reasonable solution is to bill the consumption direction only.
The ultimate answer to this is to go self-powered. The sun will never raise its rates, and PV panels+batteries are getting cheaper.
Utilities are not admitting that independent power generators contribute to creating a more resilient grid at no cost to ratepayers/full cost to the homeowner.
It's certainly increasing the availability of power but I fail to see how it makes a "more resilient grid". Who is gonna fix a power line that goes down?
A downed power line is minor compared to Hurricane Sandy or the Great Texas Freeze. Who demonstrated resiliency during that time? The ones with Powerwalls and microgrids powered by gas/alternate storage systems kept the lights on in many places. The lesson is that reliance on a centralized grid can quickly turn into a big problem. Distributed and localized energy generation and storage is where the incentives should be placed.
I can understand why it can be necessary, but why is being off-grid desirable? Having solar/wind/etc is great, but a grid connection gives you a bail-out in case things go south, e.g. an outrageously hot and windless summer night might create a demand that cannot be handled by your battery (if any).
I don't agree with the parent commenter, but in some states/countries net metering is being turned around to having to pay a flat fee per kWh of solar generators. For example, my electric bill is around $160, I can net zero it out with 8kWh of solar costing me (installing it myself) about $8k total, but then if I get charged the $8 per kWh per month that is being proposed, I now pay $80/month to maintain a grid I rarely use as opposed to $0/month. Shifting my ROI from 4 -> 8 years. If you get solar installed with an installer, you would probably pay something like $20k for that same array, so your ROI goes from 10 -> 20 years, where your warranty might stop at 10 or 15 years. If you instead threw that $20k lump sum on the stock market and got 5% per year, you would match the amount you would have saved on solar.
Edit: Math is hard, that's $64 a month and the numbers change slightly but the essence of what I'm saying still holds
Well, if grid connected, then it wouldn't make sense to have a battery that is basically never used. Plus, you pay a fee just to be connected. If building a new house, I would rather save on the expensive hook-up cost.
In the event of installing a system, I would want it to be sized appropriately and have proper design of the rest of the system. Better insulation, passive heating and cooling strategies, as well as a geothermal heat pump would all be good improvements. Arguably, those would the best to focus on before implementing solar due to the increased efficiency, reducing the necessary battery size, etc. Some of these my not be easy or practical with existing houses, but many are.
Ideally I would like a solar/hydro setup, but that would require a property with a water source.
But your price in that case should be really outrageous because your just externalizing the cost of the utility having to build a peaker plant somewhere and run it on a couple peak days a year (and maintain the infra). That cost should be averaged over the year for someone who uses 100% grid electricity, but for someone who only uses it when the production is the most expensive then they are freeloading on everyone else. That is sorta the point of the whole article.
It is also fundamentally the problem with wind and PV even at grid scale. Its true costs are buried behind the (generally) natural gas turbines being built to back it up because the grid can't just say "sorry no power right now, you get to freeze" like happened in TX last year. So, one has to take the max power usage, and assure there is capacity even if it happens to be dark/cold and without wind. Usually there is a fair bit of excess capacity in place to deal with plants have to shutdown for maint/etc so it just becomes a question of assuring that all the plants don't do maintenance at the same time (enron/CA anyone?), and they aren't going to be doing maintenance during the parts of the year when peak power draw happens (generally the dead of winter, and summer).
A lot of this is actually a very well explored problem in electricity markets, particularly at the wholesale level, and part of why, e.g., capacity markets exist in most deregulated market sin the US (outside of Texas). I know this post is focused on retail, and net metering, but this concept extends pretty broadly across electricity generation and sales.
For a little more explanation on the capacity market side of things I'll quote from the Independent Market Monitor for NYISO, ERCOT, MISO, and ISO-NE in a FERC filing from last year (disclaimer, I used to work there)[0]:
The purpose of the capacity market is to satisfy resource adequacy requirements. Because an efficient energy-only market would generally sustain a long-term capacity level far below the planning requirements of the Eastern RTOs, additional revenues are needed to sustain capacity levels to satisfy these requirements. The capacity markets, therefore, set prices that reflect the marginal cost of satisfying these planning requirements and provide the “missing money”. This marginal cost or “missing money” in the long-run is equal to the cost of investment minus the operating revenues from the sale of energy, ancillary services, etc.
If resources are under-compensated for energy and ancillary services, it will tend to increase the missing money and raise capacity prices. Importantly, if flexible resources are systematically under-compensated, it will inefficiently shift revenues into the capacity market and shift incentives in favor of investment with less flexible characteristics. For this reason, we have repeatedly sought to promote energy and ancillary services market reforms that will reduce the need for out-of-market actions to maintain reliability, which while necessary in the short-term, are particularly harmful to incentives for investment in flexible resources.
Probably switching to transparent pricing is the way to go. Calculate the costs of things ($X/year for maintaining transmission lines and other over Y customers = $Z infra fee) and charge separately for each of them.
This is a good idea, but it would never survive in California, because people would complain that it's regressive. Rich households use more electricity than poor households, but the infrastructure maintenance cost for each is approximately equal, so with your proposal, poor households wouldn't get subsidized by rich ones anymore.
Not necessarily, you can scale each of the fees by income, either of the household or the average income of the suburb/region. Or just introduce subsidies for poor households.
Rooftop solar was always form of green subsidy: you get the same flat price for energy you dump into the network as the price the utility charges you. But what you put in at random times of your own choosing is much, much less valuable than a guaranteed power feed at any hour or season. At times it might have negative value, the power you put in costs the utility money. That simply cannot scale.
The only way I can see the two prices equal is if you provide power in the network on request from the utility, at specific time intervals from your own storage. But then you wouldn't need a power utility.
I bought a giant solar array this fall and finally got it activated last month. The initial way I thought "net metering" would work was:
If we buy & consume 2000kWh but then produce and sell back 2000kWh, then the total bill should be near-zero.
That's not even close.
When we buy power, we pay $0.115/kWh but when we produce excess power, they only buy it at $0.027/kWh.
Therefore, they bill us for $230 (0.115 * 2000) and credit us $54 (0.027 * 2000) so our bill is still ~$176. In order to zero out our bill, we have to sell back 4.25x more than we consume.
I didn’t realize it was that bad but kind of makes sense that they are not going to pay you “retail” prices. Another way of looking at it is there is a huge incentive to size your installation for 100%, not just plan to offset some cost of use because you pay a big premium for their power.
Kind of different in germany. I work as a dev team lead for a company that develops billing software for the german energy sector. Its super regulated by the government. For example, depending on the year you got your soloar, the amount of money you get for your energy you bring back into the grid, is different. All has its pros and cons tho
Fine. I get the need for the need to cover my offload, downtime and night time when grid tied. What really grinds my gears is that many states REQUIRE you to be grid tied and pay those fees. I would like to go it on my own. Not a legal option.
Many energy deregulated states charge supply, transmission, and distribution as separate line items. Is this not the case in CA? Seem strange that it wouldn't be, how else would you handle billing when someone chooses a different supplier?
those are average rates, not actual retail rate schedules - useful for talking about something like an annual consumption number but not so much for something like net metering where the time of use is a big deal.
How exactly do they come up with a single price per zip-code given that rates are dependent on choice of electricity plan, on-peak vs. off-peak, % of baseline and so forth?
Shouldn't the people who use the resource more pay more for its maintenance and upkeep? Seems silly to force everyone to equally maintain a resource that not everyone equally utilizes.
Really, in deregulated markets, a similar concept should apply to wind/solar generators. They should be forced to guarantee 100% reliable production, which means that they are responsible for the batteries or gas plants as well.
Then they won't get to financially destabilize the reliable power producers by shifting the costs of having a plant sitting around idle for most of the year to some other org that has to balance the books.
Well power deregulation has a lot of meanings, here in TX, in which is considered a "deregulated" market (because the producers, transmission and retails are different orgs, and there is an energy market) normal generators have to file servicing/downtime requests, which can be rejected, when they won't be able to deliver their nameplate capacity. That is to assure there is sufficient grid/transmission capacity, they won't be offline during peak demand season, etc.
So, power deregulation doesn't mean "free for all", because then they would just play games of assuring under supply and drive the price up, and the grid stability down. In the US it just generally means that there aren't integrated municipal power companies (which can sometimes still exist in deregulated environments). In TX case, the deregulated market has a market regulator called ERCOT.
(edit: to expound on this more)
An integrated power company generally is responsible for assuring it can meet the peak demands of its customers. Which means it builds the power plants, transmission lines, and gets paid directly by the consumers. This was much of the US a few decades back where individual co/orgs were responsible for their service areas. The grid is more a bunch of regional grids all synced, so while a certain amount of power could be drawn from one region to another it wasn't the normal mode of operation. Anyway, the point being that should such an org build wind/pv they would also be responsible for building/maintaining the backup generation. So the books balanced in the end, that isn't true when any rando can attach an intermittent source to the grid, and reap the benefits when it suits them.
Hu? I was trying to define what a is considered a deregulated power grid, because apparently people don't know how its generally defined in the US. I wasn't saying that the entire US is deregulated, its state by state as the example below points out, and even in some deregulated states (like TX) there remain integrated power companies, again as I said.
Blue pill: prices are economic signals reflecting supply and demand and play five distinct roles in capitalist economies...
Red pill: prices are a statement of relative power between and among interacting entities that occasionally take economic factors into consideration, but only occasionally.
Subsidy irrationality and many other artifacts mentioned in this piece that are difficult to reconcile in a blue pill world make complete sense in a red pill world.
In his book "10% Less Democracy" the economist Garret Jones pointed out that politicians make terrible decisions during election years, therefore, if we had longer terms in office, and therefore fewer elections, we'd have better government.
Likewise, in 1787, Alexander Hamilton insisted that the USA President should be elected "for life, on good behavior." He imagined that having a leader commit to a country for life should lead to good governance, so long as the person could be easily removed if they behaved badly.
"Democracy For Realists" rounds up some of this thinking. While Achen and Bartels don't explicitly endorse longer terms in office, they do quote a lot of people who feel longer terms in office would lead to better government, and also more honest government.
I've been studying this issue and using a Substack as the dumping ground for my research notes. If you're interested, here is an excerpt where they talk about the struggle to add fluoride to municipal water, and the pushback the political leaders got:
"La Follette was eventually the 1924 Progressive candidate for president, but the anti-party spirit of that movement is already apparent in these remarks two dozen years earlier. As Key (1942, 373-374) put is, “The advocates of the direct primary had a simple faith in democracy; they thought that if the people, the rank and file of the party membership, only were given an opportunity to express their will through some such mechanism as the direct primary, candidates would be selected who would be devoted to the interests of the people as a whole.”
Some canny political scientists were immediately skeptical. For example, Henry Jones Ford (1909, 2) noted that
“One continually hears the declaration that the direct primary will take power from the politicians and give it to the people. This is pure nonsense. Politics has been, is, and always will be carried on by politicians, just as art is carried on by artists, engineering by engineers, business by businessmen. All that the direct primary, or any other political reform, can do is to affect the character of the politicians by altering the conditions that govern political activity, thus determining its extent and quality. The direct primary may take advantage and opportunity from one set of politicians and confer them upon another set, but politicians there will always be so long as there is politics.”
I include my own opinion in the Substack, which is that longer terms would help make for most honest government.
Achen and Bartels also offer a detailed look at a region of Illinois in which the public was invited to vote on the budget for the fire department. The public voted for the cheapest, least expensive budget they were offered. The public saved themselves a total of just $0.43 cents per family a year, while having to suffer from very slow response times from the fire department. This seems to be a clear example of the public sabotaging its own interests, when invited to vote on issues directly:
Finally, here is the part where Achen and Bartels come close to suggesting that longer terms would allow politicians to be a bit more honest. They make the point that it was the politicians close to an election who were most likely to pander:
"For lower-level offices, however, a good deal of variation in term lengths remains, and it seems to have just the sort of consequences suggested by Hamilton and by Canes-Wrone, Herron, and Shotts’s analysis. For example, elected officials facing the issue of fluoridating drinking water in the 1950s and 1960s were significantly less likely to pander to their constituents’ ungrounded fears when longer terms gave them some protection from the “sudden breezes of passion” that Hamilton associated with public opinion. Figure 4.3 shows the dramatic difference that longer terms made to mayoral support for fluoridation. Many political leaders, not caring deeply about the topic, ducked; but those with longer terms had more political leeway to do what was right, and a significant fraction of them used it."
It seems likely we could get a more honest kind of government if politicians were elected for a single very long term, of perhaps 15 or 20 years. The top judges in Britain are appointed for 18 years, so perhaps that is the ideal number when you want to ensure someone's independence, while still allowing the regular churn of generational change.
Alexander "I helped patroons in Upstate New York put in place a literal feudal system that kept tenants in debt peonage for decades and entailed their land" Hamilton has no business suggesting life terms for anything.
The solar installation (which is probably larger than optimal) is dictated by the policy for the house to be “net zero”, which in turn is dictated by a policy based on the size of the house. (In practice, solar is the cheapest way for the builder to get all the way to ‘net zero’ after the usual decent insulation, windows, etc.)
So that’s how I got solar, but now I want to turn it on. Well, this is not in the interest of the utility at all (they lose money), but they still by policy get to ‘approve it’. This required a many-month (and many phone call) process of reviews, approvals, etc. which concluded in the utility activating (installing a meter for) the installation. In total it was maybe 9 months from when the solar was all wired up and sitting in the sun until it was producing any electricity for the world!
Now the utility gives me a choice of two billing options. At the end of each month, excess energy I’ve generated can either be put in a kWh bank and rolled over as credit, or it can be paid out. However, the payout is hilariously low (like $0.01/kWh) so of course everyone chooses the bank.
But now incentives are all screwed up! Since I easily generate more electricity that I will ever use (see above for why policies drove us to an installation larger that necessary) my household has no incentive to conserve at all. E.g. I am heating my garage with an electric heater because it costs me zero.
So the net effect of all of these policies intended to promote conservation are:
1) To drive up the price of housing in an area where that is already one of the big challenges the community is fighting
2) To completely disincentivize any actual conservation
3) To have new solar installations laying fallow for 6-9 months
I don’t know what the solution is, but the problems are pretty easy to see.