My dusty crystal ball and the future economics of home solar

[DanKegel]

Someone asked:

could you expand a bit into what your "crystal ball" might be telling you about net metering?

Here's my take. After the dust settles, and subsidies go away:

The utilities don't want to have to act as batteries for solar customers, so they're going to charge for it.

And their costs are driven by peak demand, not average energy use, so they're going to charge by peak power use in any 15 minute window during the billing period.

These are not evil motives, that's simple economics.

That sets up incentives for

- demand management, e.g. in the future, appliances will try to avoid running if you're too close to your peak grid load. ("Are you sure you want to do that, Dave? It will be expensive.")

- supply curve matching, e.g. pointing panels west (to minimize peak power taken from grid) rather than always south (to maximize energy generation)

- peak shaving, e.g.. having just enough storage locally to reduce your peak usage so the peak demand charges don't kill you
(as opposed to having even more storage to let you run overnight without grid power).

[pleppik]

If I wanted to design a rational system for buying/selling distributed solar power from the ground up, I would do one of these things:

Approach 1: Customers who want to sell power to the grid would be required to sell all the power they generate to the grid at a wholesale price, and buy all the power they consume from the grid at retail. The difference between wholesale and retail pays the power company for maintaining the infrastructure and keeping adequate power on standby. Customers who want to consume power on-side without selling it then buying it right back would not be allowed to sell any power to the grid--in other words, you have to choose between paying the power company its vig or installing your own battery to store power on-site. Solar/wind/hydro/nuclear producers would get an additional credit for reducing the amount of pollution from the burning of coal, oil, or gas (alternatively, coal oil and gas producers would be required to pay into a fund for mitigating emissions of CO2, mercury, sulfur, nitrous oxides, etc.).

Approach 2: All power is priced minute-by-minute on an exchange for both production and consumption, and the power company gets to charge a fixed per-kWh markup in exchange for maintaining the grid and exchange. Solar producers who sell power to the grid get the current market price, but power consumed on-site doesn't go through the exchange. In other words, if you don't like the price for the power you are selling, you are free to consume it yourself at no charge. As with the other approach, power generated by polluting sources would be subjected to a surcharge which goes to a fund for pollution mitigation/cleanup.

IMHO, either of these approaches would allow proper market pricing of different energy sources, pay both the producers and the power companies a fair price, and still let residential solar pay for itself.

Unfortunately, I don't see either approach gaining a lot of traction in the near-term. Option 1 is going to make a lot of solar advocates mad by taking away the option of selling only the excess to the grid; and Option 2 is going to be confusing to consumers and raise a lot of people's power bills until they figure out how the new system works.

[Sunking]

You are talking about California, not the USA. California energy problems are not meeting PEAK Demands, that is just what you have been lead to believe by your state government. Meeting Base Load Demands are your problem. California energy policy created the problem. Solar is not the solution, it is the problem. 25 years ago when California decided to close unpopular conventional power plants and quit building power stations to replace them, the state imported roughly 10% of it's electric power. Today 30% is imported from neighboring states. If the country of California had generation to meet base demands, Peak Demand takes care of itself, energy prices fall, and California can become independent.

But that is not in the plans. The plan is to continue on a failed energy policy. California can easily be held hostage by neighboring states who can charge anything they want. You fail to pay, you go DARK. Do you Californians realize there are several states where rates are 6, 7, and 8 cents per Kwh for all you want. Some states like TX pays 7.9-cents per Kwh for the first 2500 Kwh's, then after 2500 Kwh the rate drop down to 7.3 cents. If you are a commercial or industrial user rates in TX are just under 5-cents per Kwh. Even better the Republic of TX does not have income taxes. Eat your hearts out CA. Either that or a change of address.

[pleppik]

You are talking about California, not the USA. California energy problems are not meeting PEAK Demands, that is just what you have been lead to believe by your state government.

So what sort of system do you think California should or will wind up with? I mean, assuming for the sake of argument that the state doesn't go dark and wind up back in the steam age.

[DanKegel]

Peak demand charges aren't a California thing, nor a solar thing.

Alabama Power offers a demand tariff, with a demand charge of $1.50 per peak kW:

http://www.alabamapower.com/residential/pricing-rates/time-advantage-demand.asp

Black Hills Power offers a demand tariff with a demand charge of $9.75 per peak kW:

https://www.blackhillspower.com/rates

Georgia Power offers a demand tariff, with a demand charge of $18.09 per peak kW:

http://www.georgiapower.com/pricing/residential/residential-demand.cshtml

Otter Tail Power Company offers a demand tariff, with a demand charge of $7.05 per peak kW:

https://www.otpco.com/rates-and-pricing/residential-rate-summary-print-version/

I could go on, but I think that's enough to demonstrate that my crystal ball isn't as cloudy as you thought it was.

[SunEagle]

Peak demand charges aren't a California thing, nor a solar thing.

Alabama Power offers a demand tariff, with a demand charge of $1.50 per peak kW:

http://www.alabamapower.com/residential/pricing-rates/time-advantage-demand.asp

Black Hills Power offers a demand tariff with a demand charge of $9.75 per peak kW:

https://www.blackhillspower.com/rates

Georgia Power offers a demand tariff, with a demand charge of $18.09 per peak kW:

http://www.georgiapower.com/pricing/residential/residential-demand.cshtml

Otter Tail Power Company offers a demand tariff, with a demand charge of $7.05 per peak kW:

https://www.otpco.com/rates-and-pricing/residential-rate-summary-print-version/

I could go on, but I think that's enough to demonstrate that my crystal ball isn't as cloudy as you thought it was.

Energy measurement and demand control is relatively easy to do and has ROI of 2 years or less depending on your loads and usage.

If the POCO's start adding peak demand charges to homes like they already do for commercial and industries it will be easy to roll out the hardware/software to reduce your peak demand as well as trim overall consumption.

[DanKegel]

Energy measurement and demand control is relatively easy to do and has ROI of 2 years or less depending on your loads and usage.

If the POCO's start adding peak demand charges to homes like they already do for commercial and industries it will be easy to roll out the hardware/software to reduce your peak demand as well as trim overall consumption.

It's unfortunate that Arizona is doing it in such a hamfisted way,
but demand charges in and of themselves are not a bad thing,
and we'll eventually adapt.

But I am not sure how easy it will be. Sure, for any particular piece of equipment
it might be easy, but getting all the appliances to talk to the electric
meter to figure out if they dare run now is going to be like herding cats.

My dusty crystal ball says it will first happen in an indirect way,
with the appliances phoning home on the internet, and then
some Rube Goldberg or Frankenstein internet piping stitching everything together
after the fact. But that'd be better than nothing. At least until
the damn cable modem goes out, which it does around here
with distressing frequency.

[SunEagle]

It's unfortunate that Arizona is doing it in such a hamfisted way,
but demand charges in and of themselves are not a bad thing,
and we'll eventually adapt.

But I am not sure how easy it will be. Sure, for any particular piece of equipment
it might be easy, but getting all the appliances to talk to the electric
meter to figure out if they dare run now is going to be like herding cats.

My dusty crystal ball says it will first happen in an indirect way,
with the appliances phoning home on the internet, and then
some Rube Goldberg or Frankenstein internet piping stitching everything together
after the fact. But that'd be better than nothing. At least until
the damn cable modem goes out, which it does around here
with distressing frequency.

Maybe installing and programming a system to measure and shed loads as needed is a little high up the ladder for most people.

I unfortunately (one of my old job tasks) have been designing and installing systems like that at industrial plants for years. Looking at the newer (and cheaper) technology coming out, putting a system in a home environment would not be that hard or expensive. Biggest issue is the clientele of the home having to adjust their lifestyle a little.

I have had a rudimentary load shed system installed by my POCO for over 12 years. It can control my HVAC, pool pump and water heater (before I went with a solar thermal system). I also get a rebate from my POCO because they can load shed if needed.

[DanKegel]

Yeah, it's been done for ages, here's an example of a local power company that offers it for central A/C units in residences:

http://www.mid.org/yourhome/programs/step.html

I'm talking about having it built in to appliances right out of the box, so people don't have to think about it, and everybody just has it by default.
Demand Management 2.0, as it were.

[SunEagle]

Yeah, it's been done for ages, here's an example of a local power company that offers it for central A/C units in residences:

http://www.mid.org/yourhome/programs/step.html

I'm talking about having it built in to appliances right out of the box, so people don't have to think about it, and everybody just has it by default.
Demand Management 2.0, as it were.

I see the possibility of "smart" appliances being introduced to the public. Look at the Google thermostat Nest. It all comes down to the cost and if the communication protocol used is reliable.

Almost no different from back in the 80's when the HVAC companies started to come out with "smart" or "set-back" thermostats to help people reduce their energy costs. New and better mouse traps are on the horizon especially if the EPA gets their way and we start to see electric bills sky rocket. Everyone and his brother will be looking for ways to cut back and save on energy consumption.