Typically, electricity companies are not big fans of Orange County and Los Angeles solar power. They see distributed generation (DG) and particularly Net Energy Metering (NEM) as threats to a long-standing business model that relies on a regulated monopoly to generate profits and earn income for investors.
Utilities Claim Solar Creates Higher Costs
The utility companies have argued that as more customers migrate to solar power, the fixed costs of running an electricity grid (things like maintenance and transmission) will be spread over fewer rate-payers. This will raise electricity prices, which will make solar more attractive and convince even more customers to make the switch. And then, the price of electricity will rise once again.
Because of this belief, utilities spend a lot of their marketing and lobbying budgets trying to persuade policy makers and the general public that solar power is an economic disaster. One of their strategies is convincing people that NEM policies, which allow customers to receive a credit for the solar energy they feed back into the grid, act as a subsidy for solar customers at the expense of non-solar rate payers.
Winning the Battle with AB327 and “Net Metering 2.0”
Actually, the utility companies almost succeeded in eliminating the NEM program in California with the introduction of AB327 using this exact argument. Thankfully solar advocates were successful in getting specific amendments made that not only protects the current NEM program but also extends the program for what is now being called “Net Metering 2.0”.
Though the solar industry won this small battle against Big Energy, we expect the utility companies will try to get similar legislature passed using the same argument that solar customers make electricity more expensive for everybody.
Research Proves Utility Claims are Incorrect
For this reason, we decided to revisit a study published by Crossborder Energy earlier this year that analyzed the effects of California’s NEM policies on overall electricity rates. It found that there was actually a positive effect for non-solar customers.
“On average over the residential markets of the state’s three big [investor-owned utilities], NEM does not impose costs on non-participating rate payers, and instead creates a small net benefit,” state the report’s authors. “In the commercial, industrial, and institutional (C&I) market, NEM results in significantly greater benefits than costs for non-participating rate payers.”
How does NEM help non-participating customers?
- DG (distributed grid) put less stress on the grid and resulted in lower maintenance costs, offsetting the price hikes that would occur due to a smaller customer base.
- Renewable energy purchases from other sources (wind farms, geothermal stations, etc) were cheaper because of the availability of DG sources.
- The more homes that switch to rooftop solar, the fewer investments utilities will have to make in building new generating plants.
Solar Results in Financial Benefit for Non-Solar Customers
Most importantly, while Big Energy has claimed that solar customers in the NEM program cost non-solar customers big bucks, the study proves that it actually brings $92 million dollars in benefits to non-solar customers.
The report’s authors stress that the results of their study may not necessarily apply to other utilities, and more research needs to be done to understand how DG truly effects energy costs for non-participating entities.
Still, it seems clear that the story of how solar affects other customers is much more complicated than the narrative that electric companies are trying to sell. It’s important to note that utilities are invested in protecting their profits and shareholders, regardless of whether doing so might negatively impact their customers. When making choices about the future of California solar energy, we hope that the public will consider other priorities than those of the electric companies.