Why Utility Companies Want You to Pay More for Solar Power

Reader Contribution by Bryan Phelps and Vivint Solar
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Solar energy has been an attractive alternative energy source for decades, but it wasn’t until recently that widespread adoption has increased. The cost of panels, installation and system maintenance have fallen, making the prospect of solar affordable and appealing to both homeowners and businesses.

To encourage solar power consumption, the federal government has implemented tax incentives. The ITC (Solar Investment Tax Credit) provides a 30-percent tax credit for solar systems on residential and commercial properties. Competition among solar companies has also helped to lower costs and simplify the solar installation and rebate process.

Part of the government’s interest in solar isn’t just about helping the environment; it’s about helping the economy. The solar industry has contributed a substantial number of new jobs. In the last four years, job creation has grown by 86 percent, a period during which many industries were stagnant or shrinking.

Unfortunately, not everyone has been so welcoming to the new kid on the block. As residential and commercial solar installation surges, utility companies who have grown accustomed to large market share are pushing back.

Utility Push-Back

As more consumers make the switch to solar, utility companies around the country are looking for ways to curb the trend. Though solar power still makes up less than 1 percent of the energy produced in the United States, many utility companies can sense a shift in the energy market and are fighting to maintain market share.

The demographics of solar consumers have changed dramatically in the last few decades, due to both affordability and public awareness. Over 40 years ago, most solar panels were being installed on structures that were off the electrical grid. In contrast, today over 95 percent of installations are “grid-tied.” With these changes, utility companies set on sticking to the status quo may have reason to be concerned.

To stop solar expansion, utility companies are spending a lot of money to sway public opinion and push legislation to increase fees for solar users.

Net Metering

The Energy Policy Act of 2005 provided tax breaks for consumers making energy conservation improvements on their home and mandated all public utility companies to provide net metering options when customers request it. Since then, 43 states have adopted net metering policies and solar power consumer adoption has grown by over 1,600 percent.

The debate surrounding solar energy production primarily deals with the issue of net metering, which is the practice of solar customers selling excess power generated from the panels to power companies. Many utility companies feel that net metering isn’t fair because it forces them to buy solar-produced power. They argue that the cost of maintaining the grid should be shared by everyone that benefits from it.

The problem, utility companies say, is that the solar consumers who produce excess power are not paying anything to maintain the use of the grid. Because utility companies are required to buy and sell the power produced at retail cost, they don’t recoup the cost of maintaining the grid system.

Meanwhile, solar companies contend that the excess power produced by residential solar panels helps generate power for their neighbors on the grid, which decreases the load for central plants. The fees that utility companies are pushing for are intended to force solar companies and consumers to pay additional costs and deter “freeloaders” on the grid from using solar.

Whether your residential solar panels are self-installed or installed by solar providers, these proposals for legislation and utility fees have the potential to impact you as a solar user. In many states, utility companies have proposed a fee for customers to sell their excess power. Additionally, states like Arizona, Utah and California are seeing an increased lobbying effort to gain support for discontinuing net metering policies.

Solar Battle in the “Valley of the Sun”

Phoenix and surrounding areas see almost 300 days of sun a year, making Arizona a “hotbed” for solar expansion and energy competition. Arizona’s largest electric utility company, Arizona Public Services (APS), began pushing for monthly $50 solar fees in 2013, but was only able to get a $5 fee approved.

As solar continued its growth, APS hired nonprofit lobby firm Prosper to release several ads describing the perceived burden of solar customers on the whole grid. Just before a proposal for rate hikes to the Arizona Corporation Commission, one ad claimed that every solar system “adds $20,000 in costs to customers.” In addition to the APS ad spending, Arizona utility company Salt River Project (SRP) spent roughly $1.7 million on advertising in an effort to increase support for solar rate hikes and solar fees.

No matter how large or small these policies and fees are, they are intended to discourage widespread solar energy and reduce the competition traditional utility companies are facing. Although solar power is the most popular alternative energy source, with public support near 80 percent, utility companies are still succeeding in their efforts to raise fees and dissuade the public.

In February 2015, the SRP board of directors approved a basic service fee increase for solar consumers, as well as an additional fee of $50 a month. With every increase in fees, solar systems become less profitable, making the prospect of clean and renewable solar power less appealing. Solar customers are facing similar situations all over the country.

The Future of Solar

Despite legal and policy battles, many industry analysts say that the future of solar looks bright. A recent report from Deutsche Bank projected that rooftop solar will become as affordable, if not more affordable, than grid power by 2016 in all but 3 states. That affordability will continue to drive massive solar adoption.

The Solar Energy Industries Association reports that US solar capacity increased to 20 gigawatts in 2014, an increase of 30 percent. They predict solar capacity will double to 40 gigawatts by the end of 2016, producing enough power for 7.6 million homes.

To stay competitive, solar companies are determined to find solutions that will require less support from the grid. One option gaining in popularity is the use of batteries that can store the power generated during peak daylight hours for use in the evening. Energy consumers have shown they’re ready and willing to use alternative energy sources, which will continue to drive innovative solar technology advancements.

Solar energy is a renewable energy source that benefits the world. Some utility companies have seen the opportunity to increase their market share by entering the solar space as well. Ideally, utility companies will adapt to changing markets and work together with solar providers to create new renewable solutions for everyone.

Photo by morgueFile/Jusben

This is a guest post by Bryan Phelps atVivint Solar.

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