Solar is Still Worth the Investment … But California Utility Pricing is a Mess!
Our solar was turned on around 9am PDT on Wednesday, June 26, 2019. In our first week of solar production we have generated 294.37 killowatt hours (kWh). (I subtracted the energy generated on this eighth day morning as I write this post).
Several people asked me for an update on how solar is working out for us. Turns out it is right on track!
- Our is a 6.60 kW system with an estimated year 1 production of 10,380 kWh
- The projection on how many killowatt hours we will consume in a year is approximately 8,600 kWh
- Which will leave us with a “credit” or excess production of 1,780 kWhs.
Though I won’t really know what a year looks like until June 25, 2020, suffice to say I’ve run a few numbers:
- This is just about the most perfect time of the year to generate power. My average per day for our first week has been 42.05 kWh of solar generation and we will have at least 3-4 more months of near-daily full sun.
- With climate change the weather is an unknown, especially since southern California experienced an unusual number of overcast and rainy days this winter. Therefore my assumption is a full year’s daily solar generation will average 30 kWh.
- Total generation would then reach 10,950 kWh in a year, a full 570 kWh above the solar installer’s estimate of 10,380 kWh.
THE COMPLEXITY OF CALIFORNIA UTILITY PRICING
Holy crap are the variables involved in solar generation pricing difficult to maneuver! From a guy who moved here from Minnesota just over one year ago — where electricity is cheap (we were paying $ .117 per kWh around-the-clock with Xcel Energy in MN) — paying anywhere from $ .24 at Off-Peak times to $ .54 per kWh during Peak usage hours is OUTRAGEOUSLY EXPENSIVE!
San Diego Gas & Electric (SDG&E), the most expensive electricity in the USA, has a myriad of plans that I researched before installing solar:
- A Standard Plan with three tiers depending upon usage (and this plan is going away).
- Time-of-Use Plans which have Peak, Off-Peak, and Super Off-Peak rates.
- Electric Vehicle Plans which let you charge your vehicle cheaply.
- Net Energy Metering Options (NEM) which is what one is placed on when you install solar (which is the plan I’m on now).
- EcoChoice and EcoShare which essentially enables one to offset carbon generation if one cannot afford solar.
- Level Pay Program is a balancing out of payments for those on a tight budget.
I’m stuck on the fourth one down for now (NEM) so I thought this plan should be pretty straightforward though, right? California wants homeowners to invest in solar, right?
Then I had to figure out what I was going to actually be saving with solar. OMG … it got even more complex … but I’ll try to make it simpler since I had my initial choice for a plan foisted upon me by SDG&E (the Net Energy Metering or NEM plan).
A SOMEWHAT SIMPLER SOLAR PRICING EXPLANATION
After re-reading this detailed NEM page (and its child pages) I still didn’t understand exactly how I’d be billed or credited for my solar energy production. So this morning I called the solar specialist group at SDG&E to talk-through how the hell all of this stuff works and get a human’s explanation along with some level of detail.
Unfortunately there is not a one-to-one relationship between a kWh used and a generated kWh. Because almost all of SDG&E’s offered plans have tiered pricing and Peak, Off-Peak and Super-Off-Peak rates that vary dramatically, it turns out that if you use more Peak energy than you generate all day at Peak or Off-Peak times, each are “credited” to your account at their respective rates. Therefore Peak rate generation (which starts at 4pm … a time when solar generation is becoming weak) is fairly minimal and is to the utility’s advantage.
That’s variable pricing is why the California utilities have a “true up” as explained in this SDG&E article:
There may be times when your renewable system generates more energy than you need. This typically happens in the winter, when you don’t use much air conditioning, or if you’ve installed a system that’s larger than your current energy needs. If your system generates more energy than you use, the excess will be sent out to the grid, and you’ll receive generation credit. Generation credit accrues throughout each Net Energy Metering 12- month cycle. At the end of each 12 months, you’ll get a “true-up” bill for any remaining balance. You can use your generation credit toward this balance. Then your credit balance will reset to zero for the subsequent 12- month cycle. To make the most of your credit, residential NEM customers have options for paying your monthly bill.
Let me give you an example as to what it looks like during the summer period which runs June 1 – October 31. To make this example simple, let’s leave out Super-Off-Peak (solar doesn’t generate from at night anyway) and use only Peak and Off-Peak for usage and generation:
- Summer Off-Peak
- In any given day we generate about 30 kWh at $ .24 per kWh
- We consume about 15 kWh at $ .24 per kWh
- Excess kWh available for future days until true-up = 15 kWh at $ .24 per kWh
- Summer Peak
- We generate about 12-15 kWh during Peak times at $ .54 per kWh
- We consume about 5-7 kWh at $ .54 per kWh
- Excess kWh available for future days until true-up = 7-10 kWh at $ .54 per kWh
So the strategy for a solar customer is, like any electric customer, to use as little energy as possible from the grid during Peak times and shift usage to Off-Peak. That’s fine for people working all day and gone from the house using next-to-nothing for electricity (but my wife and I office in our home so are hear a lot), but a big family requires a lot of electricity during peak times, making solar an electric bill reducer instead of a bill eliminator.
You may be saying, “Hey Borsch! I thought I read the headline above that said this was a SIMPLER explanation!” I know this example was still complex, but that’s why the title of this post includes the phrase CA utility pricing is a mess because it is. Just take a look at this NEM-based billing statement (PDF) about how my SDG&E utility bill will look going forward.
THIS BILLING & PRICING MESS IS NOT AN ACCIDENT
I’ve spent literally dozens of hours of study on going solar, figuring out what it will cost, which pricing plan to choose (without knowing they’d choose for me) and, once solar was installed and begun generating, how convoluted the entire process was.
While talking to many people as well, I wondered out loud why an electrical utility company would want to make choice and billing easy. Wouldn’t helping to accelerate solar adoption work to put the utility out of business or at least reduce revenues? Yep.
Which is why I’ve grown to believe that the strategic direction SDG&E (and other California utilities) are taking is to ensure that, over time, solar generation becomes less and less viable as a cost eliminator and instead becomes only a cost reducer.
Turns out I’m not the only one. This San Diego Reader article Go solar, get screwed by SDG&E starting today discusses how SDG&E’s tinkering with pricing in 2017 would begin the squeeze for solar customers which I’m experiencing now:
Effective December 1 (2017), San Diego Gas & Electric is implementing a new rate structure for solar customers, moving the “peak demand” window when power costs the most from midday to mid-evening.
Under the new rate structure, residential solar customers will pay 27 cents per kilowatt hour for power from 9 p.m. until 4 p.m. the following day, with prices (then) doubled for the 4-to-9 window. Likewise, solar customers who are able to generate excess power during the late afternoon and evening stand to be compensated more by the utility than for power generated during the day, when the sun is most likely to be shining.
This squeeze has been going on for a long time. This New York Times article from 2015 got to the essence on why the tweaking to pricing and making it as difficult as possible to understand:
Other states and countries, including California, Arizona, Japan and Germany, are struggling to adapt to the growing popularity of making electricity at home, which puts new pressures on old infrastructure like circuits and power lines and cuts into electric company revenue.
As a result, many utilities are trying desperately to stem the rise of solar, either by reducing incentives, adding steep fees or effectively pushing home solar companies out of the market. In response, those solar companies are fighting back through regulators, lawmakers and the courts.
The shift in the electric business is no less profound than those that upended the telecommunications and cable industries in recent decades. It is already remaking the relationship between power companies and the public while raising questions about how to pay for maintaining and operating the nation’s grid.
The net-effect of this squeeze is that solar customers — who used to get a one-to-one payback for a generated-kWh vs. a consumed-kWh — now have their generation radically reduced in value. Based on many other articles I’ve read over the last couple of months, this trend is only going to accelerate.
ORGANIZATIONS: SOLAR RIGHTS ALLIANCE & VOTE SOLAR
Do you live in California and have, or want to install, solar? Then take a peek at the videos at the Solar Rights Alliance, a coalition of solar customers and installers who are pushing-back against the utilities who would rather California stay utility-based for its electricity.
Also look at Vote Solar, another grass-roots organization focused on ensuring solar continues to grow.
About Steve Borsch
Strategist. Learner. Idea Guy. Salesman. Connector of Dots. Friend. Husband & Dad. CEO. Janitor. More here.
Connecting the Dots Podcast
Podcasting hit the mainstream in July of 2005 when Apple added podcast show support within iTunes. I'd seen this coming so started podcasting in May of 2005 and kept going until August of 2007. Unfortunately was never 'discovered' by national broadcasters, but made a delightfully large number of connections with people all over the world because of these shows. Click here to view the archive of my podcast posts.
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