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Sunday, June 16, 2013 - Page updated at 06:00 a.m.

Money dispute casts shadow on solar power’s sunny outlook

By Lenny Bernstein
The Washington Post

It’s a sight that would bring joy to anyone who has ever paid an electric bill: that little wheel on the meter outside your home spinning backward, signaling a reduction in your payment and the distribution of excess electricity to your neighbors.

Yes, that happens at a few hundred thousand homes across the United States that have rooftop solar panels and are part of an arrangement known as “net energy metering.”

“Every time people install a solar system, it means the need for more power distribution is reduced and the need for more energy generation [by utility companies] is reduced,” said Ed Fenster, co-founder of Sunrun, a California company that installs rooftop solar systems.

That would seem to be a good thing in a nation whose government is trying to limit the burning of fossil fuels. But some large utilities are challenging a critical part of the effort to promote renewable energy, and some in the solar-power industry see that move as an attempt to slow a booming alternative that could transform the way power is brought to homes and businesses across the country.

The utilities contend that customers without solar panels are subsidizing those who have them, by paying more for the power-generating stations, transmission lines and distribution wires that both groups use. They want regulators to change that pricing structure so people with solar panels pay more.

Solar advocates say every home that installs solar panels provides a savings for utility companies, and ultimately society: Fewer generating stations must be built, fewer distribution lines must be strung. Tom Beach, principal consultant for Crossborder Energy, which produced a study of the issue for the Solar Energy Industries Association (SEIA), said the savings produced by solar-power users means the price break they receive is justified.

Details vary slightly in the 43 states (including Washington) that have adopted net energy metering, but the basic arrangement works like this: A homeowner installs solar panels on the roof. On sunny days, particularly at midday, those panels can generate more electricity than the home needs. The excess automatically spills back onto the electrical grid and is distributed to nearby homes, causing the solar home’s electricity meter to spin counterclockwise. The electricity generator is credited for providing the power and pays less overall than a traditional utility customer.

But at night, on cloudy days and at times of high demand, that customer still needs power from the utility company, which must provide it instantaneously, as it does for other homes. That electricity flows from the only place it can: the company’s generating stations. And it arrives over the giant network of transmission and distribution lines that utility customers pay to build, maintain and expand. Southern California Edison, for example, serves customers over a 50,000-square-mile area.

Utility officials contend their solar customers enjoy the benefits of that network, whenever they need it. But they pay less to build and maintain it, shifting costs onto other ratepayers.

“Until there’s a day when the sun is up 24/7, those customers will continue to” enjoy an advantage, said Steven Malnight, vice president of customer energy solutions for Pacific Gas and Electric, the Northern California utility that counts 85,000 solar-energy users among its 5 million electricity customers.

Arizona Public Service, which has 18,000 rooftop solar systems among its 1.1 million electricity customers, estimates solar homes each shift about $1,000 in costs annually to other ratepayers. “This is not a revenue issue. This is not a profitability issue. This is a shifting-of-costs issue,” said John Hatfield, the company’s vice president of communications. The company will submit a proposal in July to the state’s regulator, the Arizona Corporation Commission, to alter the current system.

In California, the Public Utilities Commission is re-examining the costs and benefits of net energy metering as part of its decision to raise the cap on the number of homes statewide that can take part in the arrangement.

Growing popularity

Net metering has been around for decades, but until recently had few adherents because rooftop solar-energy systems were so expensive. But as the cost of solar panels declined in recent years and states turned more attention and money toward promoting the use of renewable energy, the number of homes with rooftop solar systems has grown to about 270,000, according to the SEIA.

More than 80,000 solar systems were added last year alone. Homeowners are able to lease panels from Sunrun for 20 years.

The spread of such “distributed generation,” while limited now, holds enormous potential to upend the century-old system under which monopoly utilities provide power to everyone, in exchange for a rate of return guaranteed by regulators.

The new technology “is a threat to their business model,” said Carrie Cullen Hitt, SEIA’s senior vice president for state affairs.

“The customer produces [his] own electricity. That’s pretty cool. That’s a big deal. And it’s not just a crazy guy out in the woods who wants to be off the grid,” she said.

The “standby charge”

It’s not just solar advocates who see that day coming. The Edison Electric Institute, the powerful association of utilities, warned in a January report that, along with declining demand for power, “the threats posed to the electric utility industry from disruptive forces, particularly distributed resources, have serious long-term implications for the traditional electric utility business model and investor opportunities.”

David Crane, president and chief executive officer of NRG Energy, a large, independent energy company, told a March conference sponsored by The Wall Street Journal that utilities “realize that distributed solar is a mortal threat to their business,” according to The Journal.

One possible alternative is to charge solar customers for the right to have the utility’s services available whenever they need it. That “standby charge” went into effect two years ago in Virginia, where just 833 of Dominion Virginia Power’s 2.3 million customers take part in net metering and only five produce enough power to pay the charge.

It’s those kinds of proposals that Sunrun’s Fenster and other advocates fear. Some in the industry have formed a new organization, the Alliance for Solar Choice, to push back against the utility efforts, especially in California and Arizona.

“The only reason the utilities are picking this fight is because they know that in the very long term, we’re going to compete with them and we’re going to win,” Fenster said.

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