301 Moved Permanently

---

nginx

Utilities and the solar industry have been locked in an endless war being fought on multiple state battlefronts. At the heart of the dispute is how to value the benefits and costs of distributed generation, especially DG solar, to the grid.

Net metering was justified as sound public policy that was needed in order to incentivize what was then a nascent technology trying to establish itself in the marketplace. Self-generators, it was argued, should be compensated at the full retail rate for electricity delivered back to the grid.

As a public policy argument to help a nascent technology gain a foothold in the marketplace, this made sense. As an economic argument for sustaining what has now become a mature technology, it makes little.

At utility commissions charged with establishing rates and incentives, the dispute became more of a political referendum than an economic one. Colorado, for its part, studied net metering for months and then simply kicked the can down the road, maintaining the status quo. The Colorado docket was marked by dueling advocacy rather than objective analysis.

To help resolve these disputes, there are a few general principles that an unbiased policymaker should find unassailable.

First, why should any business - including utilities - be compensated to make up for consumers using less of their product? Were buggy-whip makers compensated for the transition to automobiles? Innovate or die.

Utilities clearly have the investment/return relationship backward. In Colorado, the major utility, Xcel Energy, recently announced its Our Energy Future plan, which kicks off not with new services, but with a rate case that includes a new monthly grid fee for solar customers. This comes after the Colorado Public Utilities Commission rejected the utility’s efforts to reduce net-metering compensation.

Apparently, for investor-owned utilities, “No” never means “No.”

Utilities, here’s the way it works: First, you invest. Then, when that investment yields a product or service that is accepted by the marketplace, you realize the rewards.

Now, for the other side: Self-generators, you are a customer, not a supplier. (Unless, of course, your business partner - in this case, a utility - wants you to be.) You have no unalienable right to access the grid, unless you pay for it. Nor do you have a right to sell electricity to your neighbors using that grid, unless you pay for it. The typical utility customer receiving power pays for that access, as do wholesale suppliers. If you are using that grid to both send and receive power, you should pay for it.

Now, let’s talk about that full-retail-rate, net-metering compensation. Businesses purchase inventory at wholesale and sell at retail. Why should electricity be different? It is often argued that the value of solar energy supplied in the afternoon is far higher than electricity delivered at other times. True enough.

The simple - if not incredibly obvious - answer is to put self-generators on bi-directional time-of-use (TOU) rates. If you supply power to the grid, you are paid a wholesale rate based on the rate that the utility pays for power at that time. Similarly, you pay for power drawn from the grid at a retail rate in effect at that time. Given the differences in peak versus off-peak pricing, I expect you may come out ahead.

With that said, this does not imply that all customers need to be put on TOU rates. TOU rates, and even tiered rates of various types, have been the bane of typical utility customers, who simply want to turn on the lights when needed and not have a side job of managing their electricity use every 15 minutes.

Last, with respect to the dueling advocacy, it would be great if commissions would keep one prime directive in mind: Argument is not evidence.

 

Richard P. Mignogna, Ph.D., P.E., is principal consultant with Renewable & Alternative Energy Management LLC in Golden, Colo. He is also a professor in the Global Energy Management Program at the University of Colorado at Denver. He can be reached at rich@energystrategies.co, or read more at richmignogna.blogspot.com.