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The hole in the rooftop solar-panel craze isn’t there

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The hole in the rooftop solar panel craze isn’t there

A recent Wall Street Journal article tried to make the case that while large scale solar energy installations is “good”, distributed scale / rooftop solar is “bad”. In the author’s thesis large scale solar provides more benefits at lower costs, and is thus a better use of capital and tax credits, while  rooftop solar is a poor use of capital, creating the “hole in the rooftop solar panel-craze“. I posted a detailed rebuttal to the article elsewhere, and have updated it here. In short, when all the benefits of distributed generation are considered, it provides significant, and sufficient, value to continue, extend, and expand the use of tax incentives. Or put in the lexicon of the author, the hole in the rooftop solar-panel craze isn’t there.

This issue has taken on new and greater urgency since President Obama’s commencement address at the US Coast Guard Academy where he said “Climate change constitutes a serious threat to global security, an immediate risk to our national security, and make no mistake about it, it will impact how our military defends our country. And so we have to act, and we need to act now.”

Understand that when speaking to the Academy as Commander in Chief of the United States, The President’s words take on a different meaning. They are broad guidance and direction to the military on their mission. The military does not decide the mission, they create the plan to implement the broad mission set out by the CoC. Distributed solar energy one of the fastest and least expensive ways to combat the security risks created by climate change. More on this in another post.

Point by point, here is my rebuttal to the article.

  • First, understand the bias. The Edison Electric Institute (EEI) the largest lobby group for utilities, and a behemoth in DC, is waging a war against DG (Distributed generation) solar, because we’re taking revenue from them under their current business model. They could change their business model (like Green Mountain Power), but generally are not.
  • The author is wrong when he says that solar is hugely subsidized. DG Solar in most states has only the federal investment tax credit (residential or commercial flavors) to incentivize it. This is similar to, and perhaps lower cost, than the incentives provide to other forms of electric power generation and other energy forms.
  • Net Metering, the process by which power companies buy solar at higher than “average”wholesale prices, has been extensively examined for “cross subsidization”. That means it has been studied to understand if a ratepayer without solar is unfairly paying higher costs to subsidize the ratepayer who has the benefit of solar. Good studies (and they are not all good) also look at whether the solar owner is subsidizing other non-solar ratepayers. This is actually a very complex study, and the results are legitimately different in different areas of the country.

    But what is true is that some of these studies come out with subsidy going in one direction, and other studies come out with it going in the other direction. This is because solar power provides more than just raw electricity (kWh) to the utility grid. It provides distributed kWh, taking the load off of (potentially) over loaded transmission and distribution systems. Solar can provide “grid services” meaning it can assist in controlling the frequency and voltage along the lines. This has real and significant value on today’s grid, and utilities often pay for this service from other providers, but it is included “for free” as part of net metering. Another large component of value is the time of day that solar make electricity. It costs a utility different amounts to purchase power at different times of the day, on different days, and in different months. Power costs (to the utility) can vary from well below what a home owner pays, to many times what a home owner pays, due to the effects of weather, fuel prices, peak demand, and other factors. So the price paid from the utility to the solar owner can actually be far below the cost of other power purchased by the utility.

  • The price paid for rooftop solar in a given location is usually NOT 3x higher (as stated in the article) than the price paid in that same location for power from large solar arrays. While there is a differential, it is usually in the 2x range. (And of course, the same tax incentives decried for use by residential solar still pertain to large scale solar. Different tax code section, same percent of cost). As noted above, there are also reasons why rooftop solar is more valuable to the utility. The article is correct that large solar power plants built in the southwest can generate electricity very inexpensively (as low as $0.05/kWh). However, the last I knew, North Carolina and Vermont did not wish to move to the southwest US, no reasonable proposal has been put forth for the mega-transmission required to move all our power cross country, and of course, that would add significant cost, decrease reliability, and change the economic balance of the states.
  • Overall cost of installation on a residential rooftop is typically less than 3x, and as low as 2x, cost of large scale solar. (Just the facts from inside the industry.
  • In the CA example of $0.17 vs $0.05, that does not include the cost of transmission, or the power losses in transmission. Transmission cost in CA is >$0.02 during peak. Losses can amount to >10%. Suddenly that $0.05 (from solar, or a gas plant, or any other form of generation) is now about $0.08, without providing the many very real and valuable local benefits.
  • In short, Mr Potts appears to be carrying the water for EEI in their attack against the freedom for homeowners to install solar and generate their own power. He also ignores any and every benefit of DG solar.

We need a new energy generation infrastructure in the US. It is going to take every kind and type of generation to have us achieve our low carbon goals. The article portends that we could achieve this faster without DG. That would be trusting the utilities to implement something they have long opposed. DG solar, along with the many other benefits, also is working to force the utilities to move forward in energy, despite their centralized power dreams and desires. For our economy, and our national security, we need solar at every possible scale, across the country.

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