Net metering in Arizona

Last updated

Net metering in Arizona is a public policy and political issue regarding the rates that Arizona utility companies pay solar customers sell excess energy back to the electrical grid. The issue has two political sides: utility companies that to pay solar customers the "wholesale rate" for their excess electricity, and solar panel installers and solar customers who want utility companies to pay the "retail rate" (higher than the wholesale rate).

Contents

Under net metering, utility customers with solar panels get a credit for the energy they send back to the grid. The credit offsets the energy that they use from the grid. According to The Arizona Republic , "Utilities view net metering as a subsidy because they essentially pay retail rates for power from rooftop solar panels when they could purchase wholesale power much more cheaply, even from renewable sources." [1] Solar companies take the opposite view; net metering is not a subsidy and without customers being able to get a credit for their excess energy, they wouldn't save money on their electric bills (and hence, would have much less or little incentive to install solar panels in the first place). [1]

2013 rate hike

In November 2013, the Arizona Corporation Commission approved a small fee for people who operated solar panels at their homes. Specifically, the fee was levied on people who were a part of the net metering process, meaning they would sell back to the utility company any extra energy that their solar panels produced. The fee was 70 cents per kilowatt of installed solar panels, amounting to around $5 per month per house. [2] [3]

According to IEEE Spectrum:

"Net metering has been controversial among utilities across the United States and in countries like the UK as well, because of claims that if customers generating electricity at home are allowed to sell electricity back into the grid at the going spot price of electricity, then the added system costs of providing the needed infrastructure will be shifted to all the rest of the customers." [2]

2014 election

In 2014, two Republican candidates (Tom Forese and Doug Little) ran for and won seats on the Arizona Corporation Commission. The campaign ads, both for and against the candidates, were highly negative. The campaign pitted the solar leasing industry against utility companies, particularly SolarCity against Arizona Public Services (APS). According to TheArizona Republic: [1]

"The campaign got ugly. Besides questioning Forese and Little's motivations for seeking office, the rooftop-panel leasing companies took out ads depicting Little as a Pomeranian "lap dog" to APS."

After Forese and Little won and began their terms, they traveled to California to meet with SolarCity executives. Both parties are working toward finding common ground. [1]

2016 proposed state constitutional amendment

In the 2016 election cycle, a group called Yes on AZ Solar attempted to get an initiative on the ballot that would have amended the Arizona Constitution regarding net metering. [lower-alpha 1] The initiative was called the Arizona Solar Energy Freedom Act. It needed 225,963 signatures to get on the ballot. [4]

As it was written, the amendment focused on the payment structure between utility companies and people who have solar panels and generate extra power that they sell back to the power grid. The amendment would have required utilities to pay the solar customers the same price that the utilities charges all its customers. [5]

In favor of the amendment, the head of Yes on AZ Solar, Kris Mayes, said: [4]

"We believe Arizonans have the right to decide this issue for themselves. ... Do we want to be the solar capital of the world? Do we want the right to produce our own power? Arizonans will overwhelmingly say, yes, we do. Solar is part of who we are as Arizonans. This will enshrine that fact in the Constitution."

In opposition to the amendment, Jim McDonald of Arizona Public Service Co., said: [4]

"This is a ridiculous attempt by California billionaires to get richer by forcing higher energy costs on Arizona consumers. ... It works against Arizona families and is detrimental to sustainable solar in Arizona."

In the end, the amendment did not make the ballot. Yes on AZ Solar worked with Arizona state legislatures on a compromise in exchange for dropping the effort to place the amendment on the ballot. [5]

2016 rate proposal

In 2016, Arizona Public Services (APS) proposed a new fee structure for net metering in Arizona. The structure included a grandfathering provision. Per the proposal, rates would change beginning on July 1, 2017. Investor's Business Daily wrote, "By then, APS estimates, non-solar customers will have paid $1 billion over 20 years to carry solar subsidies. . . . But the Arizona proposal also carries the potential of killing solar demand in the state . . ." [6]

The proposal would switch the burden of costs from people without solar panels to people with them. When the proposed fee structure was written, the current policies required utilities to pay customers on a "one-to-one" basis instead of the wholesale rate. A "one-to-one" basis means utility companies would have to buy back energy at the same price they sell it at, which is higher than the price that utilities normally buy it at (called the wholesale rate). Utilities have argued that being required to purchase energy at an inflated price forces them to charge all customers higher rates; in effect, they argue that non-solar customers subsidize the solar customers through the higher rates. [6]

Companies that install solar panels, such as SolarCity, could face hurdles in trying to make a profit in Arizona. In 2016, Arizona's solar market was around 124-megawatts. The proposed fee structure seems to be on hold until after the November 2016 elections. Three seats on the Arizona Corporation Commission are up for election. [6]

2017 rates for Tucson Electric Power

The Arizona Corporation Commission approved new rates for Tucson Electric Power in early 2017. The new plan adds new rates; adds new solar fees ($2.05/month for residential customers and $0.35/month for small commercial customers); gives a monthly discount of up to $15 to low income people; and overall, adds $8.50 to the average customer's monthly bill. [7]

Discontinuation

In December 2016, the Arizona Corporation Commission (ACC) voted to discontinue net metering. The new rate will be based on the cost of energy from large solar farms; the rate is expected to be much lower than the retail rate, which is approximately 11.5 cents per kilowatt-hour from Tucson Electric Power Company (TEP). The utility proposed using the cost of its recent power-purchase agreement for utility-scale solar at 6 cents. A decreased export rate and the ACC’s decision to suspend banking has prompted solar customers to add a battery to their solar systems and never send energy back to the grid. [8]

Arizona utilities TEP, APS, and Trico Electric Cooperative sought to put an end to net metering because, as the utilities have said, solar customers do not pay their portion of fixed grid costs. Solar companies and advocates responded by explaining that solar energy is worth far more than the utilities claim regarding decreased costs and pollution. They also stated that a decrease in net metering rates would destroy the industry. Hawaii has eliminated net metering, and at least 25 other states are considering the move. [8]

Notes

  1. The text of the amendment and the filing with the Secretary of State can be found at: http://apps.azsos.gov/election/2016/general/ballotmeasuretext/C-09-2016.pdf

Related Research Articles

In economic terms, electricity is a commodity capable of being bought, sold, and traded. An electricity market is a system enabling purchases, through bids to buy; sales, through offers to sell; and short-term trading, generally in the form of financial or obligation swaps. Bids and offers use supply and demand principles to set the price. Long-term trades are contracts similar to power purchase agreements and generally considered private bi-lateral transactions between counterparties.

Net metering

Net metering is an electricity billing mechanism that allows consumers who generate some or all of their own electricity to use that electricity anytime, instead of when it is generated. This is particularly important with renewable energy sources like wind and solar, which are non-dispatchable. Monthly net metering allows consumers to use solar power generated during the day at night, or wind from a windy day later in the month. Annual net metering rolls over a net kilowatt-hour (kWh) credit to the following month, allowing solar power that was generated in July to be used in December, or wind power from March in August.

Demand response

Demand response is a change in the power consumption of an electric utility customer to better match the demand for power with the supply. Until recently electric energy could not be easily stored, so utilities have traditionally matched demand and supply by throttling the production rate of their power plants, taking generating units on or off line, or importing power from other utilities. There are limits to what can be achieved on the supply side, because some generating units can take a long time to come up to full power, some units may be very expensive to operate, and demand can at times be greater than the capacity of all the available power plants put together. Demand response seeks to adjust the demand for power instead of adjusting the supply.

Arizona Public Service Electric utility in Arizona, United States

Arizona Public Service (APS) is the largest electric utility in Arizona, United States, and the principal subsidiary of publicly traded S&P 500 member Pinnacle West Capital Corporation, which in turn had been formerly named AZP Group, when Arizona Public Service reorganized as that holding company in 1985.

Edison Electric Institute American trade group

The Edison Electric Institute (EEI) is an association that represents all U.S. investor-owned electric companies.

Financial incentives for photovoltaics are incentives offered to electricity consumers to install and operate solar-electric generating systems, also known as photovoltaics (PV).

Grid-tie inverter apparatus to convert DC electrical (solar, wind) energy to AC and deliver it back to the grid

A grid-tie inverter converts direct current (DC) into an alternating current (AC) suitable for injecting into an electrical power grid, normally 120 V RMS at 60 Hz or 240 V RMS at 50 Hz. Grid-tie inverters are used between local electrical power generators: solar panel, wind turbine, hydro-electric, and the grid.

The Southern Maryland Electric Cooperative (SMECO) is an electric distribution cooperative which is headquartered in Hughesville, Maryland, United States. SMECO serves approximately 161,000 customers in Calvert, Charles, Prince George's, and St. Mary's counties of southern Maryland. Under its rules as a nonprofit cooperative, SMECO passes on its costs to its customer-members without markup or profit.

Grid parity

Grid parity occurs when an alternative energy source can generate power at a levelized cost of electricity (LCOE) that is less than or equal to the price of power from the electricity grid. The term is most commonly used when discussing renewable energy sources, notably solar power and wind power. Grid parity depends upon whether you are calculating from the point of view of a utility or of a retail consumer.

Solar power in California

Solar power in California includes utility-scale solar power plants as well as local distributed generation, mostly from rooftop photovoltaics. It has been growing rapidly because of high insolation, community support, declining solar costs, and a Renewable Portfolio Standard which requires that 33% of California's electricity come from renewable resources by 2020, and 50% by 2030. Much of this is expected to come from solar power via photovoltaic facilities or concentrated solar power facilities.

Solar power in Arizona

Solar power in Arizona has the potential to, according to then-Governor Janet Napolitano, make Arizona "the Persian Gulf of solar energy". In 2012, Arizona had 1,106 MW of photovoltaic (PV) solar power systems, and 6 MW of concentrated solar power (CSP), bringing the total to over 1,112 megawatts (MW) of solar power. The Solana Generating Station is a 280 MW parabolic trough solar plant which is the largest plant of its type in the world. Solana includes 6 hours of power storage by molten salt. The plant will provide 5% of the power from Arizona Public Service, the state's largest utility.

Solar power in Hawaii

The energy sector in Hawaii has rapidly adopted solar power due to the high costs of electricity, and good solar resources, and has one of the highest per capita rates of solar power in the United States. Hawaii's imported energy costs, mostly for imported petroleum and coal, are three to four times higher than the mainland, so Hawaii has motivation to become one of the highest users of solar energy. Hawaii was the first state in the United States to reach grid parity for photovoltaics. Its tropical location provides abundant ambient energy.

The National Association of Regulatory Utility Commissioners (NARUC) is the national association representing the state public service commissioners who regulate essential utility services, including energy, telecommunications, and water. NARUC members are responsible for assuring reliable utility service at fair, just, and reasonable rates. Founded in 1889, the Association is a resource for its members and the regulatory community, providing a venue to set and influence public policy, share best practices, and foster solutions to improve regulation.

Community solar farm

A community solar farm or garden is a solar power installation that accepts capital from and provides output credit and tax benefits to individual and other investors. In some systems you buy individual solar panels which are installed in the farm after your purchase. In others you purchase kW capacity or kWh of production. The farm's power output is credited to investors in proportion to their investment, with adjustments to reflect ongoing changes in capacity, technology, costs and electricity rates. Companies, cooperatives, governments or non-profits operate the farms.

Rooftop photovoltaic power station type of photovoltaic system

A rooftop photovoltaic power station, or rooftop PV system, is a photovoltaic system that has its electricity-generating solar panels mounted on the rooftop of a residential or commercial building or structure. The various components of such a system include photovoltaic modules, mounting systems, cables, solar inverters and other electrical accessories.

Grid-connected photovoltaic power system

A grid-connected photovoltaic system, or grid-connected PV system is an electricity generating solar PV power system that is connected to the utility grid. A grid-connected PV system consists of solar panels, one or several inverters, a power conditioning unit and grid connection equipment. They range from small residential and commercial rooftop systems to large utility-scale solar power stations. Unlike stand-alone power systems, a grid-connected system rarely includes an integrated battery solution, as they are still very expensive. When conditions are right, the grid-connected PV system supplies the excess power, beyond consumption by the connected load, to the utility grid.

Solar power in Virginia

Solar power in Virginia on rooftops is estimated to be capable of providing 32.4% of electricity used in Virginia using 28,500 MW of solar panels. Installing solar panels provides a 6.8% return on investment in Virginia, and a 5 kW array would return a profit of $16,041 over its 25 year life.

Net metering in Nevada is a public policy and political issue surrounding the rates that Nevada public utilities are required to pay to purchase excess energy produced by electric customers who generate their own electricity, such as through rooftop solar panels. The issue centers around two policies: paying solar customers the "retail" rate versus the "wholesale" rate.

Net metering in Michigan was a state program that allowed utility customers to develop renewable energy generation projects on-site at their home or business to meet their own energy needs and reduce their electric bill. As of the end of 2015, Michigan had approximately 2,000 net metering customers. The net metering program was replaced with a inflow/outflow program which charges retail rate for grid energy used and pays for excess sent to the grid at a cost-avoided rate. This cost-avoided rate is much lower than the retail rate and each utility must have their price approved by the state utility board in their rate case.

Net metering in New Mexico is a set of state public policies that govern the relationship between solar customers and electric utility companies.

References

  1. 1 2 3 4 Randazzo, Ryan (2015-12-29). "Arizona regulators seek solar net-metering compromise". The Arizona Republic. Retrieved 2016-07-25.
  2. 1 2 Sweet, Bill (2013-11-19). "Arizona Imposes Net Metering Fee on Rooftop Solar". IEEE Spectrum. Retrieved 2016-07-25.
  3. Cardwell, Diane (2013-11-15). "Compromise in Arizona Defers a Solar Power Fight". The New York Times. ISSN   0362-4331 . Retrieved 2016-07-25.
  4. 1 2 3 Randazzo, Ryan (2016-04-20). "Arizona solar ballot initiative launched by super PAC". The Arizona Republic. Retrieved 2016-07-25.
  5. 1 2 "Arizona Net Metering Amendment (2016)". Ballotpedia. Retrieved 2016-07-25.
  6. 1 2 3 Gatlin, Allison (2016-06-07). "Arizona Net-Metering Cut Would Kill Demand For SolarCity, Sunrun". Investor's Business Daily. Retrieved 2016-07-25.
  7. "Arizona regulators approve new rates, solar fees for Tucson Electric Power". Utility Dive. Retrieved 2017-02-22.
  8. 1 2 Wichner, David. "Arizona net-metering decision may slow solar adoption". Arizona Daily Star. Retrieved 2017-01-24.