I see your point. Maybe daily demand fees would make more sense. I'm just wondering if demand fees would more effectively address the concern of "cost shifting" of the grid costs to non-solar customers, since solar customers would still have to pay the demand fees based on their peak usage after the sun goes down, which would address one of the reasons why NEM 3.0 was being proposed.
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CPUC NEM 3.0 discussion
- Thread starter jjrandorin
- Start date
nwdiver
Well-Known Member
??? Maybe a complete construct of economics but from that perspective EVERYTHING is a complete construct. If the grid operator needs to have 70GW instead of 69GW that extra 1GW isn't free. And if demand is only 70GW for a few hours every 2 years ensuring that capacity is available is extremely expensive. It's just supply and demand.
The grid isn't like a restaurant. If there's a 15 minute wait for a table the lights go out. Think of how much more expensive it would be if a restaurant needed to have enough tables for mothers day breakfast instead of just having people wait.
On top of that if you're using energy from 9am - 2pm or midnight - 4am there's a good chance it's from a renewable source that was being curtailed so the fuel cost is 0 as opposed to a kWh used at 8pm which would almost certainly need to come from gas and would incur a fuel cost.
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nwdiver
Well-Known Member
What's wrong with just charging ~3x more per kWh for electricity during peak hours to keep demand down? Would that not be just as effective as per kW but more fair since it's not all or nothing?
Same thing for freeway capacity. The freeways handle all of the traffic at 3 am easily. But it's the people who insist on driving at 5:30 pm who force Caltrans to need to widen the road at great expense. Those folks should be paying for the widening, not those who drive at 3 am.
It shouldn't be time based, it should be demand based. On an unusually cold day in July, electricity should be cheap, even at 7 pm. If it's unusually hot, electricity should be unusually expensive.
nwdiver
Well-Known Member
TOU is a form of demand fee but averaged across the rate class. If you have a 15kW peak at the beginning of your billing cycle should you get no credit for not using energy during peak hours for the remainder of the billing cycle? That's why TOU is more fair.
That is what Texas has, and during the 2021 cold snap, the rates got pretty wild...
On our side, we have a meter under demand charges, that pretty routinely runs us $5/kWh (high demand for a brief time period).
Having peaker plants for limited high demand time periods isn't an artificial construct. If the IOU neees to meet the demand, it is required. Whether one averages the cost over the whole year, even when it isn't generating, is a construct. For most people, it is easier to understand that the annual cost of of the peaker plant divided by the time the peaker plant runs is one way to think about the marginal cost of that power.
All the best,
BG
nwdiver
Well-Known Member
I think you mean $5/kW.
That's not bad. Xcel is charging ~$15/kW in the summer in NM.
Sorry. I should have explained it better.
I did mean $5/kWh. The demand charge is $60 or so per month, and we use 13 kWh (ish) at $0.34/kWh, so the effective cost per kWh is $5/kWh, with the demand charge factored in. ($4.93/kWh using the above numbers)
My apologies for the confusion.
BG
I did mean $5/kWh. The demand charge is $60 or so per month, and we use 13 kWh (ish) at $0.34/kWh, so the effective cost per kWh is $5/kWh, with the demand charge factored in. ($4.93/kWh using the above numbers)
My apologies for the confusion.
BG
There are those who are already or would be willing to play the TOU game at pro-level to minimize peak hour electricity use. Many of them can be found among these threads. If you build/price the right TOU plans...
Some items are free, others are not, but may options:
Batteries, insulation upgrades, solar PV, pre-cool/heat house, charge EVs middle of the day and at other off-peak times, upgrade everything to heat pumps and run them off peak (and lower draw during peak hours if you must use then as they replace older low SEER/HSPF equipment), variable speed pool pumps and run off peak, induction cooking and microwaves run off peak, washing machine/dryer/dishwasher runoff peak, charge batteries for yard tools off peak,...
Some items are free, others are not, but may options:
Batteries, insulation upgrades, solar PV, pre-cool/heat house, charge EVs middle of the day and at other off-peak times, upgrade everything to heat pumps and run them off peak (and lower draw during peak hours if you must use then as they replace older low SEER/HSPF equipment), variable speed pool pumps and run off peak, induction cooking and microwaves run off peak, washing machine/dryer/dishwasher runoff peak, charge batteries for yard tools off peak,...
nwdiver
Well-Known Member
I don't mean to be pedantic but I think it's important to clarify kW (Demand) vs kWh (Energy). How is it $5/kWh? I've never seen demand fees charged per kWh....
The objection that was raised to this in the NEM 3.0 discussions was that this represents a cost shift from solar to non-solar customers because the solar customers get to offset their solar production early during peak hours against their usage later in peak hours after the sun goes down. The idea of the demand charge would be to offset this and more clearly represent the true cost to the grid of supporting these solar customers. Presuming that the peak usage for typical customers is after the sun goes down, both solar and non-solar customers would have the same demand charges. Obviously this could be mitigated using storage, but that would also help the grid so I think that's sensible.
I need to be clear about where I am in this argument. I the sense of where, structurally.
So, its:
1. Is decentralized power good? Yes.
2. Individual solar good? Yes.
3. How about individual battery storage? Yes.
4. Does decentralized power either allow a typical use to "cut the cord" from the grid? Nope.
5. So even if you have an individual power plant, with ESS, you still need to be connected? Yes. So the grid needs to be paid for? Yes.
6. How much, then, should an individual with solar and or solar plus ESS pay? How much should the utility credit for over-production?
So we are at point 6, and what the utilities are basically saying is that they need to credit less, and maybe charge more as a basic fee. Why? The latest argument is that solar and solar and ESS "shifts costs" to lower income people.
That's their argument.
My thoughts are its a BS argument (more on that below) but they aren't making this argument just out of greed, they are making it because under the current pricing structure, where the costs of the grid are paid for by volumetric pricing, the entire system cannot be sustained if any form of conservation actually happens, and solar and especially solar plus ESS are, hands down the most anyone can do to conserve. Better than turning off light bulbs, better than getting energy efficient stuff.
I've looked at plenty of data, from CASIO to financials, and its clear that the price of electricity varies across the western grid from a low of 3 cents per kwh to 6 cents. at peak.
The rest of our charges are everything else, "the grid" the billing department, the guys in the trucks driving around fixing stuff.
That's why we don't have tons of utility scale renewables, they have to come in at like 3 to 6 cents. And that is why we have residential solar, it comes in at like 10 to 15 cents, but since that is less than the charge per kwh its an industry.
My hamburger example was OK, a better one is roads. We pay for roads, other than the occasional toll road, out of general revenues. I know there is gas tax but its merely one source -- construction of roads is not limited by gas tax.
What that means is a switch to EVs is fine, the roads aren't paid for by the amount of miles driven by ICE cars, so reducing the number of ICE cars is fine.
What is going on with electricity is as if everyone had a monitoring device on their ICE car, and they were charged by the mile. And roads were paid for, and only paid for, by this charge. And THEN, it becomes desirable to burn less gas. So people start riding bikes. But bikes don't pay via my hypothetical monitoring device. These bikes just use the roads. Then, the cities and counties go -- we need to have a tax on bikes, instead of buying one for $100 we need an extra $900 of tax. Its "only fair" -- all these rich bikers are "shifting costs" for the roads to poor car drivers. Result? No more bikes, its cheaper just to drive.
They are going to kill off residential solar, its the only way they can survive long term. Its a completely avoidable environmental mistake.
The point is its all based on how the utilities decided to charge. The already switched from tiered to TOU, if the switched to some basic fee the problem is that for either poor people or low users the "basic fee" might be more than they are currently paying!!!
The grid has to be paid for in a different way. No utility pricing is going to actually decrease usage. There should be no investor owned utilities. The grid needs to be paid for like roads.
nwdiver
Well-Known Member
My problem with demand fees is it's all or nothing. You have one high day and you carry that fee for the entire billing cycle AND there's no longer an incentive for shifting consumption. I don't understand how a $15/kW demand fee is better than TOU. I agree it probably needs to be very high. Probably >$0.50/kWh. But at least then one event doesn't carry for the entire billing cycle.
nwdiver
Well-Known Member
I don't think anyone here is attempting to argue that it would. My only point is that there needs to be some kind of incentive to implement demand response that would enable more demand to be shifted from when Supply < Demand to when Supply > Demand. A kWh at 8pm is inherently more expensive on average than a kWh at noon or 2am. Why should they cost the same?
I agree completely.
I should have also pointed out that during the last go round on NEM 3.0 people in SDG&E were talking about non peak 17 cents and peak over 40 cents per kwh. That is complete BS. It arbitrary, they know that despite the fact that there is a gigantic incentive to switch use, most people can't do it. So they are just raking in dough at 40 cents per kwh that costs them 6 cents. If everyone logged on to CAISO there would be a total revolt.
If most people could do it, with all this residential solar you would just have major usage switching going on at the utility level.
That's why I suggested a daily demand fee instead of one per billing cycle. Instead of $150/billing cycle, you'd pay $5 for the day of the one-time event (or whatever number makes the costs work out right). Averaging peak demand across the billing cycle would also work to achieve this.
I would presume demand fees would be combined with a smaller usage charge, since there definitely is a usage based component to the utilities' costs. Using only usage charges is subject to the argument that "rich" solar users can offset the fee using NEM. Conversely, fixed fees don't make sense for those with batteries, because they would have to pay more than their share if they never use peak energy.
nwdiver
Well-Known Member
That's not really how it breaks down. The $0.40kWh has a demand fee component but it's averaged across the rate class. If a rate study finds that 1M solar owners are contributing 10GW of demand to the grid during peak hours they have two options. $/kW + $/kWh or $/kWh to recover the cost of that 10GW. If you look at the screen shot I posted the $/kWh is comically low because Xcel has shifted ~all the cost to $/kW to discourage solar. My point is a higher $/kWh with an embedded kW fee is the better approach since one high kW event doesn't peg you with a higher monthly bill.
nwdiver
Well-Known Member
..... how would that be any different than just ~$0.50/kWh during peak hours? I think ~$0.50/kWh would be easier to comprehend than attempting to average kW across 30 days....
I've never heard of daily demand fees... it's always monthly. I mean.... sure... averaging peak kW daily would work... it would just be a lot more complicated and probably work out to the same result as just $0.50/kWh.
But that was my point solar owners aren't "contributing" anything to demand. Prior to getting solar when the sun is down they were using X and after solar when the sun is down they are still using X.
My point is that the 40 cents isn't just for solar owners, its for everyone, and up link there was a cite that only ten percent of customers actually were able to shift their own usage to cheaper parts of the day, and for half it made no difference and for 40 percent it just cost them more.
Solar owners are (although it depends on the size of the system) reducing demand during the day, that's for sure. I don't think the IOUs can even handle that.
The main issue is that if the peak hours include solar production, solar users can reduce their fee disproportionately to their impact on the grid if their peak usage occurs after sundown. Wasn't that one of the arguments the utilities were using in the NEM 3.0 discussions? A demand fee would eliminate this disparity.
I'm not that familiar with what conventions are for billing, but I thought I at least heard of rates that allowed you to average your peak demand across the billing cycle. This would come out to the same amount as a daily fee, I think.
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