How to equitably fund the utility grid...

[nwdiver]

I'm attending a demonstration next month in Santa Fe NM to protest the $6/kW fee that PNM is requesting our PRC approve. ~90% of the people that responded to the poll that I posted would be against this measure since it's impossible to make a profit when the utility charges you more for production than they pay for exports... for obvious reasons the math simply doesn't work. Understanding that the people using the grid should somehow pay for the grid I want to get a little more specific...

Please forgive me if this feels like I'm beating a dead horse. There is little doubt in my mind that this issue to going to become VERY prevalent in the next 5-10 years and it's important that we work to get it right...

Please provide some option feedback and I'll post a poll in a couple days. Thank you. Merry Christmas and Happy Holidays. :smile:

For some context we'll imagine a two PV homes, each home has a 10kW system, uses 1500kWh/month and produces 1500kWh/month. The difference is that one home uses the grid significantly less than the other by actively managing 'self-consumption'.... Plus as an extreme example a home where the residents are on vacation for a month...

High Grid use home A
Export: 1200kWh
Import: 1200kWh

Low Grid use home B
Export: 600kWh
Import: 600kWh

Vacation home C
Export: 1480kWh
Import: 15kWh


Fixed Connection Fee
- Grid maintenance is effectively socialized across all rate payers. Regardless of wether you have solar or not grid costs are divided equally among all ratepayers (Real World example WA PSE)
Home A, B & C = $8/month

Elimination of net-metering
- Export value is periodically re-evaluated and approved by the PRC in a similar fashion to rates. (Real World example TX TXU)
Home A: $54
Home B: $27
Home C: -$109.2

'Minimum Bill' + net-metering (Depending on consumption 'Negative Bill' possible)
- A fee is levied on Production or Capacity. Production fee < Export Credit so it is possible to have a profitable pay period depending on consumption. (Real World example AZ APS)
Home A/B: $7 + connection fee
Home C: ~ -$140 assuming $0.10/kWh

'Minimum Bill' + net-metering ('Negative Bill' not possible)
- A fee is levied on Production or Capacity. Production fee > Export Credit so it is NOT possible to have a profitable pay period depending on consumption. (Real World Example NM Xcel)
Home A/B: $54
Home C: ~$16 dependent on fuel cost factors

 

[RandyS]

Don't forget to factor in a demand fee based pricing scenario....

In other words, let's say that two customers consume 1,500 kWh per month, but one customer has a maximum demand of 20 kW and the other customer has a maximum demand of 6 kW. It costs the utility more for the infrastructure to serve the 20 kW demand customer than the 6 kW customer, so a rate design that is based on actual costs will charge more to the 20 kW customer...That scenario will definitely be a factor in future rate designs...

 

[nwdiver]

Don't forget to factor in a demand fee based pricing scenario....

In other words, let's say that two customers consume 1,500 kWh per month, but one customer has a maximum demand of 20 kW and the other customer has a maximum demand of 6 kW. It costs the utility more for the infrastructure to serve the 20 kW demand customer than the 6 kW customer, so a rate design that is based on actual costs will charge more to the 20 kW customer...That scenario will definitely be a factor in future rate designs...

Are you referring to a peak power charge? That's typically more common with commercial service. For commercial 3-phase I know that Xcel charges something like $6/kWp + $0.03/kWh. So a business that peaks at 800kW during the day but averages 500kW would pay $2400 in 'demand' fees + $10800 in energy fees.

 

[RandyS]

It could be something like a peak power monthly charge, and while they are currently most common in commercial rates, everything I'm hearing is that they will be part of the residential landscape as well within a few years...

By the way, $6 per kW peak per month total is a bargain...In San Diego, the summertime demand charge on AL-TOU can be upwards of $30 per KW peak per month (worst case) in summer....

 

[bxr140]

At a fundamental level I think the pricing strategy of a grid tie system should make it easy for the homeowner to significantly reduce their monthly/yearly bill, but very difficult for the homeowner to make a profit off the utility company. Like water (and waste mangement), its really easy to devalue the complexity of electricity generation and distribution. In the case of small PV systems, I think the interests of the 'power company' (whatever that means on a regional level) shold outweigh those of the homeowner...and not for the good of the company, but for the good of the grid.

I'm sure there are plenty of acceptably fair ways to get there, from a basic buy high sell low structure to a complicated algorithm that layers in TOU, peak demand, total consumption, etc.

 

[dhrivnak]

At a fundamental level I think the pricing strategy of a grid tie system should make it easy for the homeowner to significantly reduce their monthly/yearly bill, but very difficult for the homeowner to make a profit off the utility company. Like water (and waste mangement), its really easy to devalue the complexity of electricity generation and distribution. In the case of small PV systems, I think the interests of the 'power company' (whatever that means on a regional level) shold outweigh those of the homeowner...and not for the good of the company, but for the good of the grid.

I'm sure there are plenty of acceptably fair ways to get there, from a basic buy high sell low structure to a complicated algorithm that layers in TOU, peak demand, total consumption, etc.

Very well put and as a PV generator I agree.

 

[nwdiver]

At a fundamental level I think the pricing strategy of a grid tie system should make it easy for the homeowner to significantly reduce their monthly/yearly bill, but very difficult for the homeowner to make a profit off the utility company.

So... difficult but not impossible? Would paying ~50% less for exports then you're credited for imports qualify? The thing that really angers me about the production/capacity fees that utilities keep chasing is that it treats ALL PV owners the same regardless of how much/little they use the grid.

Does anyone here really think it would be fair for wk057 with his 170kWh battery pack (only rarely using the grid) and someone with no storage that uses the grid EVERYDAY to pay the same grid use fees?

 

[dhrivnak]

Does anyone here really think it would be fair for wk057 with his 170kWh battery pack (only rarely using the grid) and someone with no storage that uses the grid EVERYDAY to pay the same grid use fees?

Since a large part of the "grid" is to have the capacity there when needed then yes. If one pulls 200 amp,s but only once a year the pole, wires, transformer etc. all need to be the same as the person who pulls 200 amps daily. So some sort of fixed fee is likely fair in my mind.

 

[nwdiver]

Since a large part of the "grid" is to have the capacity there when needed then yes. If one pulls 200 amp,s but only once a year the pole, wires, transformer etc. all need to be the same as the person who pulls 200 amps daily. So some sort of fixed fee is likely fair in my mind.

.... so 360 days of supporting the grid don't compensate for the ~5 days you might need it to support you? If more people did what wk057 is doing then the grid would require fewer upgrades since on average they would be able to support each other through the grid... shouldn't there be a financial incentive to be less of a burden on the grid? Shouldn't there be a financial incentive to install as much solar PV as you can afford/accomodate?

 

[Robert.Boston]

.... so 360 days of supporting the grid don't compensate for the ~5 days you might need it to support you?

No, it doesn't, in large part because the utility has no idea when you are going to perform and when you're not. On-grid customers have a call option on power: the utility has to stand ready at every hour to deliver power to you up to your interconnection (panel) size. The option is costly for the utility to provide regardless of how often you use it. The variable cost of producing the power you actually take delivery of is typically small.

Customers who ordinarily produce their own power but might rarely need to rely solely on the grid are typically charged a "standby rate". Even if the customer never draws a single kWh under this tariff, it pays for the option to do so, allowing the utility to recover costs associated with maintaining generation capacity, transmission, and distribution charges. Looking at the structure of these standby rates might be a good place to start thinking about a equitable way to structure charges for customers with PV, CHP, and similar systems.

If more people did what wk057 is doing then the grid would require fewer upgrades since on average they would be able to support each other through the grid... shouldn't there be a financial incentive to be less of a burden on the grid? Shouldn't there be a financial incentive to install as much solar PV as you can afford/accomodate?

I always worry when I think about utility tariffs giving "incentives". Tariffs should not, IMO, be policy instruments. If a state wants to incentive something, be it solar or EVs or whatever, it has many tools to do that other than utility tariffs. Tariffs should reflect costs, equitably allocated. So if distributed generation really is saving a utility costs, then the tariffs should reflect that. It would require some very careful studies, though, and possibly a complete rethink of how we wire up and operate the distribution network. Important issues, but not easily done. Nor can it be done once in one location and applied everywhere without change.

 

[nwdiver]

No, it doesn't, in large part because the utility has no idea when you are going to perform and when you're not. On-grid customers have a call option on power: the utility has to stand ready at every hour to deliver power to you up to your interconnection (panel) size. The option is costly for the utility to provide regardless of how often you use it. The variable cost of producing the power you actually take delivery of is typically small.

Hmmm... I think I'm asking the wrong question... There are 3 items that are critical to renewables comprising >20% of our grid...

- Residences and businesses install as much solar as they CAN... not as much as they NEED
- Demand response uses energy when it's available as much as possible
- Storage helps smooth spiky Solar/Wind production

How should utility commissions encourage this?

 

[RandyS]

If customers install as much solar as they can on a widespread basis, the utility will have to spend infrastructure money to deal with moving that power elsewhere off that circuit. There could be other issues, such as high voltage on distribution circuits, large amounts of power backfeeding, all things that the current grid was not designed for...Adding widespread solar is not "Free" to the utility....

 

[nwdiver]

If customers install as much solar as they can on a widespread basis, the utility will have to spend infrastructure money to deal with moving that power elsewhere off that circuit. There could be other issues, such as high voltage on distribution circuits, large amounts of power backfeeding, all things that the current grid was not designed for...Adding widespread solar is not "Free" to the utility....

If XYZ utility buys power from me for $0.04 and sells it for $0.10... how is that not a profit for the utility? As I have mentioned OVER and OVER and OVER... *sigh*.... things will change.... can a 4TW market support 100TW of solar? OF COURSE NOT!!

But... let's start stomping on new solar PV at 3TW... not 3GW.... what am I missing? The 'cost' of exporting already goes negative from time to time... if it COSTS me $$$ to export I WILL STOP. But the power on the grid at that point should be 0% carbon-based.

Again... we NEED distributed storage. we NEED demand response. Those things aren't going to be used out of good-will. There MUST be financial incentives to store/use energy when it's abundant and sell/curtail use when it's not. So... again... how do we encourage that?

 

[ItsNotAboutTheMoney]

I don't like the word equitably. The word needed here is accurately. Utility pricing should accurately reflect costs.

It obviously doesn't. The problem is that a lot of people who care don't want accurate pricing, because that'd inconveniently make home PV much more expensive and then encouraging it would become even more political.

Obviously, feed-in needs to be handled, and I'm sure there are costs, but the joke is that home solar system output is nowhere near system input capability, where even old homes have services over 20kW.

.What should be asked at these meetings is:
If you want charge per kW upload, why don't you also want to charge per kW download?
What's the big deal with variable feed-in from home PV systems, given that demand is constantly varying as well, and given that homes can't feed in anywhere near what they can demand?

Then you might be able to get somewhere, and have a proper reevaluation of pricing and incentives.
The utility in this case talks about how costs are per kWh, then they should be asked "Then isn't that the real problem?"

Once you get accurate pricing, _then_ you can discuss what you need to do to encourage more renewables, and whether _taxpayers_ should provide solar incentives, or whether there should be carbon or other sin taxes on use.

 

[nwdiver]

I have no desire to get into a semantic debate but the definition of equitable is 'fair and impartial'... that's all I'm going to say about that...

This thread is really more about 'Distributed RESOURCES' than 'Distributed GENERATION'. It's highly likely that at some point in the near future someone living in a home, condo or apartment that is totally incompatible with solar PV will be able to significantly reduce their electric bill simply by installing storage. As has been pointed out in various ways a kWh produced at 1pm on a sunny day will have significantly less value than a kWh produced a 8pm in the evening.

The point that I've been trying to make is that we need a billing system that encourages the consumption and storage of the 1pm kWs and the sale or decreased consumption of 8pm kWs.... (Production/Capacity fees do NOTHING in this regard)

YES... the utility needs to take their cut to keep the lines up but that often isn't their goal. Their goal is to keep tight control of ALL services they offer which is why production/capacity fees are their tactics of choice.

 

[jerry33]

The problem is that "making it equitable" will keep the utilities at their current level forever. As solar becomes more common and solar plus battery storage start coming online, and devices become more energy efficient, the required level of grid electricity will be reduced and perhaps even eliminated in many areas by neighbourhood grids. (I've heard neighbourhood grids are already being deployed in some European communities.)

Of course, the change from mainly grid power to mainly local power won't happen overnight, but with utility subsidies in place it won't ever happen.

 

[Robert.Boston]

I agree with @ItsNotAboutTheMoney: we have to start with accurate pricing. The utility tariff shouldn't be tilted to encourage or discourage activities or investments unless those are cost-effective. Like any investment, my decision to install PV or home energy storage should be based on an expected return on that investment, so if the prices I face are wrong, then my investment decision is premised on incorrect information, leading to under- or over-investment in PV, storage, or what-have-you.

It would also help if the utility bills were more disaggregated. When you see a single price per kWh, you have no idea how much of that is paying for commodity power, losses, distribution services, transmissions services, capacity reservation charges, and customer account support (to name a few categories). When you generate your own power, you are supplying only the commodity power, not all those other cost categories.

A major stumbling block to accurate pricing the absence of a carbon tax, which would capture in prices the negative externalities associated with carbon emissions. The EU, California and the RGGI states have a carbon tax, but it's level is well below the level needed to decarbonize the power sector by 2050. But that's a different conversation....

Once we get prices right, then what I'd advocate is for states, either directly or through PUC-approved utility programs, to make low-interest loans available to enable people to install distributed resources and energy efficiency measures without capital availability being the constraint. If done through the utility, the loan repayment could be done on the utility bill--and if the investments were actually cost-effective, then the bill+repayment will be lower than the pre-install level. Yes, this would challenge the PV lease model of SolarCity and others, but the lease option isn't always the best; I suspect a significant number of people choose lease because they don't have the capital to pay up front. Businesses have enjoyed these low-cost energy efficiency loans for decades; it's time to to bring the same benefits to residential customers.

Utilities look first to transmission-level resources for a simple reason: hey have direct control over these resources and can measure what they do. Grid operators need to control operations in real-time, and distribution-level resources in today's grid don't have the same level of transparency to the operator. So one key to getting distribution-level resources adopted widely is to improve the information flows, in both directions. Grid operators also need to gain confidence in the ability of distributed resources to respond to signals.

There are safety issues, as well. Most components of the distribution grid were built with the assumption that power will flow in one direction. There needs to be some investments in hardware and training to support safe repairs of lines that can be energized from either end.

Jerry, I respectfully disagree that utilities are trying to undermine distributed resources out of corporate aggrandizement. The executives I've talked with are trying to figure out how to adapt their business models to a new world, sometimes called Utility 2.0. The institutional inertia of any company is reinforced by conservatism in adopting new, under-proven technologies that might reduce grid reliability. Utilities face significant penalties for failing to follow standards, and a lot of the distributed-resource model is not standard.

 

[bxr140]

...if it COSTS me $$$ to export I WILL STOP.

I think you need to separate production/consumption from access.

I think you also need to clarify your motivation-it may be unfair of me to jump to this conclusion since I don't know you, but from your posts it seems as though you feel as though you should have more money in your pocket at the end of the year because your production>consumption.

I don't believe that should ever be the case. Only in cases where production >> consumption do I think its far for the homeowner to come out ahead, and even then its got to be ocasional and case by case. If someone is on an extended summer holiday or perhaps on travel for many months thats one thing, but if someone >>-isized their PV system for the purpose of turning a constant profit, then I dont think the utility has any obligation to accommodate. If someone is interested in for profit power generation one should manage all the associated overhead themselves...exactly the overhead that is covered in a [not yet quantified] fair access fee.

Same goes for battery systems.

Big picture, if everyone in a neighborhood or everyone in a town was net profit, how does the utility survive? If a storm or accident takes out a transformer or whatever from a community that collectively profits from PV but still uses that grid every day, how is that fair when the utility is still on the hook to do the repair?

Certainly we agree that a fair PV pricing system has yet to be created, and you're very right to want longer term considerations in play, so this conversation is a good one. I think its going to come down to compromising on the definition of 'fair', and balancing short-term factors like paying for that downed pole with long term concepts like incentivizing homeowners to install PV systems and understanding how reduced system loads benefit the utility.

 

[jerry33]

Jerry, I respectfully disagree that utilities are trying to undermine distributed resources out of corporate aggrandizement. The executives I've talked with are trying to figure out how to adapt their business models to a new world, sometimes called Utility 2.0. The institutional inertia of any company is reinforced by conservatism in adopting new, under-proven technologies that might reduce grid reliability. Utilities face significant penalties for failing to follow standards, and a lot of the distributed-resource model is not standard.

I don't claim to any kind of an energy expert (except maybe while driving so I'll say you're likely more correct than I am, but we have Enron as an example of how deregulated energy companies work.

 

[Robert.Boston]

I don't claim to any kind of an energy expert (except maybe while driving so I'll say you're likely more correct than I am, but we have Enron as an example of how deregulated energy companies work.

Enron wasn't a rate-regulated utility, but rather a company that was ruthlessly pushing the edges of what a restructured energy market should be. No moral compass, but it did have a commitment to open and free markets.

Utilities do have a strong sense of self-preservation, like any company or person. I think there is a compelling need for them going forward because there are still economies of scale and scope in the power business. Much remains, though, to redefine what a 21st century utility should look like"