Value of Solar Tariff

The Nevada Public Utilities Commission has been holding public hearings on the value of residential rooftop solar and this morning I stepped forward with the following statement to the commission.

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My name is Craig Ruark, and I have been a resident of Las Vegas since 1975. Currently, I work as a freelance writer and have written several articles that have appeared in the Las Vegas Business Press, on the topic of Net Metering and rooftop solar. The following represents my views and not necessarily those of the Business Press.

I am here to discuss the basic issues.

First of all, NV Energy from 2006 to 2011 has spent $4.3 billion to build, expand or buy eight power plants, more than doubling its generating capacity to 5,862 megawatts. That is a huge investment to bring reliable energy to the citizens of Nevada. And even today, NV Energy continues to invest the funds necessary to maintain the transmission lines and infrastructure that makes up the local grid.

The complaint that NV Energy has about rooftop solar customers not paying their fair share for the grid is legitimate. One of the problems that NV Energy faces is that they must plan the amount of power that they generate based on the needs of all customers in the valley regardless of whether they have solar or not. The reason for this is they never know how much solar energy they will be receiving from the residents at any given time. One home with a seven kW system might contribute four kW of that energy to the grid, and another may contribute one kW back to the grid. The variables are dependent upon the time of day, the number of resident’s home during those times, and the amount of electronics in use, in addition to air conditioning comfort preferences.

The electronic components that make up the power grid do not like power spikes and surges. So when NV Energy generates power based upon the number of connections, and solar starts throwing a few thousand extra kilowatts back into the system there is a problem.

That said, the other side of the coin is that distributive generation is far more efficient than building more centralize power plants. And when calculating the contribution made by residential and commercial rooftop solar the PUCN needs to take a number of things into consideration.

  • It reduces the need for expensive new power plants and transmission lines;
  • less energy is lost in transmission because much of the power is used right where it’s generated;
  • it requires no fuel and so provides a hedge against future fossil fuel price increases;
  • the kilowatt hours produced by solar does not require water
  • and it could allow utilities to meet state renewable energy and greenhouse gas emission goals without paying for utility-scale solar and wind farms.

The recent passage of SB374 shifted responsibility from the Nevada Legislature to the Public Utilities Commission (PUC) to evaluate what is called the “Value of Solar” (VOS) tariff and establish new guidelines for connecting rooftop solar to the grid.

This may be a logical solution assuming that the PUCN attaches a proper value to the energy generated by residential and commercial solar.

To make this work, all solar customers would purchase all of their energy from the utility company at the utility’s retail rate which includes all of the costs of power production and/or the purchasing of power, as well as, the transmission and distribution of the power.

Second, the solar customer feeds 100% of its generated power into the grid and is compensated by the Utility, based on an established VOS rate in dollars per kilowatt hour. The VOS calculation generates a long-term leveled value rate that is looked at annually, based on factors that may include:

  • Utility variable costs (fuel and purchased power)
  • Utility fixed costs (generation capacity, transmission, and distribution)
  • Distribution system and transmission line losses
  • Ancillary services (to maintain grid reliability)
  • Environmental impacts (the reduction of carbon and other pollutant emissions)

With those factors in consideration, the value may not be the current 11.6 cents that are being paid under net metering, but it is far more than the 3.1 or 5.5 cent numbers proposed.

By instituting these two items, the utility company now has a constant base of power that is provided by solar and can then plan appropriately the amount of power that is needed from their central plants and purchased from the grid.

The goal of the calculation process is to estimate the total value of a unit of solar energy generated in the distribution grid, at or very near the point of consumption thus eliminating long distribution charges and limiting transmission line losses for a more efficient method of energy production. The result is a conservative estimate of the cost that the utility would face for a unit for energy with the same character as that generated from a local commercial solar facility.

In other words, the residential solar customer also becomes a source of power generation for the utility, and as such, the total amount of power generated can be more accurately calculated and relied upon for servicing all of the utility’s customer needs. This is greatly different from the current Net Metering system where the solar customer bleeds off power for their own needs and then pushes any excess power (in unknown and inconsistent quantities), into the grid causing spikes and fluctuation that wreaks havoc with the utility’s transmission and distribution equipment.

Under the VOS tariff system, the solar customer is billed for their energy use exactly as all other customers within the utility. They, however, will have an amount deducted from their monthly bill based on the amount of energy they produced and sold to the utility. One advantage that the VOS tariff system might give to the homeowner is the ability to secure better financing for the installation of their system based on the long-term projection of income.

One variable on the investment side is that each year, a new VOS tariff would be calculated using current data, and the new resulting VOS rate would apply to all customers entering the tariff during the year. Changes such as increased or decreased fuel prices and modified hourly utility load profiles due to higher solar penetration could be incorporated into each new annual calculation.

And finally, I would like to point out that the PUCN has published a document titled Choosing Wind or Solar. In that document, there is an analysis to “Determine how much energy the system could potentially produce, in kilowatt-hours in a year.” The mathematics assumes a 6-kilowatt system x 8,760 hours in a year x 24% efficiency based on inclement weather, cloudy skies and of course darkness at night for a total of 12,614 kWh per year multiplied by $.13 equals an annual savings of $1,640 off your energy bill.

This is a straight calculation without net metering.

The flaw in that calculation is that 80% of that energy is generated while children are in school, parents are at work, and the household is fairly quiet. Most residents have their air conditioners turned to a higher temperature so as not to waste energy; the television is off as are most of the lights, etc. So in reality, depending on the time of year, and the outside temperature, the home is generating an abundance of energy that is not being used. Without some sort of compensation such as net metering or Value Of Solar Tariff, the homeowner is not receiving near the value in the PUCN example and therefore the payback of the system is far greater than the 11 years used in the example.

Without fair compensation for rooftop solar, the proposition becomes a 30 to 40-year payback and for residents in particular that is not a doable situation.

About craigruark

Craig A. Ruark is a freelance writer, journalist, and marketing and PR professional. In 2008, Craig became one of the first non-technical persons to become an Accredited Professional by the U.S. Green Building Council for ‘Leadership in Energy & Environmental Design” (LEED AP). Over the years he has immersed himself in the subject of “sustainability” and by combining this knowledge with his expertise in marketing and advertising, has published a book titled “Marketing Your Green Side,” which is available through Amazon. Craig is an avid fitness participant, sailor, SCUBA diver, enjoys singing Karaoke, listening to jazz, and is working on his next book.
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