California’s default electricity rates are notoriously inefficient, with increasing charges based on how much energy you use within a billing period. The better way to price electricity would be to make it expensive when it’s expensive to generate, and cheap when it’s not. That way ratepayers are encouraged to conserve when the grid is constrained and dirtier as well, and use power when it’s cheap and clean, saving on emissions and grid costs in the process.
In response to this inefficiency, the state is moving toward time-varying rates as the default, starting in 2019. While not real-time rates, they have higher “peak” prices when electricity is expensive and in demand, and cheaper rates in off-peak hours. It’s a good way to integrate more intermittent renewables, too, as a grid flush with solar power mid-day will encourage ratepayers to use electricity then, soaking up that cheap, clean electricity and not later when renewables are more scarce.
With these time-varying or time-of-use rates, customers will increasingly look to reduce their demand during peak (more expensive) times. And Tesla is stepping into that void, with a new app update that allows customers to optimize based on rates. As Utility Dive explains:
Through the update, consumers can choose to store energy only for backup power, to maximize the amount of energy generated by a rooftop solar system, or to implement two time-based controls.
The ‘Balanced’ time-based strategy uses stored solar energy to “power your home when electricity is expensive and after the sun goes down,” the company explains on its web site. The ‘Cost Saving’ strategy maximizes consumer savings by using “stored low-cost energy to power your home when electricity is expensive.”
In the future, homeowners with rooftop solar systems will want batteries for precisely this reason, to harness as much cheap, clean power as they can to offset dirtier, more expensive power later. And as companies like Tesla automate that process, it will be easy for customers to do so.
The upside is economic savings for the customer, less strain on the grid, and reduced emissions in the process. And this is all made possible by smarter rates, software advances, and cheaper clean technology in the form of batteries.
Energy economists don’t like rooftop solar. Depending on the policy involved, it can entail significant and cost-inefficient ratepayer subsidies. For example, Lucas Davis at UC Berkeley’s Energy Institute at Haas recently calculated that non-rooftop solar customers are paying $65 per year to subsidize solar customers. He got this number by taking the difference in price between a retail credit for every kilowatt hour delivered from a rooftop solar customer to the grid and the wholesale price that this electricity actually costs.
In California, the average retail electricity price is about $0.18/kWh, while wholesale rates are close to $.04/kWh. That means that utilities are losing about $.14/kWh for each retail credit they give rooftop solar customers for their surplus solar (since they could have purchased the electricity for much cheaper elsewhere). And since utilities have a lot of fixed costs sunk in grid infrastructure, Davis was able to calculate the total subsidized amount spread over non-rooftop solar customers and divide it by ratepayers to arrive at the $65 per year in ratepayer cost-shifting.
Ultimately, it’s that cost-shifting that explains why energy economists like Davis and Serverin Borenstein hate California’s new solar rooftop mandate so much.
But this cost-shifting doesn’t have to happen — it’s due specifically to electricity rate policies. And in that respect, Hawaii tells a different and more promising story. Ultimately, I believe that state’s rooftop solar policies are where California is headed soon.
In Hawaii, utilities stopped offering full retail credit for surplus rooftop solar back in 2015. Instead, they essentially pay solar customers the wholesale rate for their surplus. As a result, utilities aren’t losing what would be $.14/kWh in California for each retail credit they give. So no cost-shifting happens.
And the impact on the ground for Hawaii rooftop solar customers? Homeowners are still ordering solar panels, but now home battery installations are starting to take off, too, as this state government chart from Utility Dive shows:
To be sure, it’s still relatively early days of the policy and the on-the-ground response. But given plunging battery prices, as well as cheaper solar installations, this solar-plus-battery technology solution seems like a great way to address complaints about cost-shifting and ratepayer subsidies. It also points to a path forward for the rest of the country, with a future of rooftop solar on most homes — and batteries in every basement or garage.
The upside is more clean technology deployed, a bigger market to bring down costs further on solar and home energy storage, reduced greenhouse gas emissions, and improved grid resilience in the case of extreme weather or other disasters. Not a bad deal all around, and one California will probably eventually see as well, as its rooftop solar policies evolve.
The vote last Wednesday at the California Energy Commission to mandate solar on all new residential rooftops may have been unanimous, but energy experts are still definitely divided. Most prominently, UC Berkeley energy economists have been out in force to argue against it as economically inefficient.
First, Severin Borenstein drafted a hasty letter in opposition to the commission, and then his colleague James Bushnell drafted a Sacramento Bee op-ed against it. Bushnell also wrote a longer post explaining his rationale:
As more aggressive and difficult carbon reduction goals loom for California, there seems to be an inclination to grasp at every policy we can think of that can add to the carbon reduction body count. It’s a spaghetti on the wall approach to carbon policy. However, it’s now more important than ever to focus on the efficient tools and policies that can push our carbon reductions in cost-effective ways. We could get away with inefficient policies like net-energy metering and zero-carbon schools when they were relatively small polices. From here on out the costs are going to start to matter.
The points they make similar: rooftop solar is not cost-effective, compared to utility-scale solar, and the policy may actually cost more money than we think because it will leave existing investments in power plants and solar PV facilities essentially stranded as useless during sunny days. It will also force ratepayers without solar to continue subsidizing homeowners with panels.
To sum it all up, Vox’s David Roberts lists all the pros and cons to the policy. For my part, I find two of the “pro” arguments convincing. Especially this one:
Time-of-use rates mean new rooftop solar could drive new storage and demand shifting.
California’s three big utilities are shifting to time-of-use rates for residential customers — meaning ratepayers will be charged more for electricity when it is more valuable. This will also affect net metering; if retail rates are lower during the midday solar surge, net metering compensation will be lower too.
That will give homeowners incentive to shift some of their solar energy around, which they can do with home energy storage — and helpfully, under the new building code, storage counts as compliance with efficiency mandates. That should get a lot of storage, and with it a lot of responsive demand, into California homes, which should help stabilize the grid.
In the long run, California will not be able to maintain net metering as a policy to compensate solar rooftop owners for their surplus production. Like Hawaii, my guess is that the state will move to paying homeowners for excess solar at the wholesale rate, as a cash payment. Combined with time-of-use or real-time electricity pricing, homeowners will then have an incentive to buy home batteries to capture their surplus solar, rather than rely on credits from their utility. The resulting energy storage deployment (and change in electricity demand) will improve the economics of rooftop solar and also the grid profile of these homes, perhaps lessening the negative effect on existing utility-scale power plants.
Second, I find convincing the argument that the rooftop solar boom will drive down prices for solar, which will benefit everyone (including utility-scale installers), as well as help promote demand for clean technology more generally, from batteries to electric vehicles (a variation on the “rooftop solar is contagious” argument).
But perhaps more importantly, we should keep in mind two things about this decision:
- it cannot be viewed in isolation, as the state is trying out all sorts of policies to address climate change (and our housing crunch); and
- because it is a regulation, if facts on the ground change, the commission is well suited to reverse course or alter the mandate in some fashion in a timely manner. That’s the beauty of regulation over legislation.
Given the many potential upsides, it’s worth it for the state to pursue this experimental policy and ideally separately encourage electricity rates that optimize the rooftop solar deployment. And in the meantime, state leaders can monitor implementation and adjust it as technologies and other energy policies change.
As I blogged about yesterday, the California Energy Commission unanimously approved a new solar mandate for all new residential construction in the year 2020. I spoke to KPCC radio in Los Angeles and Reuters about the decision.
While I think the mandate is sound economically and environmentally, Severin Borenstein at UC Berkeley takes a contrary view on the economics. Severin doesn’t like rooftop solar in general, as opposed to more cost-efficient utility-scale solar, and he foresees problems with ratepayers subsidizing the installations.
For my part, I think it’s clear the state is heading away from the retail credit model of subsidizing excess solar production, which Severin doesn’t like. Instead, state regulators will likely to move to paying the wholesale rate for surplus solar from rooftops, as Hawaii basically now does. So new batteries will likely accompany these home solar installations, because they will be an economically sound technology to capture surplus solar rather than feed it to the grid for a relatively puny wholesale rate. That’s what we see consumers doing in Hawaii in response to the loss of retail credit.
And in that respect, the new commission rules could help, as they also give batteries “compliance credits” to reduce the size of the needed solar system. They also include incentives to move away from natural gas to new homes, as well as other efficiency measures.
Once again, California is taking a strong leadership position on the environment that will benefit clean tech deployment and save new homebuyers money in the process. The decision should be a major boost for these needed technologies.
The California Energy Commission is the state agency responsible for developing and enforcing energy efficiency standards for new buildings. The result of these stringent codes, starting in the 1970s, has been higher construction costs but saved energy bills and pollution overall.
Now the commission is poised to vote today on a significant new mandate: rooftop solar on all new all new single-family houses built after January 1, 2020, as well as new multifamily buildings up to three stories tall.
As the San Francisco Chronicle reported:
Together with tough new efficiency standards for windows and insulation that the commission will consider Wednesday, the solar mandate could add $10,538 to the cost of building a house, by the agency’s own estimate. The extra expense would hit at a time when California is suffering a severe and deepening housing affordability crisis.
The move’s supporters insist the solar homes would save their owners money by slashing monthly utility bills. That savings could be worth $16,251 over the 30-year life of the house, according to the commission.
The commission took years to develop this proposal and studied the costs and benefits carefully. The agency commissioned a detailed study last year summarizing these findings, which showed the benefits of the policy exceed the costs in every climate zone in the state.
Meanwhile, for developers who don’t like the added cost of the panels to the construction bill, it’s worth noting that a Lawrence Berkeley National Laboratory study from 2015 found that prospective home buyers place a $15,000 average premium on homes with solar compared to similarly situated homes without. This premium would more than compensate developers for the increased construction costs, as homebuyers properly value the utility savings going forward.
In the long run, the move may force the California Public Utilities Commission to scale back incentives for rooftop solar from the current arrangement of giving retail credit to homeowners for their surplus power generation. With every new home having solar, the policy won’t be financially sustainable going forward.
But for now, the upside of a mandate would be a huge boon for the solar industry, as well as significant greenhouse gas emission savings from reduced energy demand from the residential sector. It would also be a powerful statement on climate change and clean energy from the fifth-largest economy in the world, as well as a big boost for renewable energy generally.
Reducing greenhouse gas emissions and ensuring environmental justice should go hand in hand. After all, residents of disadvantaged communities have the most to gain from a transition to a clean energy economy — and the most to lose from climate impacts.
Yet too often climate advocates and the environmental justice (EJ) community are at odds, particularly over policies like cap and trade and efforts to site new climate-friendly development, such as clean energy facilities, rail lines, or smart growth. EJ leaders may oppose large-scale climate policies that benefit the environment overall yet fail to protect specific neighborhoods from pollution, and they may resent changes to processes that leave disadvantaged communities without a seat at the table, among other concerns.
Given the dynamics, how can attorneys incorporate climate change concerns into their practice? Is there an ethical or professional responsibility to consider and discuss with clients the climate change implications of their decisions?
Join me at lunch today starting at 11:30am at the Alameda County Witkin Law Library for a talk on these questions. More information available on-line [PDF]. The event will take place at:
Alameda County Law Library
125 12th Street
Hayward-Union City Room, 4th Floor
Oakland, CA 94607
You can purchase tickets here for $45.00, with lunch included. One hour of participatory MCLE credit is available for attorneys. Hope to see you there!
As part of Trump’s effort to restore U.S. manufacturing (and probably undercut clean energy rivals to his fossil fuel supporters), he instituted in January 30% tariffs on imported solar photovoltaic modules and cells, declining 5% per year to 15% in 2022.
At the time, the solar manufacturing industry cried doom-and-gloom about supposedly massive job layoffs and lost solar panel deployment. For example, Solar Energy Industries Association president Abigail Hopper claimed the tariffs would lead to a “crisis” for the industry and potentially cost 260,000 American jobs.
But so far the evidence is underwhelming about the impacts to the industry. As Utility Dive reported:
But while the tariffs are having some negative impacts, the industry and its customers now say their concerns were exaggerated. This is largely because solar installed costs have fallen so far and so fast, especially for utility-scale solar, that the relatively small increase in the module price due to the tariffs is having less of an impact than anticipated.
The examples of specific companies are particularly illuminating:
Recurrent Energy, a leading utility-scale solar developer which opposed the tariffs, has reported no project changes. First Solar, an equally important utility-scale scale developer which endorsed the tariffs, has also announced no major changes.
National residential installer Sunnova and California residential installer Spice Solar both told Utility Dive the falling installed cost has offset the tariffs.
Meanwhile, solar installers are working on legislation to repeal the tariffs, introduced recently by Rep. Jacky Rosen (D-NV).
Tariffs on solar certainly aren’t helpful to the industry. But the reaction so far in the first and most severe year of the tariffs is certainly encouraging. Based on what we’ve seen, it sounds like even Trump’s hostility to clean energy isn’t enough to slow the pace of deployment.
California can’t meet its long-term climate goals without reducing its overall driving miles, per a state analysis of greenhouse gas emissions through 2050. This point was echoed in a recent New York Times article on SB 827, the measure to lift local restrictions on transit-adjacent housing. In the Times piece, bill author State Senator Scott Wiener said:
We can have all the electric vehicles and solar panels in the world, but we won’t meet our climate goals without making it easier for people to live near where they work, and live near transit and drive less.
Wiener isn’t just making that claim up. According to the California Air Resources Board’s staff report on regional greenhouse gas emission reduction targets, the state will need a reduction in vehicle miles traveled (VMT) through 2035 and 2050, even with more zero-emission vehicles sold and renewable energy deployed. They have a simple chart showing the calculations:
Basically, if by 2035 half of all new cars sales are zero emission, with half of all electricity (and thus transportation fuels) coming from renewable sources, we will still need a 7.5% reduction in baseline VMT.
The good news is all that clean technology means there would be slightly less pressure to reduce driving miles. But as the staff report pointed out:
The GHG emissions reduction contribution from VMT is a comparatively smaller in share than the GHG emissions reductions called for by advances in technology and fuels, but necessary for GHG emissions reductions in other sectors such as upstream energy production facilities and natural and working lands, and are also anticipated to lead to important co-benefits such as improved public health.
My one critique of the analysis is that it is conservative on the renewable mix by 2035. California has a statutory requirement to achieve 50% renewables by 2030, and we’re already over 35%. I would guess we’ll be at 60% renewables by 2030 and maybe 65% by 2035, not including greenhouse-gas free hydropower. In addition, bullish estimates of zero-emission vehicles could have the state at 75% battery electric vehicle sales by 2035.
Still, the point remains that VMT reductions are crucial. And worse, these VMT efforts could be badly undermined by autonomous vehicles, which could encourage more driving as people take advantage of having robot chauffeurs for every little errand and trip.
All of this analysis points to the need for much more housing production near transit and jobs — an outcome that SB 827 would directly promote. Because clean technology alone won’t be sufficient when it comes to reducing greenhouse gas emissions.
The new federal spending bill that just became law represents a big win for transit, clean technology and energy efficiency. Despite efforts by the administration to gut funding in all of these areas, a bipartisan majority in congress resisted.
Curbed covered the increased spending for transit:
The bill, which covers spending through the end of September, includes significant increases in transit funding. The Community Development Block Grant program, which many local governments have used to fund streetscaping, cycling, and pedestrian-friendly projects, would receive a significant boost, rising to $3.3 billion from the $3 billion allocated in 2017. Initially, President Trump’s budget called for eliminating the program.
In addition, the bill includes more money for Capital Investment Grants, which help pay for transit projects, increasing spending from $2.4 to $2.6 billion, and would allocate $1.5 billion for the TIGER Grant program, tripling the $500 million spent on the program in 2017. This Obama-era program has been a key tool used by state and local governments to fund new rail and transit expansions.
Notably, even Amtrak funding increased under the package.
Meanwhile, some of the most important research and clean energy programs at the Department of Energy were bolstered, as E&E reported [paywalled]:
Instead of eliminating the Advanced Research Projects Agency-Energy, DOE’s innovation arm, the package increases funding to a record level of $353 million. The Weatherization Assistance Program, which Trump also wanted to kill, would get a more than $20 million boost to $248 million. The deal keeps state energy grants and the Title 17 Innovative Technology Loan Guarantee Program intact.
It also would increase funding for the Office of Energy Efficiency and Renewable Energy, which Trump wanted to slash by more than half.
This is all good news, and it points to the bipartisan support for these key components of our climate mitigation strategies. There’s still a larger issue about the availability of long-term funding for these programs, given the massive deficits the federal government is running, particularly with the budget-busting tax cut passed last December. But for now, these programs are safe and even stronger, in a rebuke to the administration and transit and clean tech opponents.
Brazil has distinct energy and greenhouse gas reduction challenges compared to other countries around the world. But its energy leadership has one thing in common with many other countries: a desire to boost energy storage. I’m at a conference in Sao Paulo, Brazil focused on this technology, hosted by the Instituto de Energia & Ambiente (IEE) at the University of Sao Paulo (USP).
Why are Brazil’s energy and climate challenges distinct? Unlike other countries, its energy and transportation sectors are already relatively clean, at least from a carbon perspective. Two-thirds of their electricity comes from hydropower, and about 60% of their transportation fuel comes from sugar-based ethanol.
But the country’s energy leadership knows that hydropower is dwindling, as more frequent droughts and farming reduce the water supply. And they must reduce transportation emissions to meet their nationally determined climate commitments under the 2015 U.N. Paris accord. They hope to meet burgeoning demand for power through more wind and solar deployment. But this deployment will require more energy storage, too, to integrate these variable renewable sources without needing more fossil fuel-powered generation.
Today, on the second day of this two-day conference, I’ll be speaking at 12:30pm PT (4:30pm local time) about the California energy storage experience and how the state’s laws have helped create a market for the technology. You can livestream the pane discussion here. I’ll blog more about the conference and Sao Paul upon my return.
