California homeowners with solar panels have had an unusual arrangement: They’ve been able to use their utility as a kind of power storage bank through-out the year — but they’ve been forced to give the utility any extra power beyond what they use at home, free of charge.
This will change in early 2011…
Currently, when a California home solar installation produces more power than the home uses that month, this excess power can be “banked” for use in a subsequent month (applied against the bill for power bought from the utility). But every 12 months these power storage accounts must be reconciled — at which time the homeowner then either pays for a shortfall, or surrenders any remaining excess for free to the utility.
But in 2011, the state’s investor-owned utilities (Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric) will have to start paying homeowners for this extra generation capacity at a rate to be determined by the California Public Utilities Commission as early as January 2011.
The extra power production is recorded via net metering, one of the capabilities of smart meters. The “net surplus compensation” is required as part of AB 920 (the California Solar Surplus Bill), which was signed into law by Gov. Arnold Schwarzenegger and which took effect at the start of 2010.
Less than 10% of the state’s solar photovoltaic system owners are likely to be affected by this law. And in most cases, their compensation will be small.
However, the response of homeowners may be vocal. This is because most will follow their intuition, believing that they are entitled to be paid for excess generation at a rate equal to the retail price that they pay for the utility to provide electricity to them — not the wholesale price that utilities pay to conventional suppliers.
The wholesale rate for power runs about 5 cents per kWh, while the retail rate is more like 25 cents. This difference results from all of the other things included in electricity rates — including transmission, distribution, customer service, energy efficiency, and other programs.
Under the draft decision before the CPUC, the compensation for net surplus generation would be calculated by a formula that reflects short-term wholesale electricity prices. Because these prices vary hourly, the plan calls for averaging out 12 months of fluctuations. In 2009, the average price for was 5 cents per kWh for energy purchased between 7am and 5pm (typical hours for solar energy production).
The draft decision also calls for adding a payment to the wholesale electricity price that reflects the cleaner-energy attributes of solar or other renewable generation. This amount is to be based on the average market price of renewable energy credits. These are not yet traded on a public market in California, but could be about 1-3 cents per kWh.
The CPUC’s hands are somewhat tied as it addresses this pricing issue. California law requires that net generators receive “just and reasonable” compensation; but also that this cannot affect other ratepayers. But here, other ratepayers are benefitting only through avoided purchases from the wholesale market — hence the use of wholesale prices to set these rates.
A further wrinkle is the Federal Energy Regulatory Commission policy which equates excess residential generation with wholesale power. (FERC regulates the wholesale power market.) Such power can be compensated only at the avoided wholesale cost, with reasonable adjustments. Thus, the CPUC may factor in the cleaner-energy attributes of renewably generated electricity.
Of course, the higher the rate paid to homeowners who generate excess power, the more it will promote residential solar panel installations. Look for the CPUC’s final ruling in the next few weeks.
Source: eMeter Smart Grid Watch
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