Energy
Sunday, September 11th, 2022 9:19 am EDT
We have some of the most informed readers in the world, but that doesn’t mean they agree on everything. In fact, sometimes they have feverish yet well informed debates that genuinely use logic (rather than ad hominem attacks and other logical fallacies) to discuss different technology or policy approaches. I was just reading through the comments on my article about Sunrun & Tesla rooftop solar and batteries helping to save the California grid during California’s recent extreme heatwave. There was one comment I really liked that framed the rooftop solar net metering debate in a way that I don’t think I’d ever seen before. I decided I’d feature the comment as a standalone article. Then I saw a good comment from the other side of the debate that seemed to deserve some daylight as well. Eventually, I decided I’d highlight 4 comments here in this article of competing commentary. (Note that these comments are not all directly responding to each other.)
Why Incentivizing Rooftop Solar Power Is Worth It To Society
From “Jon’s Thoughts“
Looking through the comments I see a lot of skepticism for rooftop solar, so I thought I would mention the benefits that I believe rooftop solar provides. Most studies that I have read put rooftop solar at between 2.5 to 3 times more cost per installed kW than utility-scale solar. An odd place to start from a pro-rooftop solar fan, but hang in there.
The full expense of utility-scale solar costs plus profits in the form of dividends is paid by society as a whole (rate payers). In the case of rooftop solar, roughly 1/3 of the cost is paid for by society, in the form of incentives, and the rest is paid for by private individuals. Combining these results, we find that society pays out roughly the same amount for a kW whether it is installed by a utility or by a private individual.
Now let’s follow the money. A major portion of the money paid to build a utility-scale solar farm goes to a Chinese firm that manufactures solar panels. Some goes to profits paid to dividends and a much smaller portion goes to pay for labor. On the other hand, a major portion of those extra monies for rooftop solar go to pay those evil “soft costs.” Depending on your definition, soft costs include wages for local labor, permits paid to local government entities, profits to local installing companies, and so on.
Those local dollars continue to circulate through the local economy as sales taxes paid and local business supported. Solar incentives are not only a clean energy program, they are also a jobs program. Generally, very few of those jobs are filled by the 1 percenters in society.
A kW of solar installed on a rooftop takes about 3 months or less from purchase agreement to energy generation. Utility-scale solar takes 2.5 to three years before those panels can start to offset carbon emissions. This gives rooftop solar a big headstart in decarbonizing grid emissions.
Of course there are all the advantages that you generally hear about — grid resiliency, infrastructure costs delayed or avoided, avoiding disturbing virgin land, etc.
I am not against utility-scale solar, I think it is absolutely needed. But I also believe that rooftop solar is a huge benefit to society and should be encouraged and that doubters are not considering the full impact that it provides.
Editor’s note: I’ll just say again that I think that’s one of the best explanations of the benefits of subsidizing rooftop solar power that I’ve ever seen. I fully subscribe to this perspective. But I try to leave room for various opinions here on CleanTechnica, especially when well argued, and two of the three remaining comments below present a competing perspective. —Zach
Costs vs. Benefits of Rooftop Solar Net Metering in California
From “rawlsio“
It would be one thing if rooftop solar customers were being paid the actual value of what they were providing (the marginal value), but they are being paid much more than the actual value. When you take into account the time-based marginal value of the electricity, the reduced distribution and transmissions costs, etc. (the “avoided cost” analysis), utility compensation to rooftop solar customers is still many times more than its value. The best estimates by academic energy economists is that the current marginal cost of generating, transmitting and distributing electricity on the California grid is about 5.5 cents/kWh, and is even lower for daytime solar production. Yet the average rate of compensation for rooftop solar production is 32 cents/kWh. So utilities are required to pay more than 5× the value of that solar. Or put another way, utilities could procure 5 times the amount of solar generation at market prices with the money they are forced to pay rooftop solar customers. The idea that rooftop solar installs “save the utility money” is just one of the many pernicious myths that rooftop solar owners like to tell themselves as they demand extortionate compensation from other utility customers. It’s bad economics that leads to bad environmental outcomes.
Editor’s note: Hmm, that argument does sound pretty solid — assuming the one analysis referenced (from the Berkeley Energy Institute) is comprehensive and adequate. At this point, frankly, we are getting into a scientific analysis/academic debate that requires much more rigorous research and examination in order to come to a conclusion. —Zach
Incentivizing Free Market Rooftop Solar vs. Non–Free Market Rooftop Solar
This is more of a direct point–counterpoint section of the debate since the second comment is directly responding to the first one.
From “AMortalDefiant“
Ultimately, the method that incentivizes people to get solar and batteries and share that with the grid is helping, whether or not you find it to be perfect.
Your argument also conveniently ignores the ever larger role that this has in feeding into Wright’s Law. You can’t argue it is jacking up prices without *also* acknowledgment of the role it has in spurring on the mass adoption responsible for *lowering* prices over the long run. There’s two sides to the equation.
Expecting people to invest $25,000+ on solar and batteries, and supply that to the grid *without* turning a profit is pretty silly. You’re arguing against the free market. Initially, yes, demand will be way higher than supply, and prices will be high, but that’s a temporary issue.
From “rawlsio“
Whatever this is, it’s certainly NOT a “free market.” A free market would be one in which rooftop solar owners would be paid what their energy is actually worth, and would also pay for their fair share of grid fixed costs with a sizable grid connection fee. That would allow market forces to work and would force installers to reduce prices enough to make rooftop solar a decent investment without making the utilities over-compensate solar rooftop owners.
If you have to bribe people with absurdly inflated compensation in order to undertake an investment that costs one-third as much in a parallel market, it’s a sign that the first market has been rigged by the incumbent interests to the detriment of the broader society.
In other words, that $25,000 install in California should only cost $10,000 (or less with tax credits), meaning you should be able to get a decent return with compensation that is much closer to marginal cost. Who benefits from the inflated costs and compensation we have now? Only solar installers and solar rooftop customers.
If this policy of inflated compensation is supporting Wright’s Law, why are rooftop solar install prices in California still so outrageously high compared to places like Australia, with similar climate and housing stock? Why has grid-scale solar cost per kWh fallen much faster than rooftop solar install cost per kWh over the past 7 years? Why are rooftop solar “soft costs” 10× grid-scale solar soft costs?
The answer is that the grid-scale market is one in which utilities pay market rates for energy and providers need to reduce costs in order to compete. So, if anything, diverting resources, investment, labor, and hardware away from grid scale and toward rooftop is inhibiting Wright’s Law, not supporting it.
I’m already pulling those comments out of a long comment thread on another article, so you can just join in the discussion there. Or we can take it over here with this new starting point.
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