Solar Reality

An Arizona Public Service (APS) General Manager spoke the truth about net metering when she said, “[with] net metering, and other rate factors, fewer customers must share these fixed costs, which cause their rates to rise. This spirals until the utility is left with a small class of customers bearing all the costs of service at prohibitively high rates.”

The fixed costs she refers to are ignored with net metering, which forces the utility to buy electricity from individual solar installations at the same rate individuals pay the utility for electricity.

In other words, if the utility can generate electricity for 3 cents per kWh, it must buy back electricity at 11 cents per kWh.

When it sells electricity at 11 cents per kWh, the price includes the cost of overhead, e.g., depreciation of existing investments, salaries, pensions, health care, maintenance, and taxes, and approximately 3/4 cent for profit. Half the 3/4 cent from profit is used to pay for new investments, while the remainder is used to pay dividends to stock holders.

None of these “overhead” costs are covered when the utility must pay the owner of a solar installation 11 cents per kWh, or even worse, perhaps 50 cent per kWh with a feed-in tariff.

Compounding this travesty is the fact that solar is uneconomic without subsidies that come from taxpayers.

In other words, the customers of Arizona Public Service (APS), as elsewhere whenever the law requires net metering, feed-in tariffs or Renewable Portfolio Standards (RPS), are getting hit by higher rates for their electricity because of net metering, plus higher taxes to pay for the subsidies for solar.

The same can be said for wind energy that is also an inefficient, unreliable way to generate electricity.

In an effort to offset the effects of net metering, APS has been creative. They have decided, if I understand their strategy, to install roof top solar themselves, provide electricity to their customer and use the excess for themselves. This eliminates paying net metering rates for the electricity, while still collecting whatever subsidies are available for solar installations.

To implement this strategy, APS used $3.3 million of tax payer money, provided in a grant by the Department of Energy.

APS has also had to go before regulators to get approval of a Lost Fixed Case Cost Recovery mechanism, that doesn’t replace all of the fixed costs from net metering, but does recover some. This supposedly allows APS to continue to promote solar installations with net metering so as to meet the state’s RPS requirements, and recover a little of the overhead costs they would otherwise lose.

What a tangled web we weave, with incoherent energy policies that require net metering, feed-in tariffs and RPS.

We would be better off if we accept the fact that solar and wind are uneconomic and unreliable, and did away with net metering, feed-in tariffs and RPS for so-called clean energy.

Note: More about APS and their approaches can be seen in the guest column “Solar Meets the Smart Grid” in the October 12, issue of energybiz magazine.

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