For the Record

On Oct. 15, The Arizona Republic published an opinion piece by Kris Mayes, former Arizona Corporation Commissioner and current chairman of Solar Strong America, an organization funded by rooftop leasing company SolarCity (NASDAQ: SCTY). Mayes argues that private rooftop solar provides benefits to all electricity customers, and these eight benefits “should be considered in any comprehensive analysis of the value of rooftop solar in Arizona.”
 
Below are the suggested benefits in italics below, along with our response.


1.       Less need to pay for expensive infrastructure. Rooftop solar reduces the need for the utility to build and maintain more infrastructure to meet peak demand. Rooftop solar power generated by consumers reduces the demand on the grid from them and their neighbors. This means we don’t have to build and pay for as many power plants, power lines and other infrastructure that transmits electricity from power plants to population centers.

The opposite is true because APS still must be ready to meet all customers’ highest demand, including those with private rooftop solar, in late afternoon or early evening with little or no help from rooftop solar panels. Customers with rooftop solar still rely on the grid 24/7. During the day, they depend on the grid for reliable power when they use more than their solar panels produce, run large appliances, deliver excess power to the grid and when the sun isn’t shining. Solar also must be backed with quick-start, fast-ramping natural gas-fired plants, like the new units being installed for the Ocotillo Modernization Project, to respond to solar’s intermittency and maintain reliability.

2.       Fewer dollars spent purchasing fuel. If electricity is not being generated from your roof, it’s likely being generated from fossil-fuel power plants. Rooftop solar replaces electricity that would have been generated by utilities and delivered over the grid, reducing the costs the utility incurs.

When solar is producing, it does create some savings on fuel, but the overall picture is more complicated. According to studies, fuel savings make up just about all of the actual cost savings that solar provides. In our current system and in all proposed plans, we compensate solar customers for the fuel savings because they are actual and measurable.
 
But as the amount of solar energy increases on the grid, its average value declines because customer demand is low when solar production is at its peak during midday. That depresses market prices for energy, sometimes to the point that utilities in California pay other utilities to take their excess solar energy. Earlier this year, APS received $69,000 in a single day to import excess solar energy created by California’s abundance of private rooftop solar systems – allowing us to pass along savings to our customers.
 
To keep the grid running efficiently while taking the surplus solar, we shut off cheaper, more efficient utility-scale solar and wind plants here in Arizona. In essence, we get paid to take solar from California, but we still must pay the retail rate for rooftop solar generated here at the same time because of net metering. This has a negative effect on all Arizona customers and is an ever-growing problem as the number of private rooftop systems increases.

3.       Less electricity lost in transmission. As much as 10 percent of centralized utility power is lost before ever arriving at anyone’s house. The more solar installed in Arizona, the less ratepayers will pay for wasted electricity.

APS uses the transmission system primarily to import low-cost energy into the Valley, which in turn keeps our customers’ electric bills low. It is a sophisticated network that allows our customers to benefit from economical resources from across the western United States, including excess solar energy from California. Rooftop solar does not reduce dependence on the transmission system during peak demand, which is moving later in the day. Instead, additional private rooftop systems require the transmission system to bring in more electricity to keep air conditioners running as solar production drops in the late afternoon.

4.       Less of your money gambled away: Utilities have to purchase fossil fuels, which have volatile prices. They spend a lot of money on fuel-hedging — Arizona Public Service (APS), for example, spends on average $50 million a year hedging natural gas.

Hedging is a well-established practice to mitigate risk and protect customers from the volatility associated with commodities such as natural gas. We pass the price of fuel directly through to customers, and so without this careful policy that looks ahead three years, customers could see higher bills if/when natural gas prices spike. Today, natural gas prices remain historically low, about 2-3 cents per kWh, typically six times cheaper than what we must pay (about 14 cents per kWh) for excess rooftop solar energy because of net metering.

5.       More water conservation. Fossil-fuel power plants use 161 billion gallons of water a day. Solar requires practically none. Water-efficient fuel is a smart bet for the years ahead.

In short, we are generating more reliable electricity for more people while using water much more efficiently today. Our company’s overall water use peaked in 1980 and has decreased to levels similar to the 1950s, when Arizona had about 1 million residents (compared to 6.5 million today). Arizona’s utilities account for about 3% of the state’s water use today, following well behind agricultural uses (73%) and municipal uses (21%).

6.       Less pollution, better health. Hospitalizations from asthma have cost Arizonans $650 million. That’s a cost shift from the interests that profit from that pollution borne by Arizona families.

If a goal of solar deployment is to reduce air pollution, then policies that create the most solar production at the least cost for customers should be pursued. An influential Massachusetts Institute of Technology study about the future of U.S. solar says if all forms of solar production are subsidized equally, then utility-scale solar plants can reduce emissions more effectively at less cost than rooftop solar. The same holds true for water conservation.

7.       More local jobs. Arizona lost 4,400 construction jobs in August. Solar jobs can put these Arizonans back to work installing solar on homes, businesses, schools and churches.

In recent years, the rooftop solar leasing companies have been claiming that any decrease in subsidies will kill the industry, including jobs. Yet even as subsidies have decreased, the numbers of rooftop installations have gone up. In 2013, solar officials told the Corporation Commission that even a $5 monthly grid access charge would cripple them, yet we’ve seen record numbers of installations since that charge took effect. A recent study showed the solar industry could respond to a reduction in subsidies and still succeed. You can have both necessary reform that protects customers and a healthy solar market. (Note: Arizona gained 2,700 construction jobs in September and is up 10,400 jobs over September 2015.)

8.       More benefits with the coming availability of battery storage. The next big consumer-energy products are battery storage systems, which will amplify the power and reach of solar energy. The ability to store solar power for use at night or in the event of a blackout makes the investment in solar only stronger.

This is confounding. Are we supposed to pay more for private rooftop solar energy now because batteries may be widely available at some point in the future?

On top of that, energy storage will continue to emerge as a choice for consumers, but pairing storage with rooftop solar "is at odds" with current net metering policy, experts say. Even a SolarCity spokesman said battery storage “doesn’t really make financial sense” because of net metering.

With net metering, a customer with rooftop solar uses the grid as a virtual battery for free. There’s no incentive to pay for storage when the grid provides the same services at no cost. Plus any stored energy cannot be sent back to the utility for credit.