The Minnesota Public Utilities Commission has approved a time of use (TOU) pilot for approximately 10,000 residential customers of Xcel energy, starting in 2020.
The program will define a peak demand period from 3 PM until 8 PM. During weekdays and during this period, the price of electricity will be 92% higher than the standard rate. Simultaneously the ‘off peak’ rate – 12 AM till 6 AM, will be 54% lower than the standard rate.
This means the peak afternoon/evening weekday rate will be approximately 417% greater than the overnight lows.
All customers within the defined regions will be automatically opted into into the program. Some of the debate from solar power proponents was that the time of use period should be shifted an hour earlier in the day to allow for rooftop generation to assist in limiting those charges. However, in the end, the version less favorable to solar was implemented, as has occurred in a similar TOU battle in California.
Energy storage could make this a moot point, and this aligns with customer interests. 74% of residential solar power customers have suggested an interest in energy storage. Additionally, Tesla’s Powerwall has joined battery products offered by Vivint and Sunnova in offering specific TOU software options to help customers subject to these rates to optimize their energy usage.
This move by Xcel follows not only on the implementation of mandatory TOU rates for residential customers who own solar in California under Net Metering 2.0, but also actions in other states where utilities and regulators are seeking to align energy usage patterns with price signals.
In the process of evolving electric rates, many utilities are also taking aim at the rooftop solar market. Specifically, solar power customers who are able to get their electricity bills to a net zero cost after accounting for net metering benefits have drawn the ire of the electricity utilities. The logic put forth is that solar power customers shift costs from non-solar customers.
This logic has been shown to be wrong – absolutely so – in our current deployment volumes. Research suggests that under 20% of electricity production coming from solar requires little to no power grid upgrades, while lowering grid upgrade costs. For instance, we saw $2.6 billion in transmission savings recently in California, as a result of distributed generation and efficiency.
And this is, of course, before we consider the huge amount of savings that are generated in health effects, stability in electricity pricing and broader economic benefits by those investing in solar. Research by the Brooking Institute shows that solar power brings economic benefits much greater than the net metering incentives it is given.