Utility barriers to rooftop solar in Georgia

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By Cesar Prieto and Seth Gunning, Creative Solar USA

The State of Georgia has received much recognition over the last few years for its rapid expansion of solar capacity. In July, Georgia’s Public Service Commission approved a plan for the state’s largest investor-owned utility, Georgia Power, that will continue this trend and add another 2,260 MW of renewables, mostly from solar, by 2024. The decision will increase Georgia Power’s renewable portfolio by 72%. Many of the state’s rural electric cooperatives like Walton EMC and Cobb EMC are equally enthusiastic about solar, having invested in thousands of megawatts of new solar capacity to drive down the cost of electricity for their customers and to service the sustainability goals of large corporate off-takers.

Despite the praise, however, most Georgians are hard-pressed to find solar panels on the roofs of homes in their neighborhoods or on their places of business. That’s because over 97% of Georgia’s solar capacity is in utility-scale projects, according to the Q3 Solar Market Insight report produced by SEIA and Wood Mackenzie. Comparatively, the state-average across the country for utility-scale projects is 59.7%. For Georgia, that means 3% of its solar energy resources are installed “behind-the-meter,” where solar is consumed on-site by a home or business.

Overall, Georgia ranks 11th in installed solar capacity, but only 64 out of every 100,000 homes in Atlanta have solar on their roofs. Colorado, by contrast, is ranked 12th in installed solar capacity but 1,776 of every 100,000 homes in its capital of Denver hosts a rooftop solar energy system, according to new analysis by Cape Analytics. This disproportionate distribution of Georgia’s growing solar capacity means that Georgia’s home and business-owners are missing out on the financial benefits that come with rooftop solar: dramatically lower utility costs, big tax benefits and the stabilization of operating costs for decades to come.

To explain this unusually low adoption of rooftop solar energy, we turn to the punitive distributed-generation and metering policies of many Georgia utilities that throttle the financial benefits of customer-owned clean energy. Many of Georgia’s nearly 100 electric companies still view customer-cited solar energy systems as an unexpected threat to their established business model. To protect themselves from this perceived threat, they have built a complex jumble of regulations and rate structures that reduce the value of rooftop solar. Here are seven of the most commonly used roadblocks:

 

1. Solar stand-by capacity fees

Arguably the most punitive method to prevent rooftop solar, stand-by capacity fees are calculated on the nominal power rating of a solar array and are charged every month irrespective of the amount of energy produced. The stand-by fees significantly dilute the potential monthly savings of a solar energy system even if that system offsets a significant portion of the consumers electricity demand.

Municipally-owned electric utilities in Georgia routinely charge $10 to $20 per kilowatt of installed solar capacity per month. For example, a homeowner living in Fort Valley (the “Peach City of Georgia”) will have to pay around $48 in monthly fees to the municipal utility for a 5-kW rooftop system that would save $65/month in reduced consumption of utility electricity. That same size system will cost a small business in Fort Valley’s service territory $82 each month, completely eliminating any savings the system produces. No wonder peaches are the only ones taking advantage of the sunshine in Fort Valley.

 

2. Monthly fixed fees or administrative charges

Modest monthly fixed-fees for service are a reasonable way of recovering the cost of the infrastructure required to bring electricity to our homes and businesses, but disproportionately high fixed fees make solar less attractive. Higher fixed fees shift the proportional cost paid to the utility away from the electricity consumed, giving the consumer less ability to lower their overall utility costs with solar, energy efficiency or even energy conservation. This is a way for utilities to lock the consumer into high-prices no matter how much electricity is used. The City of Sylvania, for instance, currently charges a $250/month fixed-fee for homes or business installing solar energy systems larger than 5-kW. Customers adopting solar in Sylvania will need a 15-kW system to produce enough electricity to save a single dollar on their utility bills after this excruciatingly high fee.

 

3. Instantaneous netting of energy

Utility bi-directional meters deployed on sites with solar energy systems monitor the flow of electrons both into a building (consumption) and out of a building when solar production exceeds the building’s demand (production). Typical utility billing practice is to net these two flows of energy at the end of a billing cycle, and often at the end of a year. This monthly or annual “net-metering” allows for fluctuations in both solar production and power demand without financially penalizing a customer for producing too little or too much power in any given moment.

Many utilities in Georgia (including Georgia Power) net energy consumption and production instantaneously. This means that any solar power that is not consumed in the building at the moment it is generated on the roof will be sent back to the grid and valued at a set export value (often a lower wholesale price) rather than as an offset to consumption that may occur just a few minutes later. Under this scenario a solar energy system producing 4-kW of power in a home using 3-kW would send 1-kW of power back to the grid at a wholesale export rate of about $.04/kWh. Five minutes later, the solar is still producing 4-kW, the air conditioner kicks on and demand in the house increases from 3-kW to 5-kW, and the utility will sell back to the homeowner 1-kW at a retail rate of around $0.13/kWh.

To ensure that the electricity produced by a solar energy system is consumed on-site and therefore retains its full financial value to the consumer, utility customers with instantaneous netting of energy are encouraged to either significantly undersize rooftop solar energy systems or couple their solar with ample energy storage systems which can greatly increase the cost of a system.

Expert testimony from Tyler Fitch and Rick Gilliam recently submitted by the Southern Environmental Law Center to the Georgia Public Service Commission as a part of Georgia Power rate-case proceedings show that hourly-netting of energy reduces the savings of a solar energy system by roughly 30% compared to a monthly netting of energy. The SELC testimony on netting periods concludes by stating: “This reduced value proposition for customers discourages the deployment of rooftop solar and customers’ ability to choose this vehicle to reduce bills.”

4. Buy-back rates based on “avoided cost”

As opposed to places like California or South Carolina with net-metering policies that put solar on a level playing field, the vast majority of electric providers in Georgia will buy excess solar power at a wholesale price that is often only 25% of the average retail residential price. Coupled with instantaneous netting of energy, these low buy-back rates constrain the size of rooftop solar systems as the systems value proposition is reduced and payback period extended with every kilowatt-hour of energy sent back to the grid.

In markets with high solar penetration, it is clearly not a sustainable business practice for utilities to purchase excess solar not being used on-site at the same retail rate for which they will sell it. Determining a fair balance between the purchasing rate of surplus solar and cost of electricity has been and will continue to be the subject of much debate within Public Utility Commission hearings for years to come.

Most Georgia utilities continue to outright ignore the big benefits to the grid generated by having mini-power plants dispersed across their service territory when calculating their solar avoided costs. For instance, reducing consumption and having solar resources that are generating power inside the neighborhoods where the electricity is consumed reduces the utility’s cost of building and maintaining big, long, power transmission infrastructure. In California, distributed generation (DG) and energy efficiency have accounted for savings of approximately $2.6 billion on utility transmission costs. The value of exported energy from DG is devalued when utilities in Georgia don’t account for these transmission savings in calculating their avoided cost.

 

5. Power demand charges

This type of mechanism is mostly used with commercial and industrial customers, not with residential ones. 

Imagine energy as the equivalent to the fuel that goes in your car’s tank. Power is the rate of flow of the fuel into your tank, and energy is the total amount of fuel you fill it with. Now imagine a gas station that would charge you not only for the gallons pumped into your tank but also for the speed at which the tank is filled. In this scenario, filling a 15-gallon tank in a minute would cost you more than filling that same tank in three minutes. A gas station could rightly argue that they need bigger hoses and more modern pumping stations that will allow you to draw the same amount of fuel (energy) in a shorter period.

Similarly, most electric utilities’ demand charges are calculated based on the highest level of energy flow in a 15- or 30-minute interval experienced during the last 12 months. At the end of each month, demand charges are either added to the cost of the energy supplied to calculate the final bill or used to calculate energy tiers (more about this on the next section). The issue with rooftop solar is that even if it were to produce 100% of the energy consumed in the building, it will not reliably reduce the demand charges from the utility. All you need is a 15- or 30-minute interval of high power demand during the night or on a rainy day when the solar is not producing at peak capacity for that demand to be used as a factor in calculating the next 12 months of charges. Rate structures in which demand charges represent a sizeable portion of the total bill remove a utility customers ability to reduce their electricity costs by adopting solar energy systems.

Solar energy systems coupled with energy storage systems have the ability to offset both the energy and demand portions of a company’s utility bill by ensuring that capacity is available 24/7 to reduce peak demand. In order to reliably ensure that solar-plus-storage power are available in periods of peak consumption, it may require significantly larger solar energy systems or large battery banks that can push the upfront costs of a project outside the reach of many businesses.

 

6. Energy tiers with diminishing pricing

This type of mechanism is also mostly used with commercial and industrial customers, not with residential ones.

When you visit the websites of electricity providers you will often find recommendations and policies intended to promote conservation. Many of these are effective and well-intended, but when it comes to some rate structures, their actions are not aligned with their words. If energy conservation was an honest driver, rates would reflect relatively low prices for base-load consumption and increasingly higher prices for what would be considered as excess consumption (relative to the building’s size or commercial activity). With some rate plans the opposite takes place — the higher your energy consumption, the lower the rate paid for that energy.

For example, a building using 10,000 kWh a month may see an average energy cost of $0.10/kWh, which is a result of $0.13/kWh for the first 5,000 kWh and $0.07/kWh for the second 5,000 kWh. In cases like these, a competent solar installer would do a careful design to maximize the value of the system for the owner. If one were to install an array that offsets 50% of the building’s total consumption, the value of solar energy produced would only be $0.07/kWh. It would be inaccurate to say that the value of the energy produced is equal to the average monthly rate ($0.10/kWh) because energy is effectively being accounted for on a LIFO (last-in, first-out) basis. Building a bigger system would allow us to tap into the more expensive energy if there is no export to the grid. However, the bigger the offset generated by the solar system, the higher the likelihood that some energy will be exported at a devalued price, which increases the overall time it takes for the system to pay for itself.

 

7. Cogeneration and Distributed Generation Act of 2001

Last but not least, Georgia’s Cogeneration and Distributed Generation Act of 2001 regulates electrical service and contains specific provisions that have limited distributed generation in the state. Specifically, the law gives utilities the discretion to limit residential systems to 10-kW and commercials systems to 100 kW per service. It also allows utilities to limit the aggregate capacity of distributed generation systems to 0.2% of their peak demand from the previous year. No, this is not a typo. Zero-point-two percent! This means that the legal framework helps confine solar rooftop penetration to the equivalent of a rounding error.

We can’t think of a sound technical reason to merit such an artificially low ceiling on rooftop solar. As a matter of fact, some Georgia utilities already generate over 30% of their demand in certain parts of the year from solar resources on their system. The difference is that when the utility owns the solar generation, none of these restrictions apply. Fortunately, very few utilities to-date have cited this law as the reason to deny interconnection of new solar energy systems.

Solar energy has become one of the cheapest ways to generate electricity in Georgia. Everyday Georgians, just like our state’s utilities, deserve access to the big financial and environmental benefits of solar energy without punitive policy that unfairly restricts free-markets. To be fair, some Georgia EMCs are embracing the changing solar landscape as a business opportunity. In general, though, our state’s utilities, regulators and legislators who are hired and elected to act in the best interest of consumers and the public should embrace distributed generation by changing the policies that unfairly limit the value of solar.

Learn more about your utilities’ solar energy policies by checking out the database of utility policies compiled by the Southern Environmental Law Center.

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.