News + Media

Understanding Public Utility Regulatory Policies Act of 1978 (PURPA)

Defining PURPA

Passed in 1978 as one part of the National Energy Act, the Public Utility Regulatory Policies act (PURPA), provided a major benefit to the production and integration of renewable energy.

The National Energy Act was conceived in reaction to the energy crisis of 1973. It contained a plethora of legislation that would aim to drastically cut the demand for imported oil. One such act, now today as PURPA, would give manufacturers of renewable energy a toe-hold in the door to large scale energy manufacturing and deployment, which is always appreciated. PURPA was meant to promote better energy conservation, domestic power production, and renewable energy construction and integration.

Prior to PURPA, electric utilities were structured in what is known as vertical monopolies, which basically means that they control all aspects of energy supply: the generation, distribution and control were all controlled by one company, which was originally thought to be more effective method of energy maintenance. Well, that is until PURPA was introduced and broke that model and would make it much easier for other energy companies to integrate into the grid.

PURPA also eliminated “rate structure” promotions offered by utilities. Rate structure decreased the cost of electricity by kWh with increasing usage, with smaller increments included, as well.

PURPA’s Role in Renewable Energy

PURPA enabled non-utility generators (NUG’s) to generate and attach energy to the energy grid by breaking the monopolies that held control of it. Not only that, but PURPA also forced utility companies to purchase energy from other energy producers, like producers of renewable energy, if that cost was less than their avoided cost, or the cost of producing the extra energy on their own and delivering it to the consumer. As a result, more and more cogeneration plants were built and implemented into the system. These plants were required by law to harness thermal energy in the form of steam, which would otherwise be wasted if energy alone was produced.

Controversy with PURPA

PURPA was not as big of an issue back in the 1970’s. However, more and more utility providers are having issues with PURPA. Specifically, having to accept renewable energy providers, specifically providers of solar energy, due to the fact that solar energy has become gradually more affordable and viable in energy production over the last few years.

One such controversy has erupted in Montana where the state’s largest investor-owned utility company, known as NorthWestern Energy, filed a claim with the state’s public service commission stating that the current rates of qualified providers (QF’s), which were stalled at $66 per mega-watt hour, was out of date as of 2013. The commission granted the proposal and altered the terms of which QF’s that provided between 100 kilowatts and 3 megawatts received the current avoided cost rate. None of the projects met the criteria.

The Federal Energy Regulatory Commission (FERC) declared that the Montana State Commission had ruled in a way that was inconsistent with PURPA. However, as of this writing, they have not made any movements to rectify the commissions movement, which begs the question as to how seriously PURPA is being enforced.

In another instance, a North Carolina based utility company, Duke Energy, is currently backing a bill that would bring all renewable energy construction to a slow crawl. Introduced by Rep. Dean Arp (R-Union), House bill 909 is encouraging the once halted negotiations between Duke Energy, renewable energy advocates, and other PURPA stakeholders.

The bill would remove all North Carolina renewable energy projects from the umbrella of PURPA, and would throw those projects into a bidding process lead by Duke Energy. The bidding would have a ceiling of a predicted 400 megawatts.

“This bill would crush renewables in every sense, except perhaps in agriculture,” said Chris Carmody, the executive director of the North Carolina Clean Energy Business Alliance. You can read more on the North Carolina controversy here!

But Montana and North Carolina are not the only states seeing conflict with PURPA. Utah and Oregon utilities are starting to call for new contract lengths, rates, and other changes. Solar companies have since stated that the proposed changes would make it impossible to finance solar projects. It is not farsighted to say that further controversy could emerge in the near future.

New Legislation Affecting PURPA

PURPA is seeing a steady decline in significance as most of the contracts signed in the 1980’s are coming to an end. Furthermore, PURPA was amended in 2005 under the Energy Policy Act of 2005. The amendments to PURPA begin on Section E, subsection 1251 through 1254 of the Energy Policy act. Here is a short list of what amendments were made:

  • Each electric utility service shall make available upon request net metering services to any electric consumer the utility serves
  • Each electric utility shall develop a plan to minimize dependence on 1 fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies.
  • Each electric utility shall develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation.
Perfect Utility Rate Design

The Ins and Outs of Electricity Rate Design

Electricity rate design has the power to completely alter the energy sector, for better or worse. The world of electricity rate design can be a confusing one, so before we get into which rate design would be most beneficial for you and the energy sector (that’s for a later blog post!), let us first define and explore three of the main types of rate designs.

Fixed Charges and Consumption Charges – The current system for billing electricity for most utilities across the country, this rate design charges fixed fees in tandem with a usage bill and is most common with residential consumers. Fixed charges never change from month to month (as the name implies), as they are there as a result of your connection to the grid. Recently, utility companies across the country have been advocating for significant fixed charge increases. In theory, a fixed charge is there to compensate the utility for the fixed portion of their costs as a result of having you as a customer (for instance, the cost to bill you and read your meter).

Related: Are fixed utility charges bad for consumers?

Time of Use – This system is decidedly more complicated than the previous one, and would require some work on the part of you, the consumer. The idea is simple: the cost of using electricity would change according to the time of day (for instance, customers would be charged higher rates for using electricity during specified peak demand times).

Figure 1: An example of a suggested TOU rate for summer months. Source: www.pge.com

The execution of Time of Use (TOU) rates (such as advocacy and ensuring customer understanding) is where the system becomes more complicated. States such as California and Massachusetts have already adopted a TOU rate design, and our own Tennessee Valley Authority has also proposed making the transition to TOU rates. Additionally, TOU rates are already available in most states on a voluntary basis. At its most basic, TOU rates provide price signals to customers to encourage them to use when rates are low and conserve when rates are high.

Related: 6 Reasons Why Time of Use Rates Are the Best Option

Peak Demand Charges – In many states and especially for commercial customers, electricity use is billed in two ways by the utility: based on consumption, that is, how much electricity you actually used in a given period, and peak demand, or the highest capacity required during that billing period. A simple way to think about this is with an analogy: the odometer in your car would represent the “consumption,” and the fastest speed you traveled during that period would be the “peak demand.” Your car needs to be able to last for a long time (high mileage) but also may need to go fast from time to time (of course, if you drive a Tesla Model S, that’s all the time! But we digress…). In the case of this electricity rate design, you would be charged for both consumption and peak demand, and oftentimes these two charges appear as one combined charge.

The main idea behind peak demand charges is that they provide customers with price signals to encourage them not to make large, instantaneous demands on the systems but instead to spread their usage out over the day more smoothly. Depending on the rate structure in a given area, and your habits, demand charges can constitute up to 30% of an electricity bill.

Related: Probing Residential Demand Charges

 

What is the Utility Death Spiral?

The “utility death spiral” sounds pretty scary, doesn’t it? It could be if you’re a utility company. In 2013, the Edison Electric Institute (EEI) released a report positing that an eroding revenue stream, declining profits, rising costs, and ever-weakening credit metrics would diminish the ability of electric utilities to survive in an increasingly off-the-grid world.

“Recent technological and economic changes are expected to challenge and transform the electric utility industry,” the report said. “These changes (or ‘disruptive challenges’) arise due to a convergence of factors, including: falling costs of distributed generation and other distributed energy resources. Taken together, these factors are potential ‘game changers’ to the U.S. electric utility industry.”

The report gave no indication as to when this “utility death spiral” would begin happening, and, to date, no major U.S. utility has gone defunct. Is the utility death spiral, then, simply a myth? Not necessarily.

In an article from 2015, William Pentland of Forbes argues that “the predicted casualties of the death spiral have turned out to be the victors and the predicted victors have turned out to be the casualties.” In this case, the “victors” are the utility companies and the “casualties” are the distributed renewable energy companies. SunEdison, for instance, a supposed “victor” in the report, had lost more than two-thirds of its market value in 2015.

While that may have been the case in America in 2015, utility companies in Europe have hit a bit of a bump in the road since the report was released. The German mega-utility RWE lost more than $3.8 billion in 2013 as it closed down numerous unprofitable fossil fuel plants. Similarly, in the same year, the Swedish utility company Vattenfall experienced $2.3 billion in losses due to a “fundamental structural change” in the electricity market. Clearly, as grid maintenance costs increase and the cost of renewable energy decreases, more customers have substantially reduced their energy consumption from the utility or moved entirely off the grid. According to the Wall Street Journal, 16 percent of German companies are now completely and entirely energy self-sufficient. This massive shift in the energy sector could spell the end of many utility companies.

But what about across the pond, here in America the beautiful? What has happened since 2015, when renewable energy was cited as a “casualty?” As it turns out, a lot – especially in California and Hawaii.

California has seen the most progress in this area. Because of its successful energy-efficiency policies and its policies supporting utility-scale solar and rooftop solar, the state has helped more than half a million customers go solar since 2007. As a result, utility companies there have seen the beginnings of a utility death spiral. California regulators predict that, by 2020, 85 percent of customers in the state will be using electricity from entities other than investor-owned utilities.

In Hawaii, electricity prices are far higher than anywhere else in the U.S. Naturally, this means that many customers have been making the switch to solar. However, because so many customers were installing solar, utilities have had to place restrictions that prevent some from even turning on their systems. So many Hawaiians saw the positives of solar that they were literally breaking the system. Nice.

Does Hawaii’s need to restrict solar mean that your state will have to do the same? Not at all. The main reason behind the restrictions stems from Hawaii’s isolated grid. Because there are no power lines linking Hawaii with the rest of the U.S., the utility has nowhere to discard excess solar power. Obviously, this is not an issue with continental states. Because of its isolation, Hawaii has had to rethink the way it does electricity, and we think the rest of the U.S. should be in on that too.

While the utility death spiral is, in fact, a real thing, there are some things that can be done to make the transition to solar as smooth as possible. For instance, good rate design and policies can protect consumers and utilities and help manage the transition without large disruptions in the market. Stay tuned for a future blog post where we will talk about these solutions in more detail.

Peak Car Ownership: Is a Transportation Revolution Just Around the Corner?

Researchers at the Rocky Mountain Institute say in a detailed study that private car ownership will hit its peak by 2020. If these researchers are correct, it could spell the beginning of a new energy and technological revolution – if, and only if, companies prepare for such an event by researching automated personal mobility powered by electric powertrains. Thankfully, as the study points out, companies such as Lyft and Uber are already exploring self-driving robot taxis, as well as Apple, Google, and Tesla. In a few years, then, as the study claims, these companies will absolutely produce a new mobility system that is superior to our existing system. But what effects will this emerging mobility system have on the energy sector?

The study’s authors, Charlie Johnson and Jonathan Walker, say that “this future system has the potential to reduce costs by over $1 trillion, reduce CO2 emissions by a gigaton, and save tens of thousands of lives per year in the U.S. alone.” When people stop buying their own vehicles and begin using a city’s autonomous, electrically-powered taxi system, there will be a major decrease in gasoline demand, as the study suggests.

 

For many, though, it’s not about if the transition will happen (because there are few who doubt it), it’s all about when the transition will happen. Many are less optimistic about the Rocky Mountain Institute’s projections. Margo Oge, a former EPA transportation and air quality official, says that “In the end the overall success of autonomous mobility will be based on public trust. It’s not just an issue of technology. Trust takes time to develop.” By 2020, when the Rocky Mountain Institute projects we will hit peak car ownership, will cities be ready to convert to an entirely shared, automated, and electrified fleet of personal mobility vehicles? Probably not. But there’s still hope!

Walker, of the Rocky Mountain Institute, asserts that “there’s people who say the technology’s not going to be ready, but they’re quoting things like 5 or 10 years, when a year ago, they were quoting 30 years.” Who knows? A transportation revolution could happen sooner than we think. We’re crossing our fingers.

Energy vs Power

Understanding What Demand Response Can Do for You

So what is demand response? It is a change in USAGE of energy of an electric utility customer to better match the demand for power with the supply. It can also be thought of as a method of how electric companies compensate for the extra energy used during a “peak time”. When you hear “peak time”, think of a hot Alabama summer day when everyone is running their air conditioners at 2 PM.

What is demand?

Electric energy cannot be easily stored, so utilities have traditionally matched demand and supply by throttling the production rate of their power plants, taking generating units on or off line, or importing power from other utilities. But there are limits to what can be achieved on the supply side, as some generating units can take a long time to come up to full power, some may be very expensive to operate, and demand can be greater than the capacity of all the available power plants put together. Demand response is one of the solutions to these limits and seeks to adjust the demand for power instead of adjusting the supply.

At the consumer level, demand response is a way for certain areas to maintain adequate power during busier peak times and can save them money in the process. One example of this was in 2016, when the New York City grid “shed load” by reducing power at a number of public services, including the Metropolitan Transportation Authority; and utility ConEdison activated a voluntary program to adjust consumers’ air-conditioner thermostats at peak hours. In exchange for participating in these voluntary programs, electricity customers received a rebate varying in amount based on participation.

To help visualize what this looks like, think about the traffic on an interstate. Everyone suffers if the traffic is at a standstill; but once portions of traffic begins taking proper detour routes or delaying their trip, it allows everyone to get to their destination faster. Similarly, if some consumers participate in demand response by lessening their own energy use, or when they use it, then everyone on the grid can maintain their energy usage during peak hours at cheaper prices.

While the main goal of demand response is to maintain energy availability through all times of the year, consumers can earn financial rewards by participating. In many states, regulators create incentives for utilities to use less energy, especially during peak hours of the day. Demand response programs were originally put in place to avoid having to turn on “peaker plants,” or auxiliary power plants that may be used only 10 days a year to meet the traffic of high demand days. You can imagine how expensive these “peaker plants” are to operate by thinking about if we added lanes to our highways just to accommodate Black Friday traffic.

Instead of building new power plants to meet demand, utilities instead can rely on demand response. For example, in New York, 543 megawatts of demand reduction are available just from commercial and industrial customers participating in demand response, which is about the same capacity as a medium size power plant. Keeping these plants idle also helps keep the price of power down, which saves money for the entire customer base. Instead of having to call on very expensive power generators to meet high demand in the late afternoon, grid operators can reduce the load in the system and avoid paying peak-time pricing.

Much like consumers, demand response saves the system money, sometimes on the upper end of millions a week, but the program also creates a better and safer grid in doing so. The grid benefits from not needing to build any extra power plants to supply power during those “peaker times”, which are only about 10 days out of the year, which in turn would require extra power to operate and build. Furthermore, if consumers are using the demand response program, the grid will be less taxed for power output on a daily basis. By conserving energy, grid alterations can be delayed or significantly reduced. In an electricity grid, electricity consumption and production must balance at all times; any significant imbalance could cause grid instability or severe voltage fluctuations, and cause failures within the grid. Don’t forget that demand response can ALSO be used to INCREASE demand during periods of high supply and/or low demand, which, unchecked, could cause an imbalance.

Overall, demand response is beneficial to everyone involved. It saves consumers, businesses, and utilities, money and helps the grid run more efficiently. If given the opportunity, everyone should opt-in to this program for themselves, the grid, and the environmental benefits from using less energy. And if you don’t currently have the opportunity, ask your utility and your Public Service Commission about starting demand response programs to save you money.

Related: Probing Residential Demand Charges

Battery Storage and Ancillary Services

Ancillary services by definition are services that support the transmission of electricity from its generation site to the customer or helps maintain its usability throughout the system. Many people may not know that the standard 120 volts we are used to receiving from the wall actually varies a tiny amount from second to second. If you were to monitor the power from the wall, the voltage may swing from 118-122 volts. We do not typically think about the mechanisms that take place to keep our power useful and ready for when we flip the switch.

On a larger scale, ancillary services are generators or other service providers that are synchronized to the grid and are able to rapidly increase output in three major categories: contingency, regulation, and flexibility reserves. The contingency reserve requirement is assumed to be constant for all hours of the year and corresponds to a spinning reserve equal to about 3% of peak load and about 4.5% of the average load. Another way to think of “spinning reserves” are the backup or redundancy built into the grid. Basically, we slightly overbuild the total generation needed so the grid can be provided with ancillary services making good quality power possible.

Additionally, regulation and flexibility reserve requirements vary by hour based on the net load and impact of variability and uncertainty of wind and solar. The availability and constraints of individual generators to provide reserves are a major source of the cost of providing reserves. Not all generators are capable of providing certain regulation reserves based on operational practice or lack of necessary equipment to follow a regulation signal.

So, what does the future of ancillary services hold and how can they be more beneficial?

At a residential level, a combination of solar and storage is only worthwhile when specific conditions are met that make the value of storage greater than the cost of installing It. For example, when the renewable energy creates an excess, the extra energy can be stored for later consumption. This would allow the customer to buy less power from the grid and enable them to cut their costs.

However, some customers are now being charged for using power during peak times, which is known as a demand charge. Energy storage can be used to lower peak time energy consumption, or the highest amount of power a customer draws from the grid; therefore, reducing the amount customers spend on demand charges. In North America, the break-even point for most demand charges is $9 per kilowatt. Energy storage can lower that cost to $4 or $5 per kilowatt by as early as 2020. As storage costs decrease, more customers will begin to see economic benefits and existing storage users will see the optimum size of energy storage increase.

Lastly, energy storage will impact electricity grids as a whole because it provides more function than just power on demand. Batteries can provide the grid with ancillary services like frequency regulation and should be compensated to do so. All this is to say, if utilities provide appropriate price signals to the market, customers will respond by installing battery storage where and how they can be compensated.

Currently, grids experience a continuous imbalance between the power they produce and its consumption because of the millions of devices that are turned on and off in an unrelated way. The imbalance can cause frequencies to deviate, which can affect equipment and potentially hurt the stability of the grid. Energy storage is well suited for frequency regulation because of its rapid response time and its ability to charge and discharge efficiently. This storage could significantly reduce the amount and cost of the reserves currently needed to provide such services to the grid.

One reason for the optimistic outlook on battery storage’s role with providing ancillary services is the progress lithium ion batteries have made in recent years. In 2015, lithium-ion batteries were responsible for 95 percent of energy storage at both the residential and grid levels. The reason for the increase in popularity is due to the price dropping, safety improving, and better performance characteristics. All of these qualities are leading to lithium-ion batteries being suitable for stationary energy storage across the grid; ranging from large-scale installations and transmission infrastructure to individual and residential use, even without being appropriately compensated for ancillary services.

The most important aspect is the large-scale deployment of energy storage that could overturn the status quo for many electricity markets. In developed countries, central or bulk generation traditionally has been used to satisfy instantaneous demand, with ancillary services helping to smooth out discrepancies between generation and load; and energy storage is well suited to provide such ancillary services. Eventually, as costs fall, it could move beyond that role, providing more and more power to the grid, displacing plants; however, that time has not yet come although approaching quickly. It is important to recognize that energy storage has the potential to upend the industry structures, both physical and economic, that have defined power markets for the last century or more.

Media Fusion uses solar power to brighten bottom line

In May, Media Fusion added solar energy panels to its building to help supplement its power supply. The company “sells kilowatts back to the grid” and the company is credited a certain portion back from the utility company each month.

“I think the environmental part is a very big part, but let’s just set that aside. Let’s look at this from a business standpoint. This is a no-brainer from a business standpoint,” said Media Fusion Inc. President Richard Williams said. “My job as president of the company is to help us be efficient in operations and as a government contractor the government looks to us and we are graded on the efficiency of our business.”

Energy Alabama analyzed the Media Fusion building for energy saving possibilities and recommended solar panels for its flat roof.

To read the full article, please visit: http://www.al.com/business/index.ssf/2017/06/media_fusion_uses_solar_power.html

An In-Depth Look into the Solar Trade War

Exposition

Recently the world of solar energy has been filled with tension at the beginning of what is now being deemed the “Solar Trade Wars.” Suniva, a United States based solar cell and module manufacturing company, declared a state of bankruptcy back in April of this year. Since then, Suniva has drafted a petition under Section 201 of the 1974 Trade Act  that would call for a drastic increase to the tariffs of imported solar modules and cells, with new prices reaching a proposed 40 cents per watt and 78 cents per watt on modules over a period of four years. Suniva argues that they cannot compete with the cheap prices of those imported goods.

SolarWorld, a German based solar manufacturing company, is supporting Suniva in its petition. Juergen Stein, SolarWorld’s U.S president, had this to say about the petition:

“SolarWorld — as the largest U.S. crystalline-silicon solar manufacturer, with more than 40 years of U.S. manufacturing experience — will assess the case brought by Suniva but prefers that any action to be taken against unfair trade shall consider all parts of the U.S. solar value chain. We’re committed to helping to find a way that also considers the interests of other parties playing fair in the U.S. solar market.”

Suniva reported that it faced losses of $50 million in 2015 due to a “flooding of the U.S market” brought by Asian countries. Suniva states the flooding of the U.S market of imported goods caused record low prices for solar cells and modules, which inevitably led them to bankruptcy.

The Context of Conflict

 

The petition submitted by Suniva has raised some degree of conflict, especially with the Solar Energy Industries Association (SEIA). SEIA, which represents thousands of installers and developers, opposes the petition on the claim that the proposed tariffs would potentially take away 88,000 jobs from the U.S solar industry, almost one-third of the entire U.S solar workforce. The states that are projected to see the most significant impact are California with 15,800 job losses, South Carolina with 7,000 job losses, and Texas with 6,300 job losses.

SEIA President and CEO, Abigail Ross Hopper, stated that “Rather than help the industry, the action would kill many thousands of American jobs and put a stop to billions of dollars in private investment.”

She adds, “Our estimates show that even in the states where Suniva and its lone supporter, SolarWorld, have operations, if the petition succeeds, there would be many times more jobs lost than expected gains for two struggling companies.”

SEIA predicts that solar jobs would be lost in all parts of the U.S. market. The utility-scale market, which has paced the industry’s growth for years, would see jobs shrink by 60%, while residential and commercial employment would fall by 44% and 46%, respectively.

Christian Hudson, a representative of Suniva, retorts in light of SEIA’s new announcement. He says, “First we heard the scare tactic that 260,000 jobs were in jeopardy, now we hear a revised number of 88,000 – and while this is yet another inaccurate scare tactic, at this rate, we might hear accurate numbers by the end of summer.”

Suniva also argues that the tariffs would increase investment opportunities and competition in the U.S market by eliminating much of the foreign competition. In a somewhat bizarre twist, however, Suniva itself is majority owned by Shunfeng International Clean Energy, a company based in China.

Outcomes

The U.S. International Trade Commission (ITC) agreed to hear Suniva’s case in May, and is expected to reach a decision sometime around September. Their decision will determine if relief is necessary for Suniva. The ITC will then make a recommendation to the President of the United States on their suggested course of action. If the case is approved by the ITC, it will then go onto President Donald Trump who will have 60 days to make a final decision on the matter. The President is not required to abide by the recommendations of the ITC should the case reach his desk.

Are Fixed Utility Charges Bad for Customers?

As solar energy and energy efficiency becomes more common, many electric companies have responded by dramatically increasing, or attempting to increase, monthly fixed utility charges.

What are fixed charges?

Fixed charges are static charges that occur on a regular basis. Most utilities have fixed charges, sometimes called an availability charge, on your monthly bill. Typically, this charge is small (less than $15-$20/month) and is normally in place to cover fixed costs a utility must provide in order for you to receive their service. An example of a fixed cost is the meter on your house and/or the expense to read it each month.

Throughout the United States, utility companies and, to a lesser degree, electric co-ops are charging solar users a fixed cost to re-coop the perceived loss of revenue from the users going off the grid, reducing their demand from the utility, or even just to discourage the use of new technologies.

The idea of large fixed cost increases originates from a suggestion in the “Disruptive Challenges” report released by Edison Electric Institute in January of 2013. Since the report was released, many solar users have seen fixed charges affect their monthly meter bill; sometimes costing as much as 50 dollars extra each month.

Fixed charges not only affect existing solar users, they have the potential to deter future users as well. Solar paying for itself is one benefit that is slowly being taken away; with one user saying, “I think the fixed fee for solar is excessive. When I do the cash flow that amount takes 25 percent of my monthly profit. It would take an extra three to four years to get the project paid off.” Most fixed charges push the payback on installations from a 10-year plan closer to a 13- or 15-year plan before the consumer begins to see that benefit.

David Shaffer, an attorney and development director of Minnesota Solar Energy Industries Association, said a high fixed charge, “decreases the cost-effectiveness of solar arrays and elongates the payback period,” he said. “Selling solar is based on the payback. If you get payback in under 10 years it’s a great deal, but if it’s beyond 10 years it gets more difficult.

Fixed charges cut into the viability of selling solar in those (rural) areas because financially it doesn’t make sense.” Another issue with fixed rate charges is their inconsistency. During 2014, as many as 23 fixed charges proposals were being considered by state regulators across the country and that trend continued through 2015.

In Minnesota alone there are different fixed charges depending in the company. Meeker Cooperative has a $55 net metering charge on an almost 40 kilowatt system, Xcel Energy has a flat fee for $10 a month for all customers but nothing specific for solar users, Minnesota Power has a monthly fee of $2.55 a month for a 20 kilowatt system, and the list goes on.

The increase in fixed charges hits close to home in the Southeast too. In the Southeast, electricity markets are primarily served by large integrated utilities. The Southeast also lacks a single regional transmission organization or independent system operator that establishes the economics of real-time transmission costs and contracts for ancillary services, or anything that supports the transmission of electricity from its generation site to the customer. Therefore, the responsibility falls to the co-ops, municipal utilities, and regulators to create smarter rate design and make economic decisions on the cost of service and constituent feedback. This often means individual states or regions are at the mercy of one company or local regulators who may not be as well versed in the intricacies of the electric market.

In a report conducted by the Kansas Corporation Commission, they concluded that increased fixed charges in Kansas would increase electricity use by 1.1 to 6.8%, varying by utility and season. This means the projected increase would be greater than all the energy savings from all the energy efficiency programs in the state. The same report found that such a change in rate structure and consumption would offset the financial benefits of decades of energy efficiency efforts and penalize customers who have already invested in or installed energy efficiency measures under the previous rate structure. The increase in fixed charges would weaken the incentive for future investors in energy efficiency, which could have negative impacts on the local economy and environment.

There is hope the trend may stop sooner than later. Regulators and stakeholders of utilities have begun seeking a new approach to fixed costs, with one idea being a demand charge that reflects the amount based on customer usage. One reason for this is the benefit energy efficiency will provide to the utility companies and customers alike. Contrary to some utility claims, solar is projected to decrease system costs for utilities. A new study by Rocky Mountain Institute shows that distributed energy resource (DER) customers with solar and battery storage provide value to the grid by reducing peak demand, deferring or avoiding system upgrades, relieving congestion, and providing ancillary services. In addition, other studies by utility regulators have found the value of distributed solar to exceed retail rates. For example, Nevada regulators found that the value rooftop solar adds to the grid is 18.5 cents/kWh, Mississippi 17 cents/kWh, Maine 33.7 cents/kWh, Minnesota 14.5 cents/kWh, and Vermont 25.7 cents/kWh.

Implementing fixed charges as blunt instruments will only result in a missed opportunity for utilities to align the interests of customers using DERs with those of the grid as a whole. Although still a work in progress, one thing is for certain. Massive hikes in fixed charges are bad for consumers, utility companies, and solar users everywhere.

Join Energy Alabama: Be a Friend of Sustainability

You love sustainable energy. We love sustainable energy. Hey, don’t you think it’s about time we teamed up?

 

If you’ve been on the Energy Alabama website lately, you’ve probably noticed that we’ve started a membership program. So what’s the deal? Well, basically we’re looking to team up with a whole bunch of sustainable energy superstars from all across Alabama. We’re hoping that includes you.

 

Here’s the idea. You sign up for a membership and contribute a small amount of money every month. In return, we give you a bunch of cool perks. Ta-da, everybody wins.

 

Join Energy Alabama, Skip the Gas

So, you might be wondering: How small is that “small contribution?” Well, memberships begin at just $2 a month. Over a full year, that adds up to $24, or less than the cost of a single tank of gas. Of course, with this transaction, you’re not even putting out any emissions. (Except for all those good vibes you’ll feel once you sign up.)

 

In return for that $2 monthly contribution, you’ll get all of this:

 

  • Recognition as a Friend of Sustainable Energy
  • Zero emissions (except for all the good vibes)
  • 100% guarantee that all contributions go to sustainable energy
  • Opportunity to decide how to use your contribution
  • Energy Alabama sticker and magnet
  • Potential to influence energy legislation and policy
  • Ability to make a difference in your community!

 

Not bad, huh? And the more you contribute, the better the perks. So for, say, $10 a month, you’ll get all of the above, plus an Energy Alabama t-shirt AND free entry into the first annual BrewNewable Fest.

 

Yeah, we know. Score.

 

Keeping Energy Alabama Strong

 

Most importantly, your contribution will also help keep Energy Alabama strong. Here at Energy Alabama, we know that changing the world won’t be easy — or cheap. But we also know this: When we all work together, we’re all stronger, and better.

 

That’s why we’re happy to offer memberships at all financial levels. Whether it’s with $2 a month or $200, you really can make a difference for our movement. Give what you can, and we promise we’ll use 100% of your contribution for the mission of accelerating Alabama’s transition to sustainable energy.

 

For more information, be sure to visit our membership page, or email CEO Daniel Tait.