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State Utilities To Dim California Solar Boom?

The Highway 80 corridor between San Francisco and Sacramento seems like a blur of malls and new subdivisions. Though invisible to commuters, the highway link between these two cities is fast becoming the world’s Silicon Valley of Solar Energy. By Peter Asmus

Vallejo, Vacaville, Fairfield, and Davis are among several northern California cities interested in generating solar power. By Peter Asmus

The Highway 80 corridor between San Francisco and Sacramento seems like a blur of malls and new subdivisions. Though invisible to commuters, the highway link between these two cities is fast becoming the world’s Silicon Valley of Solar Energy.

Several municipal governments located along this concrete artery want to harness the “free” energy flowing from the sun, among them Vallejo, Vacaville, Fairfield and Davis. These brilliant visions will likely never see the light of day, nevertheless, if Pacific Gas & Electric (PG&E) and its fellow private utilities have their way.

Solar photovoltaics (PV), small semi-conductors comprised of silicon that transform sunlight directly into electricity, are great for California because they can be mounted on rooftops of buildings and parking structures, pushing out power right at the point of consumption. The more solar PV installed, the more reliable our power supply. Generating electricity on-site is a big plus because long distance transmission lines are terrorist targets.

What seems to particularly irk utilities is the ability of larger solar generators to be handsomely compensated for what they generate, but cannot use on site, and send to the grid under a policy known as “net metering.” California led the nation in passing a “net metering” law in 1995 designed for small residential customers with systems under 10 kW in size. That is enough juice for two or at most three homes. Twenty-five other states have since followed our state lead on this issue.

The current simple system gives these solar generators the full retail rate utilities would otherwise collect from the customer for that electricity. Their electricity meter literally spins backwards when they send power back to the grid.

In response to the energy crisis, legislation passed last year allowed solar systems above 10 kW, and as large as 1 megawatt (MW), to net meter. Last minute utility amendments allowed the program for larger solar systems to continue only until the end of this year.

Private Utilities Gripe

“Should four and a half million of our customers shoulder some additional cost so that one customer can make money from his solar system?” asked John Nelson, a spokesman for PG&E. “The politicians of this state are going to have to explain to our customers that if you don’t own a solar system, you are going to have to pay more.”

Utilities’ standard mantra is the small number of customers installing solar PV panels shift costs to the majority of other customers. During interviews, however, utility representatives acknowledged the actual cost shift is tiny. At present, customers without solar are paying less than a penny per month.

Key amendments inserted in AB 58, by Assemblyman Fred Keeley (D-Boulder Creek), before it passed out of the Senate Energy Committee in late June were the idea of Katherine Hackney, lobbyist for Southern California Edison. This bill would extend net metering for large solar generators indefinitely. Hackney’s amendment reduces net metering credits for large solar producers by 30 to 50 percent. Keeley agreed to this amendment in order to gain utility support for AB 58.

Hackney described California’s current net metering provisions as “indefensible” because these provisions supported a “fundamental inequity” between solar producers and other consumers. Her beef is that that solar generators get compensated at the peak retail rate, even if the power produced occurs during off-peak times of the day. Of course, the majority of power put on the grid by solar systems is during peak periods in demand and customers pay the same rate credited to solar generators.

AB 58, which will be heard in the Assembly when legislators return from their recess in August, could wreck havoc with Sacramento’s future solar energy expansion plans, according to Vince Schwent, a solar energy manager for the SMUD. “As currently drafted, this new law could have a major negative impact on SMUD’s solar program. Why? We will be focusing on large-scale solar projects. They are the most cost-effective.”

Today, Sacramento happens to boast the largest network of solar PV arrays in the world totaling 10 megawatts (MW). Over 1,000 installations of solar PV on rooftops have taken place in Sacramento since 1993. Schwent acknowledged that maintaining the local momentum on solar hinges on government and commercial customers. He pointed to a 469 kilowatt (kW) solar PV array is set to be installed at the Franchise Tax Board downtown; up to 200 kW is being planned for the University of California-Davis Medical Center.

Schwent continued, “AB 58 is now a negative for the customer. They get paid less, and the whole program is far more confusing. From a utility standpoint, SMUD prefers the existing net metering arrangement. It is much simpler from a billing and accounting practice.”

Simple and Clean

“The beauty of net metering always has been its simplicity,” commented Tom Starrs, CEO of Schott Applied Power Corporation of Rocklin. The utility amendments to AB 58 “compel the solar industry to participate in lengthy and complex regulatory proceedings. The utilities use their customers’ money to dedicate teams of attorneys at these proceedings, while the solar industry can hardly afford to participate. These utilities have a 100-year history of completely dominating such proceedings, and manipulating the results to their advantage.”

If AB 58 dies, whatever form it takes this August, large solar generators will get paid nothing for the power they put back to the grid. Solar advocates will be busy this July trying to convince author Keeley to go back to the simple system that worked well – at least in their view -- in the recent past.

There are other storm clouds looming on the solar energy horizon. Behind –the-scenes, utilities are also trying to apply “exit fees” to solar generators in arcane regulatory proceedings at the California Public Utilities Commission (CPUC). These fees would be assessed on solar generators to help pay off the $43 billion in fossil fuel contracts that have been the subject of much consternation by the Davis administration. “Because of the high up-front capital costs of solar PV systems, imposing these very substantial fees on these small solar systems is just another way to discourage these technologies,” said Ed O’ Neil, the attorney representing solar generators.

An array of public policies has spawned a solar boom in California over the last two years. The hottest solar PV market in the land convinced Sharp Electronics Corporation, the world’s top solar panel manufacturer, to open up shop in Huntington Beach. Schott Applied Power Corporation also relocated from the State of Washington to Rocklin due to California’s progressive solar energy policies.

While Sacramento is the current solar PV leader, the City and County of San Francisco, are planning to surpass Sacramento’s world rooftop solar PV record by adding as much as 50 MW of solar by 2012, much of this coming from larger solar systems installed on government buildings. If the current version of AB 58 becomes law, this is yet another local government whose current plans may be in jeopardy.

Kari Smith, manager of regulatory affairs for Berkeley-based Powerlight Corporation, which specializes in large-scale solar projects, summed it all up succinctly: “Does California want to support solar or not? This is the fundamental question.”


Peter Asmus is author of Reaping The Wind: How Mechanical Wizards, Visionaries and Profiteers Helped Shape Our Energy Future and co-author of Reinventing Electric Utilities: Competition, Citizen Action and Clean Power, both published by Island Press. He has covered California’s energy markets for 15 years.

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