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Green Building News

Colorado Electric Co-op Weighs New Solar Charges

The co-op delays a vote on a plan to cut the reimbursement rate for excess PV power in half and add an unusual new ‘demand’ charge

Higher solar fees in Colorado? Some solar panel owners in Colorado could see higher user fees and lower rates for selling power to the grid under a plan proposed by the state's largest rural electric co-op.
Image Credit: Wayne National Forest / Flickr

Members of Colorado’s Intermountain Rural Electric Association who have installed photovoltaic (PV) systems won’t find much to like in a plan under consideration by the association’s board of directors.

A report from UtilityDive.com says that the proposal would reduce the reimbursement that owners of PV systems get for the electricity they sell from the retail rate of 12.3 cents per kilowatt hour to 6.5 cents per kWh, which is just above the co-op’s avoided cost of about 5 cents per kWh.

At the same time, the plan would see the introduction of an unusual demand charge for residential solar customers. On top of the standard $10 monthly service charge that all residential customers pay, customers with PV systems would pay another $7 per kW in the 15-minute period of highest electric use during the month. Demand charges are common for commercial and industrial customers, but not in residential rate plans.

The proposal, however, would reduce off-peak nighttime rates for customers with solar panels to 6.5 cents per kWh.

Number of solar customers is growing

The number of residential customers with PV systems is very small, but it’s increasing rapidly. There are some 600 solar customers today, and that is expected to grow to about 1,000 by the end of the year. At the end of 2014, there were 270.

The co-op’s concern, the web site reported, is that if more of its 145,000 customers begin producing more of their own power, the fixed costs of running and maintaining the grid will be shifted to customers who don’t have solar panels. This is the same argument that has pitted utilities against solar advocates around the country.

Advocates, however, say the co-op is undervaluing the benefits of solar power.

The board of directors had been scheduled to vote on the plan on June 1, but after a three-hour meeting attended by dozens of solar customers, the board instead tabled the plan to give members more time to study the issue, according to an article in the Denver Business Journal.

Rebecca Cantwell, executive director of the Colorado Solar Energy Industries Association, said that the customers who showed up were adamantly opposed to the plan.

“The people who talked were absolutely passionate about how unfair this is and how they’re trying to make the world a better place and IREA is going against them,” she said.

7 Comments

  1. Expert Member
    Dana Dorsett | | #1

    Why only solar owners?
    For rate structures with demand charges to be fair, the demand charges need to be applied to all ratepayers. The grid infrastructure costs are a function of peak draw- houses with 8 ton air conditioners and a couple of electric tankless HW heaters are effectively being subsidized by ratepayers using the same amount of electricity, but with lower peak draws, and MUCH lower grid infrastructure needs.

    To apply demand charges ONLY to solar owners invites grid defection. Most solar owners are not net-zero-electricity. A minimum-bill approach is one fairly simple to administer and much fairer (if still imperfect) way to manage any costs that PV owners might eventually have to other ratepayers, once penetration levels of PV have hit that level.

    In commercial demand charge environments behind the meter storage & smart power management systems are cost effective for reducing demand charges. As more utilities apply demand charges to residential customers, it's only a matter of time before it becomes cost effective for homeowners to have 1-5kwh of storage to flatten their power use curves, even if they are nowhere near net-zero electricity, or incapable of outright grid defection.

  2. Expert Member
    Dana Dorsett | | #2

    A more creative approach to evolving rate structures...
    ... just became law last week, over the veto objection of Maine's fossil-fan governor:

    http://www.greentechmedia.com/articles/read/Solar-Bill-Passed-in-Maine-Sets-the-Stage-for-an-Innovative-Alternative-to

    There are details to be worked out, but it's at least an attempt to capture most of the value of the PV to all ratepayers, in a way that evolves naturally as more & cheaper PV goes onto the grid.

  3. Alan B | | #3

    They believe they can turn
    They believe they can turn back the clock with punitive laws. How long till voters realize they are being used as pawns and vote for better leaders.

  4. John Stewart | | #4

    coal huggers
    I have the misfortune of being a customer of these guys. Every month they put a "newsletter" in with our electric bill that is devoted to climate change denial and screeds against environmental regulation and the government. It's lovely.

  5. Charlie Sullivan | | #5

    +1 for applying peak demand charges uniformly
    Dana's comment #1 nails it. I don't know whether that utility has a real problem that needs that solution yet, but if they do, Dana suggests the right solution.

    It would be a fun and feasible challenge to design building systems to work well with the proposed rate structure...a little storage for early evening cooking and lighting, time shifting big energy uses like heat pumps and dyers to run coincident with sun or during the low oversight rates, and locking out flexible large loads when other large loads are running to avoid peak charges. But there's no reason for PV owners to be the only ones who have to do that to avoid unfair charges.

  6. Stephen Sheehy | | #6

    Peak demand
    If PV owners are getting punished for using power from the grid at times of peak demand, they should be able to sell peak power at the cost avoided by the grid, not for some average price. I'd be happy to shift my power use to off-peak times if I can get paid the real value of what I produce and send to the grid at times of peak power need.

  7. D Dorsett | | #7

    FERC Order 745 (response to #6)
    FERC Order 745 requires that demand-response be remunerated at the localized marginal price (LMP) for energy, just as if it were a peaking power plant. Some states and utilities sued in Federal courts against that, as an unnecessary intrusion by the Feds into state marketplaces and won in the D.C. District Court, but the FERC appealed to the US Supreme Court. The Supremes ruled in favor of the FERC just last week.

    What this means is that it's now possible to set up programs to aggregate even small power users into the wholesale market using things like remotely controlled smart thermostats & switched to be able to shed load during peaks and be paid the local peak-wholesale price for the amount of power taken off line. During annual peaks at times of grid congestion the LMP is often an order of magnitude higher than the retail residential rate, but having automated demand response (at effecitvely zero marginal cost to those turning stuff off, unlike peaking power plants that have fuel, capital, and maintenance costs) will apply strong downward pressure on the LMP, which in turn puts downward price pressures on the average retail rates. AND, it stabilizes the grid, improves grid reliability, takes peak load of the infrastructure (fewer smoking transformers), reducing the maintenance & capital cost of the grid.

    This was perhaps one of the wonkiest cases ever taken on by the Supreme Court, but it's a bigger deal for the electricity ratepayers than most are aware of.

    The utilities would be happy to remunerate small scale PV at the LMP just as if they were any other generator. That would be considerably more money to the PV owner than the residential retail rate during the peak hours, but substantially less on average. At current small scale PV's installed price it would not pencil out as a favorable investment for the PV owner if the LMP was the only compensation for that power. Large scale PV output is often sold on a long term power purchase agreement (PPA) at rates that are a multiple of the typical average LMP, but still cheaper than the lifecycle cost of the power output of gas or oil fired peakers, both of which have a price volatile fuel component to it. Even without the 30% tax credits large scale solar is often cost-competitive with peakers, even in less sunny places than the American southwest, and WITH the tax incentive is beating those types of generation in open bidding for new generation often. This too is putting downward price pressure on the LMP as more large scale PV goes onto the grid under PPAs with the utilities.

    Bottom line, the market is not ready for small scale homeowners PV projects to live and die by only the peak power value of the PV output. States like MN and ME have established methodologies for calculating the true value of PV power including things like deferred capital costs for the now-lower grid infrastructure, the carbon emissions offsets etc. to compensate PV with a value of solar tarriff (VOST) rather than net-metering. In MN they allow the local utilities to opt for either net-metering or pay the VOST. So far the VOST has been running well ahead of residential retail, so the utilities have all opted to simply net meter, but that won't be the case forever.

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