California has been a champion of solar incentive programs and so far, those policies have largely worked: the state is home to more than half of all rooftop solar projects in the country.
But they may have worked a little too well in one respect. As increasing numbers of Californians generate their own electricity, they rely less on electric utilities and that’s raising major questions about the future of California’s utilities.
The utility business model has been largely the same for decades. Utilities build transmission lines, deliver power to customers and recover those costs via your monthly bill.
So it’s not hard to see why a customer like Chuck Pershing might make utilities nervous. “This is from PG&E,” he says, digging through a folder of bills. “Electric is $4.73. Here’s another which was $5.01.”
Chuck and his wife Suzanne Pershing pay next-to-nothing to Pacific Gas & Electric because of the solar panels atop their four-bedroom house in San Leandro. On a sunny afternoon, the panels are cranking out power – more than the couple are actually using. That extra power goes onto PG&E’s grid, where it supplies other homes.
“You can see where it says ‘received,” says Pershing, pointing to his electric meter. “So PG&E is receiving from us right now 4.32 kilowatts per hour.” PG&E keeps track of this and credits the Pershings on their bill. While they still have to buy electricity from PG&E at night when there’s no sun, it’s effectively cancelled out by the extra power they feed back to PG&E during the day.
It’s called “net energy metering” and it helps solar projects like this one make financial sense. “It’s great,” says Pershing, who says he can’t resist going outside and checking the meter daily.
The Death Spiral
“The real concern is that as we move toward higher and higher levels of renewable power on the customer side, we’re going to see bigger shortfalls and the utilities are going to have to raise more revenue,” says Severin Borenstein, an energy economist at UC Berkeley.
Here’s the catch: as utilities raise electricity prices, it encourages more of their customers to go solar. That equals an even bigger shortfall and utilities raise prices again. It quickly becomes what Bornstein calls a “death spiral.”
“Even for those who hate utilities, it’s not a death spiral that should make them happy because none of these solar customers are really energy independent,” says Borenstien. “They still require having a grid.”
The Public Utilities Commission is expected to release its net-metering analysis by the end of the summer. Many say whatever regulators decide to do, it will set a precedent not just for solar customers in California, but for the solar industry across the country