Homeowner Solar Panel Penalties Imposed by Power Utility Companies–Why is that?

There is a national debate going on in the US over homeowner and business rooftop solar value to the power grid and how it should be billed. What? Penalize me for adding solar to my home? Well, I fully understand the issue that utilities face regarding a larger burden on the utility’s traditional customers, some who are low income and cannot afford solar installations, who do not have rooftop solar panels installed. Rooftop solar panel users have higher demand when the sun goes away especially at night or during cloudy days. Studies show that average peak demand drops only slightly with solar customers. They do purchase much less electricity but still require about the same capacity from the power company as it relates to power plants and transmission lines to meet their peak demand.

In this regard, some utilities are placing solar customers on a plan that includes a demand charge that increases depending on the maximum amount of electricity they draw in any 30 minute segment during peak hours in a month. Utilities claim that the extra fees that solar customers are charged can be offset by customers facing panels West to generate more electricity in the afternoon when demand peaks, or by offsetting peak demand with batteries or reducing appliance usage at those times.

Well, I’m sorry, to me this just amounts to penalizing the solar customers for trying to go “green” and help eliminate carbon emissions, especially in light of the fact that most utilities have stopped incentives for ratepayers to add solar to their homes. On the bright side, there is a 30% federal tax credit and solar installation prices have dropped, but what I do not understand is why a high tech organization like a utility company cannot come up with something better on their end to offset any ratepayer inequities and higher demand times. To me it’s an engineering problem waiting to be solved. Maybe by some innovative company out there.

And what about the Smart Grid?

One possible solution to increased peak demands of rooftop solar customers is new inverter and battery backup storage technology improvements becoming readily available in the US. Right now it seems the new innovations do not exist off-the-shelf in the US but does exist in foreign countries in Europe and Japan for example.

Solar customers with smart meters have the meter programmed to run backward and credit them in kilowatt hours for the electricity they feed back into the system.  (Image courtesy of Solar Feeds.)

Solar customers with smart meters have the meter programmed to run backward and credit them in kilowatt hours for the electricity they feed back into the system. (Image courtesy of Solar Feeds.)

And, yes, we need to be aware of our peak demand and try to control it, but unfortunately that will only happen with more smart meters installed at the customer homes. Privacy concerns are a big issue. Although millions of smart meters have been installed across the US, many still do not have them—I don’t! We need to wait until the power utility comes into more neighborhoods—a pretty slow process right now.

Tell me what you think about this situation? Can you think of any solutions?

4 comments on “Homeowner Solar Panel Penalties Imposed by Power Utility Companies–Why is that?

  1. David Ashton
    March 4, 2015

    Here in Australia (with typical Australian lack of forethought) the government rushed in a few years ago with a feed-in tariff of 60c per KWH, about double what they usually sell it for.  Result – a lot of people got systems on their roofs, fed direct into the grid without offsetting their own use first, made money from it, and the utilities rapidly found this financially unsustainable.  I heard that in Germany solar users were offered a reasonable price from the start (ie one that the utility could make a small profit on), and it has been viable and had wide acceptance.

    Now if you have solar PV on your roof in Australia, you can expect a 6c to 8c per KWH net tariff (ie that's what they pay you for what you don't use yourself).  It's certainly not worth being a generator, but if you use a fair bit during the day (I do because my wife is home all day) then you're effectively getting the utility rate of 31c / KWH for what you do use yourself.  It has made quite a large difference to my bill.

    The prices of Storage + Inverter systems is coming down and this is getting to the point where they are almost financially viable.  A friend of mine is building a new home and reckons it is worthwhile putting one in.  There's a lot of things to consider – battery replacement costs over time, the sheer size of such systems if they are going to store a useful amount, etc.  But storage will be the saviour of PV, as its disadvantage has always been that the power is generated at a flat rate and not able to cope with demand peaks.  If you are willing to use other energy sources for high demand needs (ie cooking and heating using gas) it would probably be feasible in the future for many houses to be off-grid with good enough storage.  I am told this is scaring many utilties!

  2. Bill Poole
    March 4, 2015

    It is not a “penalty” to roof-top solar users, it is a misunderstanding of what the costs are of providing a service. Since their inception, utility companies have been bundling the cost of the infrastructure in with the cost of their “product” (the electricity, or phone usage or water usage). Since most consumers use the “product”, the infrastructure cost is shared.

    What if, instead of a $0.10/kWhr fee, with an average customer using $100 per month (numbers chosen to make the math easy) utility companies were to charge separately $0.05/kWhr (the “product” and $50 per month to hook up to the grid (the infrastructure). They might also buy electricity at $0.045 ($0.005 mark up, ~10%)

    The traditional, non-solar customer still pays a total $100 per month.

    The on-grid solar customer pays $50 for the infrastructure and some amount (likely quite a bit less than $50) for night-time electricity, this can likely be offset by daytime sales.

    The off-grid solar user pays nothing to the utility for the infrastructure and nothing for purchased electricity. However, off grid users must purchase and maintain their own battery system (or do without) and cannot sell excess daytime electricity to the utility.

    Just an attempt to explain it.


    Poole, AA4Q




  3. mac_cpt
    March 12, 2015

    Hi David,

    Unless you have a seocnd meter installed just for the PV system, you will always be offsetting your own use before exporting. But you are certainly right that anyone on the 60c feed in tariff can pay off their investment quite quicky. Anyone stuck on the 6-8c tariff is being ripped off.

    The fair solution is to have a peak demand charge, not just a supply charge. A large cost of provide the network is to design it to cope with the peak loads. It seems reasonable to charge people according to their contribution to the peak load. In return, the supply charge component can be smaller and the actual kWhr charges need only reflect the cost of the energy, not the network.

    Given that Victorian consumers pretty much all have smart meters that can measure this, the only problem is that the regulators are not letting the electricity retailers charge this fee.



  4. David Ashton
    March 13, 2015

    @mac_cpt…Andrew thanks for the comments…Initially people did have dedicated meters installed to get the 60c/KWH.  Now they do put smart meters on Solar homes, so they can record the solar-to-grid amount seperately (meter running backwards is effectively paying full rate.

    Time of use charges is a good idea.  There are already peak / off-peak meters but they are fairly crude time-of-day things.  They already use Frequency Injection (injection of a higher frequency than the base 50/60 Hz) for switching street lights and water heaters, this could fairly easily be extended to metering or switching of solar generated power.  The comment in the article about facing panels west to generate more in afternoon peak demand is valid.  Solar PV that is “smarter” in being able to assist the utility with peak demands, by panel rientation or storage,  should be rewarded.

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