Wednesday, November 4, 2015

Go Solar Before PGE Pulls Up The Ladder

The end of year is always a busy solar season as homeowners rush to make the end of year tax credit deadline. This year even more is at stake, and there are more reasons than usual to move solar from the back of your mind to the front. Here is a list of the issues facing us, along with several reasons you should consider going solar now.

GET ON BOARD WITH NET METERING 1.0 OR MISS THE SOLAR BOAT
The way residential solar is credited to homeowners (this is called Net Energy Metering, or NEM) is about to change, and this will have a major impact on the economic benefits of solar energy for customers who connect after the deadline. Existing solar customers, and NEW customers who connect PRIOR to the deadline, are credited FULL value for the kilowatt hours (Kwhs) they produce, and this is grandfathered in for 20 years, even if the system changes hands (such as with the sale of the home).  PGE proposes to credit NEW solar customers only PARTIAL value for the Kwhs hours they send back to the grid. The new rules kick in once total utility power production comes from at least 5% renewables (solar/wind/etc.). This is anticipated by PGE and our industry experts to happen early next year.

WHAT NEW “NEM” MEANS FOR YOU
Connect now and you will be able to withdraw a full Kwh from your “bank” for every one you deposit, for the next 20 years.  Wait too long, and you could lose half or more of the value of the energy you produce. This is a major shift in policy that will solidify the PGE monopoly and the utility ability to push their rate structures down the customer’s throat with no viable competition. The new NEM will affect lease, financed and cash purchase solar metrics, because the value of solar is based on the percentage of utility power you can offset with a system, and this is directly related to net metering policies. Higher residual utility bills and increased payback timeframes is the anticipated result of NEM 2.0. Many young, fragile solar companies will fail in this environment, and the roofers, HVACs, cabinet builders, general electricians, pool cleaners and everyone else who threw their hats in the solar ring during the recent bubble will abandon solar in favor of their core businesses. For SunPower and Alternative Energy Systems, solar has been our core business for the past 12 years, and we have been through the solar ringer before. We are well positioned to ride out the fight while the pendulum swings yet again, and we will be here for our customers for the long haul.

30 PERCENT FEDERAL TAX CREDIT SET TO EXPIRE END OF 2016
The 30 percent federal tax credit is the only federal or state solar incentive still standing, and it is set to expire at the end of 2016. As it currently sits, solar customers have two tax filing periods (2015 and 2016) to monetize the value of the solar tax credit (which reduces your tax liability 1:1 and allows you to pay yourself for solar instead of paying the IRS for 30 percent of the gross value of the system up to your total tax liability for the year). No matter your opinion on the fairness of the solar tax credit versus the billions in tax breaks enjoyed by the carbon and extraction industries (coal, oil, fracking), the full expiration of the solar tax credit will definitely negatively affect lease rates and purchase payback metrics of residential rooftop solar. The point at which you can legitimately claim your tax credit is when your system is installed and creating electricity. 

TIER FLATTENING AND RATE INCREASES
If the financial benefit of solar is going to decrease next year, on the other side of the coin is a new PGE rate structure that will allow the utility to enjoy its largest revenue increase in decades. This structure was approved by the California Public Utility Commission in July. It consists of reducing the number of tiered rates from four tiers to three, and significantly increasing the cost for power in those three tiered rates. Over the past 10 years, we have seen an increase of 4% to 5% percent per year historically within the tiers, and a 71% increase in the five year average cost of power across all the tiers.* In the next five years, PGE proposes to increase average cost of power in the tiers from 6% to 9% percent per year, with an 84% increase in the five year average cost of power. Higher energy users -- such as we see with families that use residential water wells, or have larger homes with more A/C, or run businesses from their homes – may suffer in a new “super energy user” tier, that PGE is asking to be $.047 per Kwh in five years. Your lowest cost for power today is $.016. The solar value proposition of security from future rate increases and independence from a monopolistic utility has never been more attractive.


SUNPOWER BY ALTERNATIVE ENERGY SYSTEMS ADVANTAGE
To reiterate the SunPower by Alternative Energy Systems points of comparison and superiority:
  • AES is the area's only Master Level SunPower dealer
  • Highest efficiency panel technology
  • Longest, most inclusive warranties
  • Most flexible and competitive purchase and leasing options
  • Longest standing local exclusive solar team
  • Most local installations
  • High accountability and most trusted solution
Please let me know if you would like to revisit a solar solution for your home. There truly is no time like the present.

Sunny Days and Warm Regards!
Jim Mikles

Saturday, September 5, 2015

How to Estimate Future PG&E Rate Increases for California Customers



When you are considering whether a solar system makes economic sense, be sure to calculate future utility rate increases. In my solar cash flow calculations for customers, I estimate a 5% annual increase to calculate break even and return on investment. So the customer appropriately asks, "Why?"

All we can do is look to the past and ask if anything is likely to change in the future. In my utility (PG&E), rates have gone up 4 to 5 percent annually in each tier for the past 10 years on a linear average (see above). When you consider there is 100 percent increase in cost between tiers 1 and 4, and last year the amount of power in Tier 1 was reduced by around 10 percent, you could pretty easily make the case that the estimated annual increase is closer to 7%. I use 5% to be safe, and most other experts are in alignment with this thinking.

In any event, looking to the future, the California Public Utilities Commission in July 2015 approved a framework that pretty significantly changes the current tier structure, and it appears we will see a pretty major rate hike  over the next couple of years. 

This is the language from the bulletin by the California Solar Energy Association (CALSEIA):

"Residential rates will transition to a three-tiered structure. The differential between Tier 1 and Tier 2 will be 25%. The third tier will start at four times baseline/Tier 1 usage, and the rate will be 219% of the Tier 1 rate. The third tier will not be presented as Tier 3, but as a Super User Energy (SUE) Surchage, in order to send a strong signal that it is a penalty for consumption beyond normal levels. Only 2%-10% of customers are expected to reach the third tier."

You can see the implications of this reflected in the 2020 predicted rate column above. The new structure has already been approved, now PG&E will make its case that these should be the actual rates. The CPUC historically has pushed back a little on giving PG&E everything it wants -- to at least give an appearance of oversight and propriety I suspect -- so I expect rates will not go quite this high, but probably stay in the 4-6% annual increase range, which seems to keep PG&E shareholders happy.

Thursday, May 14, 2015

Redding Municipal Utility District Takes Cheap Shot at Solar

Redding Municipal Utility District Targets Solar Customers by Proposing Excessive Fixed-Rate Costs to All of Customers

KRCR TV Report on REU Attempt to Kill Solar Adoption

This is the trench where the fight over the future of renewable vs. carbon energy will be waged. Utilities make the case that solar customers, who use a process called "net metering" in order to get full credit for electricity produced during the day, are freeloading off the grid. This is the same thinly-veiled argument against competition and free choice that this nation fought over the disbanding of Ma Bell and big telco. Basing the majority of a customer's monthly bill on some fixed rate pulled from the sky, which will artificially subsidize the Kwh use rate -- will kill solar adoption in that utility district. This is the sole reason for this effort. This is my post on the KRCR news site:

The utility/REU committee argument that solar customers are subsidizing non-solar customers is a fallacy that has been consistently disproved across the nation. Solar customers produce their most energy during the peak of the day/during the peak of the summer when demand on the utility and its electricity costs are the highest. Solar customers HELP OPERATE THE GRID AT A LOWER EXPENSE because they don't require the utility to purchase nearly as much peak expense electricity from 3rd parties, and in fact produce excess electricity at this time the utility can sell at its full markup. Solar does impact utility profit margins, because solar customers do not have to buy so much electricity overall. Everyone (solar customers included) already pay their fair share to maintain the infrastructure if you take a hefty profit margin out of the equation. Let's call it what it is. Solar is clean, sustainable and affordable for everyone -- including the utility. They just don't like individual Americans exercising a free right to produce their own electricity. That is how a profit-driven government regulated monopoly acts and it is up to the individual citizen to resist, or forever be a victim of rampant rate hikes and lack of control."

I am hoping that here in the heart of State of Jefferson we can demonstrate that allowing the utility to establish Draconian rate structures such as this, is allowing institutional bullying by the government and the utilities because they don't like the rules changing after their 100 years of monopoly. This is a small utility, but it is a disturbing to see it in California, and it is a bellweather for the much larger fight brewing at the state Capitol with the largest utilities in the state.