The value of solar in Arizona was the subject of an Arizona Corporation Commission workshop on May 7. Two things were abundantly clear after a day of power-points and presentations:
- Had we known ten years ago what we know now -- we would have done things differently.
- This is going to be messy.
The bottom line is the value of solar in Arizona is retail (net metering), and that rate, which was set ad hoc, is under scrutiny. No analysis was performed to set the rate and no one knows with any degree of certainty if the rate is fair compensation to the solar customer, the utility, or the non-solar customer.
On the flip-side, considerable analysis has gone into setting the rates for utility community solar programs that "replace" a unit of conventional power with a unit of solar power. For their own solar generated electricity utilities charge a premium because that is what the "retail" unit of solar is worth.
When it comes to rooftop solar, nobody has done a sound analysis to figure the value. Net metering is only a reasonable approximation -- and by its simplicity it is one that nearly everyone can understand.
The workshop offered several ways of thinking when it comes to how to calculate the value of solar -- with the main sticking point between the two sides being whether rooftop solar should be treated the same as a remote solar generation station.
The fundamental difference being, rooftop solar does not use the transmission and distribution system and thus to figure its value solar advocates argue it needs to be calculated at the meter.
In other words, central station solar is a wholesale product and rooftop solar is a retail product.
In valuing solar, the utility industry's opinion is that the benefits of solar are limited to operational and system impact. The utility does not include the societal benefits or place a value on environmental benefits. It also doesn't figure the benefit of the reduced wear and tear on the transmission and distribution system.
In other words, utilities want to treat solar as just another busbar generating resource.
It may be when this process plays out -- everybody will long for the days when net metering was king and solar was compensated at retail. At least everybody understood the system. Instead, we are taking a system that some argue is not broken -- and looking for a solution.
The unintended consequence of the value of solar methodology path that the workshop is taking us down is the value could be subject to renegotiation each year. That's where things get messy.
Austin Energy is a poster child for the value of solar approach. In 2013, Austin Energy valued solar at a premium -- 12.8 cents per kilowatt-hour. In 2014, the proposed value is 10.7 cents per kWh.
Minnesota represents the state of the art in solar valuation and rate design. Yet, Xcel Energy has already filed a request for reconsideration of the methodology that would reduce the value of solar.
For an industry that needs regulatory certainty, an annual confrontation over the value of solar could create uncertainty that impedes market growth.
Arizona needs to resolve this issue in a way that is fair to all parties -- but is a system that creates uncertainty really the answer?
Jim Arwood
Communications Director
Arizona Solar Center
Questions: Is net metering (the same retail price the utilities charge) a fair measure by which to value solar? Or, is a new method needed to take into account societal and environmental benefits? Should this "value" be subject to periodic renegotiation?
