Top three ways SMUD grossly undervalues solar

Summary

Even as power outages rip through the state, SMUD stands by their flawed study that grossly undervalues the benefits of rooftop solar. SMUD is using this study to justify changes that will discourage rooftop solar in Sacramento.

At issue is net metering, a policy that allows solar users to share their extra solar energy with the community for a bill credit. The average credit is currently about 13.5 cents per kilowatt hour. SMUD’s report says that the value of rooftop solar is much less, and is the basis of SMUD’s proposal to slash the credit to just 7.4 cents per kilowatt hour.

But the study is riddled with accounting flaws. Correcting for the flaws in SMUD’s value of solar study strongly suggests that the current average 13.5 cents per kilowatt hour is fairly valued. It also suggests that SMUD’s proposed cut grossly undervalues rooftop solar. Below are the top three problems the study.

Problem #1: SMUD’s solar study incorrectly claims that SMUD “pays” solar users for simply using their own solar energy at home.

The study incorrectly claims that SMUD “pays” solar users a total of $25-$41 million a year. How do they get this number? By claiming that when customers make their own solar energy at home (rather than buying it from SMUD), their bill savings are the same as getting “paid” by SMUD.

To be clear: SMUD does not pay solar users when they make and consume their own energy. It is true that solar users reduce their energy bills when they make their own solar. But no one is paying them.

In response to this critique, SMUD has argued that when rooftop solar make and use their own energy, they don’t pay their share of the grid. That’s also false and the opposite is true: rooftop solar users actually reduce the cost of the grid for all ratepayers.

Rather than nosing around with what people do behind their meter, the study should have simply looked at the extra energy solar users send back to the grid for their neighbors to use. Since solar users get a bill credit for that extra energy, it is fair to ask what the value of that extra energy is and then perform calculations that are narrowly focused on that extra energy. The study didn’t do that.

Problem #2: SMUD’s solar study implies that rooftop solar’s climate change benefits should not be valued

The report buries an important finding: that rooftop solar reduces global warming pollution in ways that add to its monetary value. These findings are excluded from the report’s top-lines.

The fine print states that rooftop solar’s impact on reducing global warming pollution (along with several other social benefits) increases solar’s value by between $.02 and $.16/kWh.

But SMUD’s study excluded this fine print from the conclusion, and also excluded this value from the proposed net metering credit of 7.4 cents per kilowatt hour.

Problem #3: SMUD’s solar study is not based on SMUD’s new climate change goal

SMUD’s study also is premised on SMUD’s old, outdated climate change goal that assumed SMUD would still operate its five fossil fuel power plants past 2040.

Things have changed: the SMUD Board of Directors recently adopted a stronger goal to reduce SMUD’s global warming pollution to zero by 2030.

To reach zero carbon emissions by 2030, SMUD will need to build a lot of new renewable energy to replace its fossil fuels and meet additional energy demand from electric cars and appliances.

It will be more expensive to do this with big solar and wind farms alone. The most detailed study ever done on this issue found that Californians will pay $120 billion more for electricity over the next thirty years if we rely only on solar and wind farms and stop using rooftop solar.

Summary

Correcting for the flaws in SMUD’s value of solar study strongly suggests that the current credit that solar users receive for sharing their extra solar energy with the community – an average of 13.5 cents per kilowatt hour – is fairly valued. It also suggests that SMUD’s proposed 7.4 cents per kilowatt hour credit grossly undervalues rooftop solar.

Furthermore, the most detailed research done on this issue strongly suggests that rooftop solar is critical for helping reduce the cost of the transition to clean energy. SMUD and the state of California need more rooftop solar and battery storage to help people keep the lights on during power outages, give consumers more ways to control their energy bills and reduce pollution.

SMUD’s study uses deceptive methods to cover up these truths. This isn’t terribly surprising, since the study was performed by E3, a consulting firm that is routinely paid by by utilities across the nation. Here’s a list of E3’s clients.

One would think that a publicly-run utility like SMUD would use more honest accounting methods when researching an issue as important as this one. SMUD can do better than this.