Top three ways SMUD grossly undervalues solar

Summary

Even as power outages rip through the state, SMUD is pushing a flawed study that grossly undervalues the benefits of rooftop solar, and hands SMUD the excuse they need to discourage rooftop solar in Sacramento with new fees and deep cuts to the net metering credit.

Below are the top three problems with SMUD’s solar study, followed by more in-depth background.

Many community members have already expressed their displeasure. Now please tell SMUD in person what you think at their virtual public hearing on September 16th at 5:30 PM. Sign up to attend and get details here. Contact Dave Rosenfeld at Solar Rights Alliance with questions: dave@solarrights.org. Thank you!!

Contact Dave Rosenfeld at Solar Rights Alliance with questions: dave@solarrights.org. Thank you!!

Problem #1: SMUD’s solar study asserts that SMUD “pays” solar users even when they are simply making and consuming their own solar energy at home.

SMUD’s study incorrectly purports that SMUD “pays” solar users a total of $25-$41 million a year even when they are simply making and consuming their own solar energy on-site.

This is clearly absurd. SMUD doesn’t “pay” anyone when customers reduce their energy use. If this were true, it would also mean that SMUD is paying people if, for example, they:

  • Shut off lights or install energy efficient appliances.
  • Use an air conditioner with a built-in solar array and battery such that the unit is never plugged into the wall socket.

Here’s what actually happens. SMUD credits solar users for the extra energy they send back to the grid for their neighbors to use. The credit for this extra energy, that lets neighbors also use local clean energy, is the only “payment” at issue here.

Reducing electricity use from the grid is desirable behavior. It reduces the burden on the grid and makes it easier for SMUD to reach its goal of a 100% clean energy mix by 2030. No class of customers should ever be penalized or considered problematic for doing so — whether because of solar, energy efficiency or reduced business operations due to COVID. [1]

Remedy: Re-focus the study only on the solar energy that is sent back to the grid. Remove from the study the solar energy that people consume at home or at their business.

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

SMUD’s solar study and their accompanying website give the overwhelming impression that the value of solar is only $.03-$.07/kWh. This is misleading because it only captures a limited number of rooftop solar’s benefits (namely the ways that rooftop solar allows the utility to avoid generating or purchasing electricity).

There is another critical benefit, however: the impact rooftop solar has on reducing global warming pollution.[2] The report quantifies this benefit as well. But it buries it in fine print and excludes it from all the topline charts and graphs.

That is unfortunate and misleading. 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.

Combining the value of solar headlined in the report with the value of solar from reducing global warming pollution is likely to yield a solar value of at least $.12/kWh — considerably higher than the report’s headline.

Putting critiques one and two together strongly suggests that rooftop solar actually provides a net benefit to SMUD, in contrast to the study’s topline conclusions.

Remedy: Redo the study to include all of rooftop solar’s social benefits, especially climate change benefits, in the topline calculations of solar’s value.

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

In addition to burying rooftop solar’s global warming benefits in the fine print, 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.

In fairness, the study was launched before the SMUD Board adopted its new goal. But the study has to be revised to reflect the new goal. To reach zero carbon emissions by 2030, SMUD must increase both large-scale renewable investments and local rooftop solar and storage beyond what SMUD currently plans for in its clean energy plan created in 2018 (called the Integrated Resource Plan), and on a faster timeline. SMUD will also likely increase its efforts to encourage customers to switch to electric cars and appliances.

SMUD will need to increasingly partner with customers who want to install their own solar system to help the community meet these new goals, and that should get reflected in solar’s value.

Remedy: Redo the study’s calculations to reflect SMUD’s new climate change goal of zero carbon pollution by 2030.

Detailed Background

More and more compelling evidence shows that rooftop solar and battery storage provide significant benefits not only to the individuals with solar, but also to the larger community. Rooftop solar reduces the cost of maintaining and expanding the grid and also reduces pollution, especially climate change pollution. These benefits increase with solar-powered batteries that store the extra solar energy to use when the sun isn’t shining.

SMUD and the state of California need more rooftop solar and battery storage to fight global warming, help people keep the lights on during power outages, and give consumers more ways to manage their energy choices.

This is especially the case with SMUD now that they have committed to reducing their global warming pollution to zero by 2030, which means they will need to cease burning natural gas at their five power plants.

In contrast, SMUD has claimed for some time that rooftop solar has more costs than benefits, and that customers who have rooftop solar are not paying their fair share of the electrical grid, are overly subsidized, and are responsible for causing rates to increase for non-solar users. Last spring, SMUD attempted to charge all solar users a new monthly fee that averaged $40-$60, claiming this would force solar users to pay their “fair share.” SMUD withdrew their proposal after a community outcry.

After withdrawing the solar fee proposal, SMUD decided to take a step back, perform a detailed study to quantify solar’s benefits and costs, and then decide what their solar policies should be. Theoretically that’s fine, but the devil is in the details. We have worried that SMUD staff are fundamentally opposed to rooftop solar and would use their influence to steer the study towards the conclusions unfavorable to solar.

Our analysis of the study confirms this fear. SMUD’s report concludes that solar’s costs are greater than their benefits and suggests that solar should be discouraged going forward. However, the report contains several obvious flaws that suggest that the opposite is true — that solar’s benefits outweigh their cost and should be encouraged.

Please tell SMUD in person what you think at their virtual public hearing on September 16th at 5:30 PM. Sign up to attend and get details here. Contact Dave Rosenfeld at Solar Rights Alliance with questions: dave@solarrights.org. Thank you!!

Contact Dave Rosenfeld at Solar Rights Alliance with questions: dave@solarrights.org

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[1] SMUD will likely counter by saying half or more of their fixed costs are covered when people buy electricity. Therefore, when people buy less electricity, that lost revenue must be made up somehow. We agree SMUD should be able to recover existing fixed costs. The proper response is not to single out customers who reduce their energy use. Rather, it is to adjust its rate design for all customers to account for fluctuations in energy use, as it always has done. In addition, SMUD should plan ahead so that its future fixed costs are right-sized with customer demand.

[2] There are other social benefits as well, but climate change is the big banana.