As we explained in a blog report earlier this year, most Americans give little thought to the reliability of their electric power grid. That’s because, aside from brief interruptions caused by weather events or other extenuating conditions, the nation’s utilities have a near-perfect record of delivering power to customers. At that time, we described how changing policies could jeopardize the performance of the grid.
Now, a new study commissioned by the Electric Markets Research Foundation, entitled “Changing Uses of the Electric Grid: Reliability Challenges and Concerns,” should give policy makers even more cause for concern about the trajectory of U.S. energy policy. The report, which was released at the summer meeting of the National Association of Regulatory Utility Commissioners, outlines a number of ways that the grid could be in real trouble without thoughtful changes.
According to the report, “new business models and a panoply of emerging energy technologies such as rooftop solar, microgrids and distributed generation could imperil the availability of affordable electricity to all consumers and the reliability of the nation’s electric grid unless the harmful effects of ratemaking subsidies are addressed now.”
PACE has written extensively about solar power and the need for states to reform net metering practices. If left unchecked, bad net metering policies have the potential to shift costs to customers who choose not to install solar panels. Just as dangerous, overly aggressive policies toward solar power also threaten to weaken the reliability of the power grid and raise costs for everyone.
“The new technologies being introduced to the grid have the potential to provide significant benefits. However, it’s important to understand that the integration of these technologies into the grid will increase – not decrease – overall grid costs,” said Steve Mitnick of Build Energy America, the author of the study. “Success ultimately depends on the ability of the grid to accommodate these new uses while safeguarding affordable electric power.”
The report states that most of the 600,000 households nationwide with net metering are paid the full retail price for the extra electricity sold to a utility. However, the utility’s purchase of the excess electricity covers only part of its costs. In fact, the full retail rate paid by utilities under net metering reflects a payment of more than twice what the utility actually saves by buying the power. Other customers must make up the difference, subsidizing homeowners with rooftop solar and net metering.
“Net metering is a double whammy to the utility,” the study noted. “It is an incentive for customers to leave the grid, thereby reducing their contribution to the fixed costs of maintaining the grid. And it imposes additional costs on other customers, most notably the increased costs of integrating customer-owned generation into grid operations.”
“The changing use of the grid can risk the ability of utilities, under traditional regulation, to afford a prudent level of grid upkeep and expansion,” the study said. “If utilities are forced to cut back grid upkeep, for want of sufficient monies, there’s no one standing behind the utilities to step into the breach.”