Solar Comes with Hidden Costs

Can’t afford to install expensive solar panels on your home? Doesn’t matter. You might end up paying for solar anyway. That’s been the experience of power customers in more than one state.

Last year, PACE brought you the story of customers in Hawaii who were charged as much as $10 additional on their monthly electricity bills because other customers in the system opted to install rooftop solar panels. Because the customers who opted to install solar panels didn’t pay their full share of non-generation costs like transmission, the non-solar customers were forced to pick up the slack.

Now comes a new cautionary tale from California, where power customers who don’t install solar panels are preparing to cough up an extra $1.3 billion. Yes, that’s billion with a B. That’s because a head-scratching policy in California mandates that power companies pay homeowners with solar panels the same rate for a kilowatt-hour of electricity as they charge other customers.

The result is that every electron generated by a solar customer in California presents a financial loss for utilities. That’s because the fixed costs of maintaining a system with expensive transmission and reserve power requirements remain, but the solar panel owners aren’t bearing them. Instead, those fixed costs are sloughed off to the customers who either chose not to turn their rooftops into solar arrays or couldn’t afford to do so. Like a hot potato, the uncollected costs of running a power system have landed in the hands of non-solar customers, burning them to the tune of more than a billion dollars.

“You get into a situation where you have a transmission and distribution system with nobody paying for it,” explains Akbar Jazayeri, vice president of regulatory operations at Edison, a unit of Edison International and California’s second-largest electric utility.

San Diego Gas & Electric alone is currently shifting about $20 million annually to non-solar customers to make up for collection shortfalls for fixed costs. Eventually they will shift as much as $200 million per year. The state’s largest utility, Pacific Gas & Electric, eventually will up-charge its non-solar customers about $700 million annually. Executives at those utilities warn that with every new solar rooftop installed under current policy, the pool of customers left to bear the fixed costs shrinks, meaning each non-solar household pays a little more year by year.

In states across the U.S., policy makers continue to weigh how to responsibly pursue renewable power opportunities. Fortunately, they now have the benefit of bearing witness to a policy in California that is fundamentally unfair, financially regressive, and ultimately unsustainable. Let’s hope they avoid the same folly.