Our first post on the new SCE rate structures revealed that there were big changes coming to Residential customers. In this post we will look a little closer at how those changes will affect your bill.
As we explained before, SCE’s new Domestic rate structure changes baseline allocations and completely eliminates the dreaded Tier 5. Instead, the price of energy at Tiers 3 and 4 went up sharply (6.3% and 7.2% respectively) while summertime allocations generally declined. (We didn’t discuss it in our previous post because it doesn’t affect that many SCE customers, but allocations for “all-electric” homes dropped dramatically, as much as 35% or more! If you are in an all-electric home, you better be generating your own electricity!)
But the changes in the rate structure are complex - after all, non-summer allocations often increased and without Tier 5 it figured that some customers - those who use a great deal of energy - would actually benefit from the change. We decided to find out.
To assess the impact of the new rate structure, we modified our old SCE Domestic rate model (which we have used to estimate future savings from installing solar) to reflect the rate structure changes: new baseline allocations and the elimination of Tier 5 in return for modifications to the lower Tier rates. Now we had two models - one based on the “2012 Historical Rates” and the other based on the new rates effective April 1, 2013.
Since the allocations vary by region, we chose Region 9 (which covers the cities surrounding Run on Sun such as South Pasadena and San Marino) as the home for our representative SCE customer. We then ran our models based on a daily usage ranging from 10 kWh (way less usage than any single-family home in either of those cities) all the way up to 70 kWh (greater usage than all but the largest properties). To account for summertime loads, we increased the daily usage by 50% for the months of June through September (a generally conservative estimate, especially as daily usage increases).
Here are our results (click for larger):
Despite the presence of four (or five for 2012) different rates, the actual graph is almost entirely flat, except for usage at the very bottom end of the scale. Fairly early on, we see the 2013 rates bend up above the values from 2012 with the greatest increases between 18 and 36 kWh daily usage (more on that in a moment).
As predicted, however, the rate increase is actually a rate reduction - if you happen to own a mansion or are running a whole bunch of Grow Lights. Indeed, for folks way out there on the right edge of this curve, they will see their annual energy costs decline by more than 1%! How nice for them.
But how did the rest of us do? Let’s zero in a bit on where the middle class lives and see what their rates look like - check this out:
For this graph we have restricted our usage values to the range of 18-36 kWh and narrowed the scale of our cost axis to start at $1,000 instead of $0. The resulting “magnification” shows who is shouldering the bulk of this rate increase. Customers in this band will see rate increases this year of anywhere from 2.88% to 4.85% (at 28 kWh), and keep in mind this is just one year of a multi-year rate increase plan.
Who are these lucky folks? Well, in terms of potential solar clients, their system needs would range from 3.6 kW (just above our minimum system size) to 7.2 kW - in other words, the “sweet spot” of our potential residential clients.
So what is our takeaway from this analysis? Well, as is seemingly commonplace these days, if you are in the middle you are getting squeezed. Folks on the low end mostly get a pass while folks on the high end are actually getting a break! But if you are in the middle, it is your pocket that is getting picked.
Installing solar is your best hedge against the clever targeting by the team, no, make that the legion of lawyers and economists employed by the utilities to design these rate structures. We cannot stop their scheming, but we can certainly assist you in fighting back! Give us a call today, or better yet, fill out our online form and let’s put this new rate model to use in saving you some money!
Coming up later this week: how the new rate structures affect commercial customers.
You might think that the hardest part of a small commercial solar project (15-50 kW) is the actual installation - after all, installing solar does combine the two greatest occupational hazards to health: falls and electrocution. But you’d be wrong. You can guard against those.
No, the hardest part - after all the time and expense of finding your potential client and putting together a winning bid - is helping them figure out how to pay for it.
Small commercial projects are an odd-sized nut to crack when it comes to financing: at a cost of between one and two hundred thousand dollars they tend to be too pricey for an entity to just write a check, but they are too small to support more elaborate financing schemes which usually only apply for projects in excess of $250,000. So what to do?
We have written a lot about PACE, and while we are excited about it as a concept, it doesn’t seem to be getting a lot of traction.
For one thing, many non-profits (a niche of ours) don’t qualify since they don’t pay property taxes. For another, a big part of Southern California has failed to get on the PACE bandwagon at all. In particular, while Los Angeles County has a program in place, not every city has signed on (we’re talking about you, Irwindale!) and Orange County is a PACE black hole, with no activity there at all. What is up with that? (And please, don’t tell me this is a political thing - there is nothing more inherently conservative than putting your money into a near-zero-risk investment wth great returns.)
Similarly we find it odd that local banks aren’t reaching out to solar companies to work with them on financing these projects with conventional, low-interest loans. After all, installing solar helps to reduce a company’s operating costs in an area of greatest volatility. (You did hear that SCE is raising its rates on average by 17.2% over the next three years, right?) So financing such an improvement means that the local bank is creating a more stable company in their community - which means that they will be more likely to stay in business and remain a customer for longer - which is good for everyone, right?
And what of the national banks? Why aren’t they reaching out to local companies and not just the giant players? A year ago we participated in a small business contest sponsored by Chase bank. We easily collected the required number of online supporters to qualify (thank you!) and while we didn’t really expect to win, we certainly expected to hear from Chase about how they could work with us going forward. Well we were half right - we didn’t win. But as for follow-up from Chase? Zilch, zero, nada.
A Twitter friend reminded us of Mosaic, the crowd-funding service for financing solar projects so we went to their website to check them out. This is a curious thing. For one thing, the website disclaims their service from being crowd funding, saying:
Mosaic’s services do not constitute “crowd funding” as described in Title III of the Jumpstart Our Business Startups Act ("JOBS Act").
We aren’t sure what that means, but it is, at best, counter intuitive.
For another, we couldn’t find anyway on the website to submit information about a potential project that you wanted to get funded. The best that we could do was find a “support” email address which produced an auto-response but as of now, nothing else.
What is needed for small commercial projects is a simple and elegant tool like the one displayed at the start of this post. Minimal paperwork. Reasonable cost of capital given the exceptionally low risk. Quick approval times. Surely someone can help us crack this nut?
Over at the MIT Technology Review they are running a provocative piece that seeks to explain “Why We Need More Solar Companies to Fail." (H/T Mashable.com) The premise is intriguing, but the biggest problem is that those who fail may well be the wrong companies.
The article makes the case that:
If Suntech fails and shuts down its factories, that might not be a bad thing. Some industry experts say that hundreds of solar companies need to fail to help bring solar panel supply back in line with demand. That would slow the fall in prices and, as demand recovers, allow companies to justify buying new equipment and introducing the innovations that will ultimately be needed for solar power to compete with fossil fuels.
Now those all might be reasonable things to wish for and anyone who has ever attended Solar Power International knows for a fact that there are way too many solar panel companies out there. But here’s the thing - do we really want Suntech to be one of the companies that fails? Suntech makes a top-tier panel and has devoted substantial revenue to R&D. Should we really be sanguine over their (potential) demise?
Ironically, the same MIT Technology Review touted Suntech’s R&D spending back in 2010. Back then they were reporting how Suntech was well positioned to deal with upcoming changes in the market and they quoted Suntech’s Chief Technology Officer Stuart Wenham as saying:
“The industry was getting into a situation two years ago  that was getting to be a little unhealthy,” Wenham says. “The demand was so much higher than the supply that it was possible for people to enter the industry, and enter manufacturing, without even having a decent product. Whatever product they could produce they could sell at a significant profit, even if it was a poor-quality product.”
Now, however, even if the solar market were to double this year and next, the silicon suppliers would have no trouble keeping up, which will help keep prices for solar panels relatively low, Wenham says. In that scenario, only the companies with the best technology will be able to sell their products at prices that are high enough to make a decent profit. “Those that don’t have good technology will probably end up being bought up by companies that do,” he says.
Alas, having a good product is not the ultimate hedge against rapidly declining prices. But it is simply not a good thing to see cheap beating out quality. At least not on our installs.
Here’s hoping that for every quality manufacturer like Suntech that falters, a hundred fly-by-night outfits will disappear forever.
The City of Glendale is under a legal mandate to offer a Feed-in Tariff (FiT) program to its customers by July 1 of this year - but as yet, no information about a proposed program has been made public. Given that LADWP literally took years to develop its program that just began in February, Glendale’s silence raised serious questions over whether they would be able to produce a viable program before the deadline. Today we got a tiny glimpse at the process - here’s our update.
We have been trying to get information from GWP about their mandated FiT program since January. At that time we were informed that GWP was “conducting a rate design study” but that the study had not been made public “because it still [is a] work in progress." However, when we pressed for information about when the study would be made public, we received no reply. (Indeed, as of this writing that study has still not been made public.)
We then tried to contact the City’s Commissioners who oversee GWP, specifically sending emails to Commissioners Yao, Dentler, Chan, Armenian, and Adjemian. Sadly, the email addresses for Chan, Dentler and Adjemian - which are set forth on the City’s website - bounced and neither of the other two Commissioners provided any reply.
Today we decided to take a different tack and we turned to Twitter to see if that would provide a means of generating a response. Specifically, we tweeted the following:
@COGWaterPower - when are you going to release info about your mandated Feed-in Tariff program?
Score one for the power of Social Media as we got a direct message in response just 17 minutes later:
We are currently working on the rates and community meetings will be scheduled for May/June. Info. will be posted on meetings soon.Thank u
This was followed shortly thereafter with the following email from Hector Gutierrez:
As you are now aware per our response to your tweet today, the public meetings to inform our GWP customers of the new proposed electrical rates will take place during the months of May and June. Our legal department is currently working on the Feed-in Tariff implementation process. All these issues will be presented to the GWP Commission and City Council for their approval, and put in effect on July 1, 2013.
So, we still don’t know anything about the proposal’s specifics, but we do know that public meetings will be held in the two-months before the program is set to go live, which is more than we knew before. Unfortunately, public meetings in May and June to be followed by votes by the GWP Commission and then the City Council does not really provide much opportunity for changes to the program before a mandated July 1 go-live date. Moreover, it is curious that the public process would be framed as meetings to “inform our GWP customers of the new proposed electrical rates” as if only GWP customers were stakeholders in this process.
For now, we will hold our skepticism in check and await (eagerly!) news of the actual dates for the public meetings. Once any additional information is made public, we will update you on developments.
Of course, if anyone out there has any additional insight into what is happening in Glendale, we would love to hear from you!
Amidst the continuing sturm und drang between the solar industry and the Investor-Owned Utilities (IOUs), we came across this interesting piece over at REWorld documenting some revealing observations by Duke Energy’s CEO, Jim Rogers. Duke - the nation’s largest utility owner, sees the writing on the wall and is not sanguine about what it portends:
“It is obviously a potential threat to us over the long term and an opportunity in the short term… If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup,” Rogers said.
Rogers’ observation comes at a time when the conventional energy industry is facing “anemic” growth in power demand - due to increased efforts at energy efficiency and the growing impact of consumer-owned generation. Since IOUs make a guaranteed return on investment in building, mostly, added power generation capacity, if there is no need for additional capacity, there is no basis for future returns. Not a promising prognosis for an industry that has grown accustomed to those sweet, sweet guaranteed returns.
And that, in a nutshell, is the IOUs’ dilemma - as renewables become ever more cost-effective, and particularly once intelligent storage solutions become a part of standard solar offerings, the justification for the guaranteed existence of IOUs becomes weaker and weaker. Contrast this with the municipal utility model which is owned by the city in which it is based and which exists for the benefit of its residents. If their preference is for distributed generation, then the muni’s goal should be to facilitate the adoption of such systems. Since its customers are also its owners, the interests are aligned.
But not so with IOUs who exist to make a profit for their shareholders and those interests are not necessarily aligned with those of the monopoly-provided customers they “serve". Not surprisingly, it is the IOUs leading the charge against net metering and questioning the “fairness” of local solar power.
Which raises the question: Can we as a society afford to have IOUs anymore? In an era of carbon-driven climate change, are IOUs a dinosaur determined to fight their extinction to the bitter end, even if they take th rest of us with them?
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