There is a fair amount of talk lately (in nerd circles) about a graph being circulated by the utilities and the California Independent System Operator ( CALISO, the entity that manages the electric grid in the state). Known as the “Duck graph,” it is being presented as a dire prediction of impending grid instability due to the increasing role of renewable energy sources. But where some see doom and gloom, others see opportunity. Here’s our take. (H/T John Farrell at REWorld.)
Here’s the graph (credit, CALISO):
As recently as 2012, this wasn’t a duck at all as net load had two peaks, one in the morning and one late in the evening.
But look at the center of the graph: as more and more renewable sources come online, the demand during the middle of the day falls dramatically, so much so that the utilities are complaining that there will be a risk of “over generation” - producing more energy than is needed and cutting into the baseline production (from power plants like coal and nuclear that need to operate continuously to be efficient.)
Also predicted is a rather steep increase in evening demand between now and 2020.
The net result is a curve shaped much like a duck, apparently a fowl predictor of grid chaos.
Frankly, we look at that graph and see progress and opportunity. Progress in that renewables, which not so long ago were sneered at as being a, “tiny amount of energy that will never amount to anything serious,” are now completely rewriting the load curve in the nation’s most populous state. Talk about coming a long way, baby!
The opportunity, of course, is right there as well. While adding large amounts of smart storage to the grid is an obvious fix for this “problem", as we noted just the other day (see Can Renewables Power the US?), we can handle this evolving energy future in a relatively simple manner—it just requires changing how we approach the problem. Here’s the video:
We can, and will, teach this Duck to fly.
Pasadena Water and Power (PWP) is set to roll out an entirely redesigned Residential rate structure that could spark serious concerns if you are a big user of energy. Here’s our analysis.
PWP customers have been pretty smug (something we are apparently famous for) as we sit back and watch our neighbors in SCE territory suffer through significant rate increases. Well, no more. Now you too, fellow PWP customers, are about to feel the bite of a double digit rate increase. And here’s the thing—the more you use, the bigger that rate increase will be!
PWP has a somewhat hybrid rate structure, meaning that while the pure energy charges are the same no matter how much energy you use (in contrast with SCE’s four-tier rate structure), other components, most notably the customer and distribution charges, are actually tiered. In the newly revised rate structure the customer charge is now split out and is a flat fee of $7.76/month. The distribution charge, however, remains tiered under the new structure, albeit in an odd fashion. The first 350 kWh of energy per month see a low distribution charge of just 1.5¢/kWh. The next 400 are really jacked up: to 11.65¢/kWh before subsiding to 8.5¢/kWh for every kWh thereafter. Which raises the question: if you want to incentivize people to reduce their usage, why is the third tier lower than the second?
As a result of the change in structure as well as the rate components, the impact on your bill varies a lot depending on your usage, as you can see from the following chart:
As you can see, two bars (at 15 and 25 kWh) actually show rate decreases and the percentage increase continues to swing back and forth until you get to 35 kWh per day when the increase is monotonically upward.
Indeed, if you are sucking down 100 kWh/day, your rates will go up by nearly 50%!
Fortunately, very few customers are in such rarefied air as that; but a homeowner who had an average usage of about 25 kWh/day who then goes out and purchases an EV that she drives a lot, could bump into the 50 kWh range and she would see a 19% rate increase. Have a big house with a pool and a jacuzzi and a couple of EVs? If that gets you to 80 kWh/day your rate increase will be 40%!
In fact, it is actually worse than what we are showing here since this is only looking at the energy services part of your bill. On the left-hand-side of your bill you will find the Public Benefit Charge (tied to how much energy you use) and it is going up by 19%. On top of that are taxes that you pay on those energy services amounts and you can see that PWP customers, except on the lowest end of the scale, are in for some serious rate hikes starting July 1.
Of course, solar is the perfect hedge against these rate increases (and others sure to come in the future) and PWP still is offering the highest rebates around: $0.85/Watt. But in all likelihood we will see those rebates step down soon so now is the time to act! Give us a call at 626-793-6025 and let’s get started.
Yesterday we wrote about how SCE’s residential customers who take service under the Domestic rate structure could see their bills rise by 12% or more starting with their June bills, and we warned commercial customers not to get complacent about their own bills. Today we drop the other shoe: GS-1 and GS-2 customers, the bad news starts now.
SCE’s commercial customers (what it refers to as general service, hence the “GS") are largely divided into two groups: those that pay only for monthly energy usage (GS-1) and those that pay for both usage and peak power demand charges (GS-2). You can use all the energy you want in a month, but as long as your peak power demand never exceeds 20 kW you will stay in GS-1. Once your demand sneaks past 20 kW however, you will be assigned to paying higher bills under GS-2.
Solar for GS-1 users is a no brainer, just as it now is for SCE’s residential customers. For GS-2 customers, however, the question is a tougher call since it can be very hard to know how well solar will coincide with a potential client’s peak power demands, and it is those demand charges that so drive the pain of GS-2 bills. Neither GS-1 nor GS-2 are tiered, meaning that every kWh of energy is charged the same. Under GS-2, however, demand charges are significantly higher during the summer than they are the rest of the year.
We said that you could use all of the energy you like and remain in GS-1 but that’s not strictly true—if your peak power demand stays below 20 kW you can only pull so much energy into your site. Let’s imagine a commercial entity that is right under that limit: say 19 kW peak demand and they sustain that demand for 10 hours a day, every day. The remaining 14 hours their demand drops to just 5 kW. Their daily usage averages:
Usage = 10*19 + 14*5 = 190 + 70 = 260 kWh/day.
Under the old rate, this maxed-out GS-1 customer would have seen a bill of $15,355 or roughly 16.2¢/kWh. (A bargain, by the way, compared to what a residential customer using that much energy would have paid.)
Under the new rate, their bill jumps to $16,777 an increase of 9.26%, and now they are paying 17.7¢/kWh.
We recently provided a proposal to a potential GS-2 client, so we will model their usage to demonstrate what the new rates will do to a GS-2 customer’s bill. Their usage has peak demands that average 119 kW per year, but spike as high as 167 kW during the summer. Their daily energy usage is substantial as well, ranging between 600 and nearly 1,000 kWh per day from winter to summer.
Under the old rates, they were paying some $56,873 or 21.73¢/kWh. The new rates will see their bill climb to $59,598, and increase of 4.79%, averaging 22.77¢/kWh.
But here’s the interesting thing about the new GS-2 rate: it is actually more beneficial to solar customers, since the increase is mostly in the per kWh charge. Indeed, when we model our potential client’s savings in Year 1 under the new rate as compared to the old, it increases by over $1,000—going from $14,808 to $15,818, a 6.8% savings increase for no additional out-of-pocket expense! Their payback now occurs in Year 6 instead of Year 7, their IRR increases from 12.2% to 12.9% and they will have saved an additional $12,000 in Year 10 than they would have under the old rates. (Combine the solar power system with intelligent storage and you are really on to something.)
SCE’s rates are going up for all classes of customers that we see: residential (12%+), small commercial (9%), and large commercial (4.8%). Solar can help all of these customer classes, and GS-2 customers can see an even greater savings from solar under the new rates than they could before. Oh, and SCE still has some rebate money for commercial projects, but that won’t last for long.
Stop suffering, start saving—make this the summer you go solar.
One of our astute readers contacted us to ask if we had noticed that SCE had just increased their rates—and dramatically. That got our attention so we decided to spend some quality time amidst SCE’s tariffs. The news is mixed: terrible news for people who are going to have to pay these crazy rates, but great news for everyone who can install solar. In fact, SCE’s new domestic rate is about all anyone would need to be convinced to finally make the switch to solar.
In case you did not know it, every SCE tariff—that is, the rate structures under which they bill their customers such as the Domestic tariff for most residential customers or GS-1 and GS-2 for most commercial customers—can be found on their website. If you know where to look. (Hint: look here!) Of course, when you do find what you are looking for, you are rewarded with something that looks like this:
This is one half of SCE’s Domestic rate (the delivery portion)—and this is about the simplest rate structure that they use! So it is not surprising that most normal people don’t really examine these things to see what is going on—they just groan and pay the bill.
But we suspect people will do more than groan when they look at their bills this summer.
We had been working on a solar proposal for a prospective client in SCE territory when we learned about the rate change. The client’s usage was relatively high, averaging 55 kWh/day over the course of the year; high, but still far lower than some of our clients. Under the rate structure in effect prior to June 1, this client’s annual bill worked out to $5,100 but after applying the new rates her annual total jumped to $5,750—an increase of a whopping 12.7%!
We will pause a moment to let that sink in.
What about that other potential client we wrote about, the one whose SCE bill already contained an incredibly misleading chart purporting to help her understand her bill. What impact will these new rates have for her? Under the rates in place before June 1, her total bill for the year was an already eye-popping $8,435—ouch! But under the new rates? Her new bill becomes $9,560—an increase of 13.4%!
So what is actually going on here? Turns out that the rates on the high end, Tiers 3 and 4, are the culprits, increasing by 16.4% and 14.8% respectively. Live in Tier 4 this summer and you will be paying 34.8¢/kWh for the privilege!
There is a silver lining here and that is that adding solar pays off better than ever. If your solar power system gets you out of Tier 4 alone, you will save thousands of dollars a year. For our prospective client who averaged 55 kWh per day, her savings come to $4,171 in Year 1. Even without a rebate from SCE (which for now at least has gone the way of the Dodo), her payback is in Year 5! After 10 years, thanks to these new rates, she will have saved an additional $25,000! And by avoiding a lease (this client is planning on using HERO financing), those benefits all go to her!
We have said it before and we will say it again: utility rates are only going up. While this example pertains to just SCE’s residential customers, guess what? You commercial customers are about to see your rates go up as well (more on that soon). And muni customers, now is not really the time to feel smug as your rates are going up too (and yes, PWP folks, we mean you!).
Give us a call and let’s see if we can’t help—contrary to the song, we’ve got a cure for these summertime blues!
We have looked at a lot of electric bills.
Pretty much every potential client that we speak to sends us a year’s worth of their electric bills as the first step in the process of getting a proposal for adding solar to their home or business. We use that data to model what your actual savings will be, based on the rate structure that the utility applies to you as their customer. Some of those rate structures are really complicated (like this time-of-use rate for EV charging), but for most residential clients, the rate should be relatively straight forward. After all, you are only paying for total usage (not demand charges) and most folks aren’t yet on a time-of-use rate. How complicated can it be?
But we had a bit of an epiphany the other day as we tried to explain an SCE bill to a couple at their kitchen table. Perhaps you’ve noticed this little chart if you are an SCE customer:
Presumably this is SCE’s attempt in helping you to understand your bill. So what is going on here? SCE residential customers are under a tiered rate structure. The lowest tier, the so-called baseline rate, is relatively cheap at roughly thirteen cents per kilowatt hour for the first few hundred kilowatt hours needed. Of course, no one uses just their baseline allocation and so the second tier is a tiny slice that is 30% of the baseline. If you stay in those first two tiers, congratulations, you are getting some pretty cheap energy.
Tier 3 is where things start to get pricey, with the cost per kilowatt hour doubling from what you paid for baseline. Tier 3’s allocation is 70% of baseline, which mean that if you use more than twice your baseline allocation, you are out of Tier 3 and into the dreaded Tier 4 where you will pay more than 31¢/kWh.
Ok, so far so good. But notice the odd thing that is going on in that graph. The widths of Tiers 1-3 are actually proportionate to reality. The width of the bar for Tier 1 is equal width to the sum of the bars for Tiers 2 & 3— which is exactly how the rate structure works. But what is going on with that bar for Tier 4? At a quick glance, you might think that you are using about the same amount of energy in Tier 4 as you did in Tier 1 (or Tiers 2 & 3). But look at the number: whereas Tier 1 was 399 kWh, the usage in Tier 4 is more than four times that amount at 1,799 kWhs! This client is living in Tier 4!
This is not only not helpful to “understanding your bill,” this is downright deceptive.
So what should this actually look like if drawn to scale? How about this:
Now the true impact of this client’s high energy usage starts to become clearer. Their usage is dominated by Tier 4 but you never would have seen that relying on the chart provided by SCE.
Of course for most clients, they are more interested in what they are paying, and it is here that the real impact of SCE’s tiered rate structure comes home. Check out this chart:
Wow - this client is spending 10x as much on Tier 4 as they are on Tier 1! That is some painful energy costs right there!
To be sure, if you review your bill carefully, you could find this same information, but the bill obscures the facts by parsing out the numbers in a manner that only makes sense to the lawyers who crafted the rate structure (and those of us who have made it our business to decipher them).
We have a suggestion to our friends at SCE—if you really want to help your customers understand their bills, start by ditching the misleading charts and replace them with a clear representation that makes the facts readily understandable.
In the meantime we will continue to do our part, one kitchen table at a time.