SCE has two rate structures commonly used by commercial customers: GS-1 and GS-2. As part of our new website roll-out, we have been exploring the use of interactive data visualizations and we decided to create one to explore the impact of demand charges under SCE’s commercial rates.
Here’s some background. SCE’s smallest commercial customers, those whose peak power demand is 20 kW or less, are assigned to the GS-1 rate. This is a rate structure very similar to what one has at home - charges are based on the total amount of energy used in a month (as measured in kWh). Moreover, this is a flat rate structure - every kWh costs the same, and does not account for when it is consumed. (NB: this is changing; over the next year SCE’s commercial customers will be moved to a time-of-use rate structure, but for now, most are not. We will have more to say about SCE’s commercial time-of-use rates later.)
The GS-2 rate structure, on the other hand, includes all commercial customers with peak power demand between 20 and 200 kW - a very large segment of the commercial customer base. For them, an additional rate component is introduced - peak power charges, better known as demand charges. While GS-2 customers pay significantly less per kWh of usage, they more than make up for it in demand charges. Indeed, during the summer months, GS-2 customers pay for demand charges twice!
The net effect of all this is that GS-2 customers generally pay significantly higher bills than they would if their rate was based on usage alone. To explore that, we created this visualization. Derived from the actual rate tariffs (which are linked to on the site), this allows you to compare what your annual bill differential would be against a variety of scenarios. Since most commercial customers have a peak demand significantly higher than their average, that is the first “knob” to adjust - as average demand becomes a smaller percentage of peak, the differential increases.
To try this for yourself, click on the image above to go to the visualization page.
We would love to hear your thoughts about this tool, as well as SCE’s commercial rates. Please let us know what you think in the comments.
A key to the growth of solar, particularly commercial solar, is the availability of affordable storage solutions. Two recent developments suggest that we are about to see dramatic growth in this vital market sector.
One week ago the California Public Utilities Commission (CPUC) voted five to nothing approving a plan to require the three investor-owned utilities (SCE, PG&E, and SDG&E) to procure 1,325 MW of energy storage by 2020, with installation completed by no later than the end of 2024. Both SCE and PG&E are required to procure 580 MW each, with the remaining 165 MW allocated to SDG&E. 200 MW of that 1,325 MW total is to be interconnected at the customer’s site. In addition, the decision provides a timeline for this to happen with the first 200 MW to be procured by the end of next year.
Other electric service providers, like the munis, will have to procure energy storage equal to 1 percent of their annual peak load by 2020. Those storage systems can also include customer sited and/or customer-owned storage devices as long as they were installed after January 1, 2010.
Large scale pumped hydro storage (greater than 50 MW) is excluded from the program, but storage obtained from plug-in electric vehicles can be counted.
This is a tremendously significant decision as the mandate will surely drive R&D as well as deployment investment and help provide a ready market for these emerging technologies.
An announcement this week during Solar Power International shows how that investment is already starting to happen.
Stem - the company with the clever technology for using storage to “smooth out” the demand peaks that drive commercial energy costs - just announced a $5 million project finance fund with Clean Feet Investors (CFI). From the parties’ press release:
The new financing model, which Stem developed in collaboration with CFI, is designed to open access to a wider pool of customers by removing barriers to adoption, enabling up to 15 MW of energy storage to be deployed. With this financing capability, Stem hopes to follow the dramatic growth trajectory pioneered by the third party ownership model in the solar industry. Stem and CFI plan other innovative financing offers for customers including performance-based and shared savings financing solutions with the capital from this financing.
“In addition to breakthroughs in technology, Stem is focused on driving business model innovation,” said Prakesh Patel, Stem’s vice president of capital markets and strategy. “By working closely with CFI, I believe we have created a unique offering to help accelerate customer adoption of Stem systems. This transaction paves the way for Stem to become one of the first efficiency technologies to achieve bankability.”
“Deployment capital is essential for Stem to get their technology in the hands of their customers – many of whom prefer a “pay as you save” offering,” added Jigar Shah, a principal at Clean Feet, and founder of the largest solar services company, SunEdison.
Allowing companies to install Stem’s technology with little or nothing down will help those companies save money at the same time it allows Stem to ramp up. This is great news for the solar industry since it is posed to provide the energy that Stem’s system later distributes as needed to offset those costly demand peaks.
Of course, this isn’t exactly great news for the utilities who, if this technology were widely adopted, would see a huge revenue hit as more and more commercial customers were able to lop-off the most expensive energy they now have to procure. Whether it is the continuation of net-metering on the residential side or the ability to eliminate the worst of demand charges on the commercial side, the pressure on the utilities will only continue to grow. But for their customers, things have never looked brighter.
We have been teasing out bits and pieces of our new book, Commercial Solar: Step-by-Step, all summer as we neared the end of the publication process. Well today we can formally announce that it is available both at the Run on Sun Publishing eStore (where we get a better royalty - hint, hint!) and on Amazon.com!
Commercial Solar is intended for two primary audiences:
As the title suggests, the book provides an overview of the process by which an interested party - say, a facilities manager - can go from knowing next to nothing about commercial solar to identifying appropriate contractors to provide bids, analyzing those bids to make meaningful comparisons, determining financing options that are appropriate and even overseeing the actual installation process.
The book features a Foreword written by Boaz Soifer, VP of Sales at Focused Energy:
The material could be dry (much of the reading on this subject is), but is instead casual but precise, clearly laid out, and made accessible through handy use of a narrative in which the Facilities Manager of a fictional company undertakes a commercial solar project himself…
In his typical style—approachable, honest, quirky, and occasionally scathing—Jim has thoughtfully flattened out the complex world of commercial solar PV into an understandable roadmap that anyone can follow to project success.
Interested? You can download a two-chapter excerpt of the book for free, here. Better yet, you can purchase the book today from either our eStore or Amazon for just $9.95. If you are interested in bulk sales (i.e., ten or more copies), discounts are available. Please contact us at Bulk Sales for more information.
And of course, we welcome your comments either here on the blog or at Amazon. Thanks for your support.
It has been said that as with sausage making, one should never watch how legislation is actually made as the process, if not the end result, can be sickening. That adage seems to be playing out over the anti-solar/pro-solar legislation known as AB 327.
As originally drafted, AB 327 sailed through the Assembly, only to be “gutted & amended” in the Senate into legislation that many in the solar community saw as nothing short of an existential threat. Online petition campaigns were launched and one prominent solar company started robocalling to urge other solar companies to join the opposition.
(Note to colleagues: the only thing more annoying than robocalls are when the party behind the robocalls denies any knowledge about them - as this company did the three times that I called them. Bad way to build allies.)
Now the folks over at Greentech Media are reporting that the bill is facing additional amendments that might, perhaps, turn the bill into something of a win for the solar industry. The piece by Jeff St. John titled - AB 327: From California Solar Killer to Net Metering Savior? - does a fine job of tracking the twists and turns of this legislation and lays out what might be the road ahead. It is well worth the read.
But with the end of the legislative session looming - all bills must be passed by September 13 - time is tight for this process to be done correctly. Moreover, given that the CPUC is due to release a study on the costs and benefits of net metering, it is hard to understand the rush to try and get this bill passed now. The legislative process would be far better served - that is, we would have a far more appetizing result - if we were to take a pass on AB 327, digest the CPUC study, and get all stakeholders to the table to craft a long-term solution.
Will that happen? Well, betting on nothing happening is always a safer bet than on the right thing happening, particularly in the crunch time that marks the final two weeks of the session. A break in the action might not be the result we would most relish, but it is probably the most palatable result that we can achieve.
A fascinating piece over at Bloomberg Businessweek Technology turns our question into a declaration: Why the U.S. Power Grid’s Days are Numbered in a piece by three authors, Chris Martin, Mark Chediak and Ken Wells. But it isn’t the grid so much as the 3,200 utilities scattered across the landscape that are headed for extinction. (H/t SolarWakeup.com)
The article traces the story, familiar to readers of this blog, about the downward spiral facing utilities - as their prices rise, more customers get to the point where solar makes economic sense. But that switch further erodes the revenue base for the utilities so they must raise their rates yet again, driving away yet more customers and on it goes. Clearly not a sustainable future - for the monopolistic utilities. (Perhaps that is why some - and here we mean you, SCE - have so little sense of humor these days?)
Here is one of the many insightful quotes compiled by the authors:
“The technology and energy sectors will no longer simply be one another’s suppliers and customers,” the report says. “They will be competing directly. For the technology sector, the first rule is: Costs always go down. For the energy sector and for all extractive industries, costs almost always go up. Given those trajectories, counterintuitively, the coming tussle between solar and conventional energy is not going to be a fair fight.”
(Quoting from the Bernstein energy industry black book.)
Hmmm… solar beating up on the utilities so badly that it isn’t a “fair fight” is a future that many of us would pay to see.
While that future might seem inevitable to reporters viewing this from a distance, those of us in the solar industry know that we have a major fight on our hands. Today we have a sympathetic legislature in Sacramento, but that could change and our allies replaced by adversaries almost overnight. Surely the utility industry has the bucks to lobby legislators in ways that the solar industry will never be able to match.
As I said, the article makes for great Friday reading and I commend it to you.
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