Have you heard that Elon Musk and Leonardo DiCaprio are tweeting opposition to a California solar proposal? Read on to find out why they are fighting for consumer owned solar power.
At the turn of the 21st century, California radically changed public policies toward solar power. The state’s strategy was to bring solar to mass market consumer adoption in pursuit of zero emissions, lower cost electricity and development leadership in renewable energy technologies.
They implemented this strategy in two steps: Step one targeted bringing down the initial cost of solar panels to attract investment. The second step was a pioneering concept called net metering. Net metering allows a consumer owned solar system to net its generation against purchases of utility electricity. Under net metering a consumer with a sufficiently sized solar power system could net their electric bill to a zero balance.
California’s strategy worked perfectly. It generated such a high level of solar power demand that it created both manufacturing economies of scale and technology innovations that have made solar America’s least cost source of electricity generation. In fact, solar panel prices are so low that California no longer needs to offer initial investment financial incentives for their installation.
But while Californians were focused on Christmas 2021 and the Omicron surge, the California Public Utility Commission (CPUC) proposed new rate designs that would black out the ability of consumer owned solar power systems to reduce electric bills. The CPUC’s will soon vote on a staff proposal to replace net metering with asymmetric net metering. Under this new asymmetric metering plan consumers are charged significantly large flat monthly fees for being connected to the gird. In addition, this proposal assigns to consumer owned electricity sent into the grid a low “marginal cost” energy price rather than a net against the utility’s price at the meter. The combined result of a high flat monthly fee plus a low price for solar energy kills the financial incentive for going solar.
The Damage from Empowering Utilities and Not America’s Consumers
Most state utility regulatory commissions, including now the CPUC, fail to comprehend that 70% of our economy is consumer driven. America’s path to economic and technology leadership runs through, and is driven by, the American consumer.
For example, not discounting the Covid-19 trillions that governments have injected into the economy, it was consumer adoption of WiFi connectivity, smart phones/PCs and apps like Zoom and Grubhub that saved American businesses, jobs, and our economy. Faster than the spread of Covid, American consumers recreated themselves, and the businesses they buy from, through an accelerated shift into home offices and a delivery economy.
But state utility commissions ignore the value consumers generate when they buy a disruptive technology like solar. Their focus is instead on “fairly” allocating utility costs.
The CPUC’s rationale for destroying consumer owned solar economics was that it was “unfair” because a larger number of wealthier Californians own solar systems than lower income Californians. Even more, the CPUC’s calculations of how utility costs should be allocated between customer classes, an exercise not dissimilar to Solomon’s proposal for splitting a baby between two competing mothers, concluded that low-income consumers were subsidizing wealthier consumers.
But what the CPUC’s perception of fairness ignored was that net metering has financially enabled thousands of solar systems at non-profit buildings and public schools.
What the CPUC also ignored was that California’s legislature has mandated that all new residential homes and larger apartment buildings have solar systems. This CPUC proposal strips consumer cost savings from installing solar power systems and thereby creates an “unfair” economic penalty on new residential construction, especially affordable housing, at the very time California can’t build enough affordable homes to meet demand.
Most damaging to our economy and America’s technology leadership, the CPUC totally ignores consumer behavioral economics. Of course, more wealthy consumers bought solar power systems because people with the ability to take financial risks are typically the early adopters of less proven technologies. It is the purchases by early adopting consumers that create the initial consumer demand to generate manufacturing economies of scale that drives down prices for all consumers. This is how America has achieved mass market sales penetration for everything from flat screen TVs to smart phones. The CPUC removal of net metering kills the opportunity for consumers to massively adopt solar power because it robs them of their ability to lower their electric bills.
The fact that the CPUC and America’s other state utility commissions cannot see the link between mass market adoption of a disruptive technology and the consumer’s thirst for lower costs threatens America’s economic growth. At this very moment of record high inflation growth, led by energy price increases, state utility commissions are promoting consumer price inflation by blocking the consumer economics of owning a solar power system.
At this very moment when the world’s economies are attempting a pivot into a decarbonized, lower cost economy enabled by disruptive technologies like solar, our state commissions are “managing” utility costs and preserving utility revenues. By doing so they are blocking America’s consumers from embracing solar power to create economic growth and technology leadership for our nation.
And at a time when the majority of Americans believe climate change is real and needs to be addressed, state utility commission protectionism of the utilities stands in the way of consumers buying a solar system as the first step toward implementing a decarbonized economy that delivers both lower costs and emissions.
Part II of this two-part analysis on consumer owned solar power, outlines how the California consumers I have worked with, who took the risk on buying a solar power system, are now saving money with zero emissions in water heating, cooking and running their vehicles. It outlines what you and your business can do to realize lower costs and America’s competitive advantages in a decarbonized economy.