It’s something of a tradition that as summer begins, ICL dives back into Idaho Power’s ongoing efforts to re-make its solar net metering and distributed energy programs. Last month, Idaho Power submitted a new net metering application to the Idaho Public Utilities Commission (PUC). There are many moving parts in the application, but all in all the docket stands to replace net metering with a credit system based on a new value of solar.
After a first round of analysis of Idaho Power’s application, ICL believes the new program is a mixed bag. Some solar customers will benefit, while others stand to lose relative to the status quo. At any rate, it will take months to sort out the fine details that could sink or float the continued growth of distributed and customer-owned solar in Idaho.
Distributed energy systems like rooftop solar and battery storage allow customers to produce and manage their own electricity. They can allow customers to offset energy cost, are a good source of carbon free energy, and reduce stress on the grid, thereby lowering costs to all customers. There are plenty of reasons to support small and distributed generation, but customer and community ownership challenge utility monopoly control over the power system. Idaho Power is not alone in challenging net metering and curbing distributed systems.
This is just the latest story in the solar saga with Idaho Power. In 2017 Idaho Power kicked off a long series of proposals at the PUC to alter its distributed energy policy. After a rejected settlement in 2018, Idaho Power and the PUC took an incremental approach to scope, study, and change its net metering program. Every step was its own drama, and ICL stepped in each time to support rules that would preserve a viable market for customer-owned solar. With this application, it seems like we could be in a final, climatic chapter of the net metering epic.
A new rate for solar and distributed energy customers
The headline of Idaho Power’s application is a new on-peak/off-peak export rate. Idaho Power currently compensates solar customers under a net metering scheme. Net metering measures electricity used and power sent back to the grid over a month The balance of the two is credited toward the customer’s bill. But the true cost of energy across all hours of the day is not equal. The system costs of power are highest in the evening when demand peaks and lower earlier in the day when solar generation is most efficient. When properly designed, real-time exports coupled with time of use rates can reduce overall costs and promote efficiency to both customers and utilities. It can be a win-win situation.
But finding the correct price of electricity is immensely difficult, often contentious, and as much an art as a financial or engineering feat. Electric utilities like Idaho Power are monopolies, and market dynamics only go so far to ensuring a fair price to customers. It’s the job of the PUC to strike a balance between the company and customers.
Last year, Idaho Power offered its Value of Distributed Energy Resources (VODER) study to the PUC to establish a method to determine distributed energy rates. ICL submitted comments and an expert review critical of the study, finding Idaho Power valued solar exports too low. Again, energy pricing is an inexact science and we hope the PUC, Idaho Power, and other intervening parties can strike a balance between any competing interests.
Idaho Power now proposes an off-peak export rate around 4.91 cents per kilowatt hour and an on-peak rate of 20.42 cents per kilowatt hour. On-peak hours are from 3-11:00 pm, Monday through Friday, June 15 through September 15. It’s tough to say how this will affect solar customers. No customer is average, and exact results will depend on individual solar set-ups and use patterns. But without a doubt, the late afternoon and evening peak hours favor west-facing panels — south-facing panels generate more total electricity and are how most residential systems have been installed. Under typical loads and generation profiles, most residential customers stand to lose around 10% of their export value, but in certain circumstances some may be close to equal or even benefit.
To add even more complexity, these prices will change year-to-year. The VODER study ties Idaho Power’s solar export rate to market prices for electricity. Energy prices and availability constantly fluctuate with growing demand, fuel prices, and shifting use patterns. In the past year, the War in Ukraine and market shocks caused natural gas and energy prices generally to skyrocket. Fossil fuel availability is increasingly hard to predict, but there’s a good chance that costs will normalize in the short run, thereby lowering the solar export rate. It’s tricky to say what this will all mean for distributed energy, but insulation from volatile fossil fuel prices remains a clear benefit to solar customers.
There are better ways to integrate distributed energy that are fair to both the company and customers. Generally, the more energy prices approximate the actual costs to produce and deliver electricity, price signals will promote conservation and cost savings to both customers and the company. Other states have more granular peak times and are considering different rates for customers who pair solar with battery storage. At the same time, we still have issues with how Idaho Power prices distributed energy, and will re-raise a few points covered in previous phases of the solar saga. But the long-term fate of distributed energy will depend as much on the maintenance of a working program as starting with a good one. Electric programs and prices are always subject to change, and we hope that this is a starting point to build on rather than the beginning of a long backslide for customer ownership.
Lifting the cap
There is a strong argument that more than a perfectly accurate, or even fair, rate, what prospective solar customers need most is certainty. When we think of distributed energy, the image that comes to mind is a single family home with panels on the roof. But Idaho Power’s application also applies to commercial and irrigation customers. One of the big breakthroughs in this application is movement to lift the 100 kilowatt system cap. Under current rules, the largest solar customers use more power than the largest system they can connect to Idaho Power’s grid can generate. Big electricity users – like irrigators that stand to benefit most from distributed energy – often have undersized arrays or string together multiple systems as a work around. This adds costs and complexity for very little apparent upside. Idaho Power’s application would allow big users to build a system equal to their demand. It’s a huge win for big electricity users that could dramatically reduce overall system demands and costs. This could be a big step toward more carbon-free power.
Right now, the renewable energy market is awash in funding opportunities and tax-credits. For big agricultural and commercial users, the time to build would be now. But the drawn-out process of Idaho Power’s efforts to reform net metering perpetuates uncertainty for many prospective solar and distributed energy customers. For some, the most important outcome of this docket will be for it to be over.
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