Why Am I Paying $65/year for Your Solar Panels?

Below is a great article from Lucas Davis, a UC Berkeley professor that published a report a few years ago about the closing of San Onofre, the nuclear facility north of San Diego, and how replacing the nuclear energy with natural gas was the equivalent of adding 2,000,000 vehicles to the roads of California.

Why Am I Paying $65/year for Your Solar Panels?

700,000 California homes now have solar panels; what does this mean for everyone else’s rates?

“This is the future,” one of my neighbors recently told me, proudly showing off his rooftop solar panels, “Forget the old, inefficient utility.” The panels do look great, and, for a moment, I got caught up in my neighbor’s “green glow” of eco-righteousness. Should I be doing “my part” for climate?

But wait a second. I already am! As Severin Borenstein has been pointing out for years, a big part of the reason why rooftop solar is so popular in California is our electricity rates. And because of the way rates work, every time another neighbor installs solar, my rates go up. I’m tired of it. Why should they get all the “green glow”? Why should I be paying more for their rooftop solar, particularly given that grid-scale renewables are so much cheaper?

Almost 700,000 homes in California have installed solar, about 5% of all homes in California. Today I want to figure out what this means for the rest of us. No fancy econometrics, no complicated model. I just want to do a simple back-of-the-envelope calculation to try to figure out how big of a deal this is.

brick

Note: Green glow. Image licensed under creative commons.

 

Utilities have a lot of Fixed Costs

It is helpful to take a step back and think about what it takes to deliver electricity. Utilities have lots of what economists call “fixed costs”. For example, utilities have to maintain all the transmission and distribution lines used to deliver power. These costs are fixed (not marginal) because they do not depend on how much electricity is consumed.

truck

Note: Utilities have lots of cool trucks. Image licensed under creative commons.

 

Who pays for these fixed costs? We all do. Every time you use electricity, you help pay for these fixed costs. There is a long history in the United States of regulators setting electricity prices equal to average costs.  Economists have argued that it would be more efficient to set prices equal to marginal cost. But the truth is this didn’t matter much in the past, in part because people didn’t have much choice about whether or not to consume electricity.

Until now. Rooftop solar is an opportunity for consumers to radically reduce the amount of electricity they buy from the utility. In Hawaii there is a lot of talk of “grid defection”, but in 99.9%+ of cases solar homes continue to be connected to the grid. Solar homes use the grid just as much as other households, as they are always either importing or exporting electricity, it’s just that they consume much less grid-electricity.

What this means is that good people like my neighbor contribute much less to paying for utility fixed costs. The fixed costs haven’t gone away, but my neighbor now has a lower electricity bill so pays far less of them. This leaves the utility with a revenue shortfall, and it is forced to raise prices. So who pays for the fixed costs my neighbor used to pay? Everyone else.

wires

Note: Utilities have lots of fixed costs.

 

A key subtlety here is “net metering”. Households who install rooftop solar pay only for the electricity they consume “on net” after solar generation. This is easy and simple, but also wrong. Implicitly, this means that they get compensated for their solar panels’ sales to the grid at the retail electricity rate. This is too high, significantly exceeding what the utility saves from not having to supply that electricity. Under an alternative rate structure, in which households were paid the wholesale rate, you would not have this “cost-shifting” away from solar households.

Cost Shifting 

Ok, but how much cost shifting is actually happening? Outside California, Arizona, and Hawaii, probably not much. But California has a lot of solar, about half of all U.S. rooftop solar. How much have California electricity rates increased due to the 700,000 homes with solar?

spiral.png

Note: Utility Death Spiral? Source here.

 

This is tricky because we don’t actually know how much electricity is being produced by rooftop solar. Almost everyone is on net metering, so we only observe net consumption, not solar production. Fortunately, the California Energy Commission has poured over solar radiation information and other data and estimated that total annual generation from California behind-the-meter solar is 9,000 GWh. About two-thirds of this is residential, so about 6,000 GWh. To put this in some context, total annual residential electricity consumption in California is 90,000 GWh.

So how much “cost shifting” does this imply? The average residential electricity price in California is $0.185/kWh, while the average wholesale price is about $0.04/kWh. Accounting for electricity that is lost during delivery to the end customer adds about 9% more per kWh delivered. Thus, each time a California household produces a kWh, the utility experiences a revenue shortfall of about $0.14. Multiply this by total residential distributed solar generation, and you get $840 million annually. California utilities receive $15 billion annually in revenue from residential customers, so the total shortfall is about 5%.

This is a crude calculation, and it could undoubtedly be refined. For example, distributed solar proponents argue that local generation allows the utility to avoid distribution system upgrades, which would represent an additional benefit. These impacts have been found to be relatively small, but this continues to be an area of active research. On the other hand, I’ve also made an assumption that significantly decreases my estimate of cost shift. In particular, I’ve used the average residential retail price, but California customers actually pay increasing block rates so most solar customers face a marginal price well in excess of the average price.

Conclusion

The total revenue shortfall works out to about $0.01 per kWh, or $65/year for the average California household. This is more than I expected. And, I’d bet most Californians are not even aware that this cost shift is happening.

So why am I paying $65/year for other people to have solar? It doesn’t make sense. Sure, I’m concerned about climate change, but my $65/year could go a lot farther if it was used instead for grid-scale renewables. Moreover, this is almost certainly bad from an equity perspective, as we know that high-income households adopt solar much more often than other households. Rooftop solar isn’t getting rid of the utility. It’s just changing who pays for it.

To read the article please click here.

Lucas Davis

Lucas Davis is an Associate Professor at the Haas School of Business, Faculty Director at the Energy Institute at Haas, and Research Associate at the National Bureau of Economic Research. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy. His work appears in leading academic journals including the American Economic Review, the RAND Journal of Economics, and the Journal of Political Economy. He blogs along with other Energy Institute researchers at energyathaas.wordpress.com.

 

Strange Geographies: The Little Town That Los Angeles Killed (from MentalFloss.com)

A friend of ours in the Coachella Valley sent us a link to this MentalFloss.com article from 2009. In her email to us she wrote:

“If you haven’t seen this article on Keeler, CA, I thought you might want to read it. Keeler is a “living” ghost town of about 60 or less population in the Mojave. Its history is too reminiscent of what could happen in the not too distant future at the Salton Sea. This is a scary scenario for sure, but is extremely relevant in so many important ways.”

People talk about the Salton Sea being “Owens Lake on steroids.” Judge for yourself after you have read the article by clicking here. One more reason to pass Prop 68, the California Clean Water and Parks Act (SB5).

The end of the boat ramp at Red Hill Bay Marina, Salton Sea

DesertReport.org: Can Importing Water From The Gulf Of California Save The Salton Sea?

The following excerpt is from an article was posted on March 11, 2018 at DesertReport.org.

Michael Cohen, Senior Research Associate, Pacific Institute:

A lot of people are saying you need to import water from Mexico to save the Salton Sea, but there are several challenges. It would require permission of the Republic of Mexico, which is currently not very fond of our President. Even at the best of times, when there is clear mutual interest such as delivering water to the Colorado Delta, it’s taken five full years to reach agreement between the nations.

There are ecological challenges. Theoretically you could put a pipeline or channel below the biosphere core area and avoid harming a pretty productive estuary. There’s also the Vaquita porpoise, the most endangered marine mammal in the world. You wouldn’t want to bring them into whatever pipeline or canal you’re developing.

Photo above: Bombay Beach on the east shore of the Salton Sea – with the water already far off in the distance. Photo by Craig Deutsche.

The second challenge is cost: the California Department of Water Resources estimated the cost at $30-40 billion dollars. That’s because one of the key challenges with any kind of import plan is that, along with that water you’re importing a lot of salt – and you need to get rid of it.

If you simply propose to bring in water and not export salt, what you do is address the dust control problem, but not the habitat challenge. It’s fairly easy to bring in a lot of water without having to worry about pumping that water
back out. So if your intent is simply to have a brine lake where Salton Sea is, you can do that.

So there are the issues of cost, salt balance, and the Mexican negotiation – all of which by my estimate would take 20 to 30 years before you get the solution you’re looking for. The Salton Sea will be completely different than it is now.

 

Does the idea of importing water to the Salton Sea distract from what can be done now?

Right, so that’s the major problem. Even if you could snap your fingers and all of a sudden there was a restored Salton Sea and you could bring in all this water, in we’d have a real conversation about whether it is worth all this additional money to have a whole Salton Sea? But when people continue to point to this solution, it distracts from what we really need to be doing right now, which is investing money in public health and protecting the environment and rebuilding habitat at least along the shoreline. And then hopefully get some kind of deeper North Lake where you can get a real fishery habitat.

Those things seem to be achievable in what should be the relatively short term, versus under the very best circumstances seeing some resolution with the import plan.

The other potential challenge is people say “oh we’re going to desalinate the water with all this geothermal resource at the Salton Sea and put some of that water back into the Sea.” But Geothermal is not cheap, and building desalinization plants is capital intensive. But the bigger problem is that once you get higher quality there, someone will buy it.

The snow pack in California is terrible, and the current forecast for the Colorado River Basin is one of the worst in the past 20 years. So there’s just not a lot of good quality water in California or the Colorado Basin. So If you produce good quality water, someone’s going to want it – which means that it’s not going to go into the Salton Sea anyway. So if you desalinate water, what you’re really saying is you’re going to sell that water to somebody else and the Salton Sea is going to be a brine sink.

 

Do you have any other thoughts?

There is so much opportunity out there. I wish they [the state] could get their act together.

The complete article is available here: http://www.desertreport.org/?p=2060

IID, CAISO settlement promotes local renewable energy development

March 9, 2018

CONTACT: Antonio Ortega (760) 604-1092

IID, CAISO settlement promotes local renewable energy development

Imperial Irrigation District and the California Independent System Operator announced this week the two parties have reached a settlement that ends existing litigation between them.

As a result, more climate-friendly energy from the IID service area can be delivered to the rest of California.

“For IID, this has always been about ensuring basic fairness, a level playing field and protecting our balancing authority and our ratepayers for the sustained benefit of the region,” said Kevin Kelley, IID general manager.

As part of the settlement, CAISO has agreed to upgrade one of IID’s power lines (S-Line) that will allow more electricity to flow from the Imperial Valley to other markets. CAISO has also agreed to do more to help promote geothermal development, a priority for the district, in the Salton Sea Known Geothermal Resource Area.

Both parties also agreed to establish a local coordination working group to address important issues that may arise in the future.

Resolving the dispute gives the parties a common platform to move forward on issues that both agencies care about, Kelley added.

Located in what is considered  the “renewable energy capital of the world” IID can serve as a conduit for renewable energy development in the west, helping California meet its aggressive renewable energy and climate goals while creating added economic development and job opportunities in a region that desperately needs them.

 

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Dead Seas

The following article appeared on E&E News. We are posting this article because it highlights the work of an incredible public health champion, Aide Munguia-Fullton, a nurse that runs the Imperial Valley Child Asthma Program. A local leader in environmental justice.

The Imperial Valley Child Asthma Program (IVCAP) is a community-based grant-funded program, the only program in the Imperial County designed to improve the quality of life of children ages 0-18, with special emphasis on low-income Latino families with children ages 0-5 who suffer from asthma. Tthe program seeks to prevent or reduce hospitalizations by enhancing parental asthma management skills through care coordination, case management education, home visitations, community education, and encouraging the adoption of standards of care for asthma among medical professionals What is special about our program is the unique partnerships that allows IVCAP to provide essential asthma management coordination services to both local hospital emergency rooms, pediatric departments, and the coordination of referral services to local pediatricians and clinics. Another important aspect of the program is the asthma staff participations in different coalitions created to advocate clean air policies and a healthier environment for asthmatics.
Aide Munguia-Fullton of the Imperial Valley Child Asthma Program

DEAD SEAS
Shrinking lake spawns public health nightmare

IMPERIAL COUNTY, Calif. — A dust bowl is coming, and people here are scared.

Aide Munguia-Fulton, a nurse who runs a community program for children with asthma, has been seeing referrals for assistance soar in the last three years as the Salton Sea has begun receding due to water management schemes and a persistent drought.

Receiving 400 referrals last year alone, Munguia-Fulton has funding to enroll no more than 200 kids a year. She’s managed to include more children, but she knows the lake is expected to shrivel more quickly starting at the end of 2017, exposing thousands of acres of a dusty, toxin-laced salt bed and exacerbating already high asthma rates.

Munguia-Fulton has worked here for more than two decades, and, three years ago, she too was diagnosed with asthma. Just as she tells her patients, she hides indoors from unrelenting dust on windy days. She carries a dust mask with her at all times.

She doesn’t know how the cash-strapped area will cope if air quality continues to deteriorate.

“I am so concerned for our hospitals that are going to suffer the heavy loads,” Munguia-Fulton said. “We have to be prepared. And I know we are not.”

The recession of California’s largest lake (350 square miles) is exposing a lake bed saturated with arsenic, lead, cadmium and other toxins. By the end of 2017, the shrinking will accelerate under terms of state-backed water transfer from this agricultural area to coastal San Diego (Greenwire, June 13).

More than 100 square miles of toxic salt flat could be uncovered in the coming decades. The Pacific Institute, a nonpartisan think tank, estimates that by 2045, the lake bed could be putting 100 tons of dust per day into the air.

That dust — called coarse particulate matter by regulators — is by nature dangerous because it can penetrate deeply into the lungs. It will make breathing even more difficult in an area whose air quality already ranks among the nation’s worst because of dust from farms and desert.

That pollution is broadcast from this remote corner of southeast California by frequent wind storms whose gusts hit 80 mph.

It’s a “really salty dust, it burns your eyes,” said Bruce Wilcox of the California Natural Resources Agency. “It only lasts for 15 to 20 minutes. But it’s the longest 15 to 20 minutes of your life if you are standing in it.”

Winds carry that dust toward some 650,000 people — a population that’s expected to double in the next 30 years.

Hit hardest by prevailing north-to-south winds is the Imperial County near the Mexico border. With the state’s highest childhood asthma rates, the county is more than 80 percent Hispanic, suffers a 20 percent unemployment rate and nearly more than 1 in 3 of its children live in poverty.

North of the Salton Sea, asthma rates are also high as shifting winds carry dust there.

And new data suggest asthma rates are rising closer to the lake, local health officials say.

You can read the complete article here.

KPBS: The Shrinking Salton Sea Endangers Region’s Health

The Shrinking Salton Sea Endangers Region’s Health

Monday, January 15, 2018

West Shores High School principal Richard Pimentel slips on a cowboy hat before stepping outside. It is a nod to fashion as a response to the region’s harsh desert sun.

The school sits about halfway up the western side of California’s Salton Sea. Modern buildings, concrete patios and walkways and an artificial turf sports field stand in stark contrast to the desert community that surrounds the campus.

Tumbleweed and sand are common fixtures of the town’s yards.

“We are about 30 miles from anywhere,” Pimentel said.

Pimentel’s manner is relaxed and comfortable as he walks among his students during lunchtime.

A smile, a question or a joke come easily.

The Salton Sea at Red Hill Marina

“They’re my kids,” Pimentel said. “You have to take responsibility and ownership of that. These folks have entrusted me with the welfare of their kids. It’s a big deal.”

RELATED: A Look At The Incredible Shrinking Salton Sea

Dust swirls in windy desert valley

Pimentel can guide and encourage, but he cannot shield his students from the dust that swirls in this windy desert valley.

“Any time there’s any kind of a wind, you see the dust clouds,” Pimentel said.

The dust in those clouds contribute to the Imperial Valley’s highest in the state asthma rates, and most people who live here expect things to get worse. That is because the Salton Sea is shrinking, exposing thousands of acres of possibly toxic lakebed to the hot sun and the region’s powerful winds.

Inside the nurse’s office at West Shores High, Pimentel unlocks a metal cabinet. It contains plastic bags from more than 40 of his students who need to bring prescription medicine to school so they can cope with their asthma.

He holds one up and looks through the translucent material.

You can continue reading this great article here.