Item 8- Revised AE Solar and Storage Policy — original pdf

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A review of Austin Energy solar & battery deployment policies, with improvements identified Part 1: The impact of “Value of Solar” on Solar and Battery deployment and use D. SASARIDIS 21 MAY 2024 Content • Problem Statement • Goal • Definitions and Concepts • Value of Solar • Batteries • What’s Next Problem Statement Given the importance of swiftly deploying solar and batteries, at scale, in the mission to slow climate change, as is consistent with the Austin Energy Resource, Generation and Climate Protection Plan : Let’s review Austin Energy policy for effectiveness in meeting these goals. Key question of Part 1: Is Value of Solar, as a policy, consistent with these goals? The goal of this presentation, today – is to introduce this work, achieve a common understanding through questions, allow for self study, and allow for challenges to the assumptions and conclusions. Climate Change & The Importance of Solar and batteries Though the applications which lead to CO2 emissions vary widely - ~75% of emissions can be turned off by the availability of carbon-free energy. Source: https://ourworldindata.org/ghg-emissions-by-sector Solar and batteries are the fundamental building blocks of a carbon-free energy present. Solar without batteries More solar power is available than is needed during the day, not enough at night. Note: Solar power data from PVWatts, demand is representative. Plot for illustration purposes. Charge Discharge Solar less than demand? Batteries don’t get used (simplifying a bit). Charge Discharge Excess daytime solar? Batteries charge, then discharge. Charge Charge Discharge Discharge Charge Discharge Key point: The answer to too much mid-day solar is not less solar, it’s more batteries! With enough solar, charge from yesterday gets used in the morning. Definition: Value of Solar Let U be the power measured by the utility meter. Let S be the power measured by the solar meter. Let T be the total power, used by the home, including from the solar panels on this house, and the grid, T = U + S. U is also the net power used by the home, i.e. if U = 0, this is a “net zero” home that is powered by solar panels only. Note that the utility knows U and S, and must add them together to get T, the total power used by that home. Austin Energy uses Value of Solar, and charges the customer for T, using the tier-based rate structure, and pays the customer for S, at a fixed rate of about 9.91 ¢ / kWh. Utility Meter, U Solar Meter, S Home’s Electrical Panel Definition: Net Metering Let U be the power measured by the utility meter. Let S be the power provided by the solar panels. Let T be the total power, used by the home, including from the solar panels on this house, and the grid, T = U + S. U is still the net power used by the home. Note that the utility knows only U! The homeowner knows S, as reported by the solar panel inverters. Utilities that use net metering charge the customer for U, net imported energy, and pays the customer for net exported energy. Utility Meter, U Home’s Electrical Panel Problem #1 with Value of Solar: Perverse Incentive: Increasing Carbon Emissions The addition of this meter allows Austin Energy to charge the customer for all power use, even if they made that power on their roof with their own investment in solar panels. This disincentivizes all electrical energy use indiscriminately, which sounds good, but is actually bad, because technologies like EV’s, heat pumps, and induction stoves all increase electrical energy use. This perverse incentive is inconsistent with the Austin Energy Resource, Generation and Climate Protection Plan, because these technologies decrease energy and carbon emissions overall. Induction Stove EV Heat Pump Don’t incentivize reduction of electrical energy use, incentivize reduction of burning fossil fuels, and electrical energy waste! Problem #2: Value of Solar discourages batteries. Under Value of Solar: • Homeowners have no reason to consider buying a battery, other than home backup. • Homeowners are charged for the energy from their battery in a home backup scenario. • Most home batteries are purchased for backup only, meaning they stay charged all the time, which is worse than not having a battery at all. This is because we are using our city and citizen resources and to install batteries, but doing nothing with them. Problem #3 with Value of Solar: Perverse Incentive: Small Solar Panel Installs For large systems, value of solar bills can be 3x vs net metering! Value of Solar incentivizes small solar installs. Small solar installs = capital inefficient. Value of Solar always costs customers more than net metering Value of solar discourages large systems: $500 vs $175 annual cost! Calculations actual customer bill, includes all taxes, fees, and tiered rate structure. Problem #4 with Value of Solar: Fairness Customer Charge ($ per month) Energy Charge (all per kWh) Tier 1: 0 – 300 kWh Tier 2: 301 – 900 kWh Tier 3: 901 – 2,000 kWh Tier 4: > 2,000 kWh Power Supply Adjustment (PSA) PSA Administrative Adjustment Community Benefit Charges Customer Assistance Program Service Area Lighting Energy Efficiency Programs Regulatory Charge $14.00 Total (including PSA & customer benefit charges) 4.088¢ 5.115¢ 7.492¢ 10.836¢ 11.6¢ 12.6¢ 15.0¢ 18.3¢ 4.598¢ 0.724¢ 0.242¢ 0.197¢ 0.349¢ 1.374¢ Source: https://austinenergy.com/rates/residential-rates Value of Solar is unfair to customers, because: • AE is charging customers for electricity that AE did not produce, source, or transmit. • Customers cannot benefit from using a large solar install to offset a large electrical load (like a heat pump or EV), instead, AE captures that value by charging the customer for the higher electricity use. • In a grid outage event, a customer with solar and backup battery would still be paying for electricity from their battery, even though the grid is out. For every kWh of energy a customer’s solar panels produce, AE charges 12 – 18 ¢, and pays the customer 10 ¢. Problem #5 with Value of Solar: Equipment Solar installs in Austin are made more difficult, and more expensive because an additional meter is required to measure all PV generation, because of Value of Solar. The meter box is paid for by the customer, and AE owns the meter itself – so both parties are carrying additional cost. For battery backup systems with sub-panel loads, a third (!) meter is required. Solar is now so inexpensive, that costs like these represent a large fraction of system cost! Meter Box = $300 Meter = $300 Worth 1.5k W of Solar panels! Value of Solar Net Metering Moderate Strong Comparison Area Increasing incentives to offset 100% of home energy use, when sizing solar Investment payback strength for electrification: EV’s, heat pumps, etc Utility has a mechanism for incentivizing battery deployment Used by California, Hawaii, Germany, Australia – saturated solar markets Extra equipment on home to implement. ✗ ✗ ✗ $600 $0 Energy Storage – How to make battery payback possible Implement battery payback mechanisms: • Direct rebate – Make $2,500 AE rebate only available to people that get a battery, and add cost of deleted meter to the rebate. At $5,000 rebate + Inflation Reduction Act savings = most of the battery is paid for on day 1. • Net metering – Example: You have 1 kWh stored in your battery. You could sell that for $ 0.10, and you could buy 1 kWh from AE for $0.18. Your house needs to use 1 kWh -> Logical conclusion is to discharge battery for use in your house. • Time of use billing for battery customers – Ultimately, time-of-use billing does create a direct incentive to add batteries to a solar install, because the customer can store energy in the battery when it is cheap, and use that battery energy when grid energy is expensive. Review of common VoS / NM Arguments It is not. Reasons: Value of Solar more equitable than Net Metering. 1) Tiered rate structure uses energy as a proxy for income. 2) Low-income households could be subsidized independently from rate structure + VoS. 3) Solar customers are making an investment with net positive external value (reduced CO2 emissions). Value of Solar encourages energy savings more than Net Metering. Energy savings is the wrong goal. Reducing energy waste & electrification are the goals consistent with our climate plan. Net Metering avoids costs which get pushed to other customers. It depends. Solar customers still buy electricity on cloudy days and in the winter, so they are exposed to per kWh pricing, still pay fixed customer charge, and the utility can change the export value of power to make the balance sheet solve. What now? Thank you for listening. Call to action: please be open minded. • All listeners: Please take some time to take it in and consider your position. If you consider VoS “settled”, • Requesting evidence from AE that VoS is more consistent than NM with Resource, Generation, and Climate Protection Action, including accounting for cost of meter & meter box. • Requesting AE provide additional policy recommendations, under VoS paradigm, that address problems 1-3. Questions? Appendix Solar panels make power. Power is what’s happening right now. Scientific units are Watts. Batteries store energy. Energy is the accumulation of power, either stored or spent. Power x time = Energy. 1 watt [W] = average cell phone 10 watts [W] = bright LED light 100 watts [W] = laptop charger 1250 watts [W] = average home power use 12 watt hour [Wh] = average cell phone battery 80 watt hour [Wh] = use a laptop all day 80,000 watt hour [Wh] = Battery of an electric vehicle 30,000 watt hour [Wh] = average home daily energy use Common arguments about VoS/NM If NM = more solar, is that really a good thing? Don’t we have too much solar? Isn’t solar bad because it isn’t a dispatchable (able to be turned on and off) energy source? • • • Yes, more solar is a good thing. Solar panels require incredibly low capital investment, and they have a marginal cost of energy production of zero, and they last 30 years. They don’t pollute, and create no dangerous waste products at all. It is foolish to not leverage this as a primary energy source input. ERCOT expects energy use to double in the 2020 decade: • • “ERCOT’s latest predictions say demand will jump 40 gigawatts from what the forecast called for just a year ago. If total demand hits 152 gigawatts by 2030, as current estimates show, it would represent an increase of more than 100% since 2020.” – San Antonio Express news So if solar panels don’t double between 2020-2030, we are not even at risk of a duck curve problem. If they do double: Batteries! The concept of only dispatchable energy sources being good is built in the framework of burning fossil fuels for energy. Having energy only when the sun shines doesn’t make solar bad or difficult or less valuable – it makes solar different. Batteries solve this problem. Time to turn the page from fossil fuel mindsets. Common arguments about VoS/NM If NM = more batteries, is that really a good thing? Don’t utilities need to be able to control batteries to make them useful? • • • Yes, more batteries are a good thing, they increase mid-day demand by storing solar, and can release their energy at night, when there is no solar. • More batteries increases the floor for the amount of solar we can install without running into grid stability problems. So more batteries = more capacity for solar = good. All batteries with inverters sold since 2014 have the ability to be controlled by utilities if needed (IEEE 1547). The utilities have not done the work to take advantage of this, but they should. Utility control of batteries is not necessary if people are financially incentivized to do the right thing with them. Wholesale energy markets have those incentive signals, but value of solar blocks these signals from getting to the customer! Common arguments about VoS/NM If NM = more solar and more batteries, won’t that make the system more complicated, creating more work for energy providers? • Yes, this work is required to combat climate change. Energy providers (all parts of the stack) need to do this work. Common arguments about VoS/NM Net Metering is not equitable because it allows the wealthy to pay less into the system, because they can afford solar panels. • • Value of Solar doesn’t tax wealth, it taxes high energy use, which does not always follow wealth Let’s define three domains of energy users: 1) high income, high energy, no solar. 2) high income, high energy, solar, and 3) low income. The most equitable way for dollars to flow are that group 3 pays little or nothing for energy (which is a human right), and all of the people in group 1 pay the most, and are heavily incentivized to move into group 2. VoS treats group 1 and 2 the same, whereas NM converts group 1 to 2. If all group 1 converts to group 2, then this is a win, because a lot of solar has been added to the grid, dropping the cost of energy for everyone. • Does having a passive home (very low energy), which also reduces how much the wealthy pay into the energy pool, have the same problem? • Wouldn’t it be better to have solar + EV + heat pump be highly incentivized, while just directly subsidizing energy for low-income households? VoS is not the right place to pay for low-income energy subsidy, when we could arrive at the same math by decreasing the cost of energy for those that qualify as low income, and raising it across the board for those that don’t. Those who choose to get solar are not opting out, they are opting in to a needed investment in climate change, which also benefits society, not just the household. Common arguments about VoS/NM Net Metering pushes external costs back on to the utility, such as keeping gas plants available but not running, transmission lines, line repair, etc. • Net metering customers are still exposed to fixed costs on their bill (customer charge) • Under net metering, the utility has a mechanism to cost share these external costs with solar customers, and that is the price of solar energy. • In the limit, you can replicate the value of solar cost structure with net metering, by decreasing the price of solar energy- and no extra equipment is needed. Common arguments about VoS/NM Value of Solar is better than Net Metering because it exposes all users to the energy cost tiers, and encourages energy savings. • The enemy is energy waste, in general, not electrical energy use, in particular. There is no reason to discourage electrical energy use as a way to encourage energy waste. You can discourage energy waste directly! i.e. rebates for attic insulation. • Not all increased energy usage is bad: Heat pumps, EV’s. We should not be discouraging these. • Customers are still exposed to cost tiers under Net Metering, they are just given a reason to reduce their exposure: install more solar and batteries, and this benefits everyone!