Solar Subsidy

Californians to be charged $1.3 billion for not using solar panels

December 18, 2012

Regulations subsidizing the use of solar panels in California will cost customers who don’t have them $1.3 billion annually, according a report in the San Francisco Chronicle. California utility companies claim that rates will have to be raised on traditional customers to make up the shortfall.

The San Francisco Chronicle reports:

Booming rooftop solar installations in California are bringing an unwelcome surprise to the homes and businesses that don't have the devices: an extra $1.3 billion added to their annual bills, more than half of that for Pacific Gas & Electric customers.

Power companies in the state, the nation's biggest for solar power, are required to buy electricity from home solar generators at the same price they resell it to other customers, meaning utilities earn nothing to cover their fixed costs. The rules are shortsighted because eventually rates must be raised to make up the difference, according to Southern California Edison, which has joined with competitors to estimate potential losses.

As more homes and warehouses get covered in solar panels, higher rates imposed on traditional consumers risk a growing conflict between renewable-energy advocates and power companies that foresee a backlash in California and 42 other states with similar policies. The tension has also emerged in countries including Spain and Germany, where solar investments are curbing investment in the power grid. 

Akbar Jazayeri, vice president of Southern California Edison, said that eventually California will "get into a situation where you have a transmission and distribution system with nobody paying for it."

The solar customers, who typically sell power to the grid during the day to offset the cost of using electricity at night, "are just using our system as a storage device," said Jazayeri. "They should pay something for that service."

Costs will continue to rise for non-solar customers as California’s push toward renewable energy continues. According to the California Solar Initiative, a state program to encourage the rooftop energy systems, 245 megawatts of solar panels were added in 2011 and 315 megawatts have already been added in 2012.

"The problem exacerbates with each new system that goes on a roof," explained Mark Bachman, an analyst at Avian Securities Inc. "Utilities will need to get reimbursed for their grid costs by a shrinking number of consumers."

The flaws that exist in California’s overcomplicated energy policy are becoming increasingly clear. Just last month, a report by the nonpartisan Little Hoover Commission warned that California’s push to derive a third of its power from renewable sources by 2020 would lead to soaring costs and significant damage to the environment. A separate report by Stanford’s Hoover Institution finds that California’s massive dive into renewable energy is complicating California’s energy grid in ways that are sure to increase costs.

The massive amount of money coming in from the federal government in support of these projects is perhaps acting as an enabler for California’s rush into renewable energy. California companies received over $4 billion in Department of Energy loans as part of the American Recovery and Reinvestment Act, including loans of $1,124,110,000 to Mojave Solar, $646,000,000 to First Solar Electric, and $273,368,534 to (now-failed) Solyndra.