By RICHARD “SKIP” DUNN
Los Alamos Sustainable Energy
For the past ten years, local and national trends have been that the price of solar has been sharply declining while cost and risks associated with coal and other fossil fuels are going up as evidenced by closure of half of the San Juan generating facility and a wave of divestiture. State and Federal incentives for homeowners and businesses adopting solar energy, including tax credits that can amount to a significant portion of the upfront solar investment have also been a significant driving force behind the rapid adoption of solar.
In a state that is widely recognized as a natural leader for solar energy, it is stunning that the Los Alamos Board of Public Utilities (BPU) is proposing to slap its residents who operate solar systems with a steep monthly fee of $12/month. At best, this fee is seen as the Department of Public Utilities (DPU) attempt to recover the costs of distribution service. At worst, it penalizes Los Alamos County residents with a fee that does next to nothing to offset DPU operating costs and discourages other homeowners wishing to adopt renewable energy.
Charles Keller, a solar-powered Los Alamos resident, felt that the DPU had not looked at what are called “value of solar” considerations. Using this method, utilities around the country are assessing a fixed infrastructure charge, but reducing it for PV providers by an amount calculated as “value of solar” to their effort. Keller is hoping that DPU will not see this as a localized issue since utilities all around the country are seeing shortfalls in their revenue. A majority of customers are increasing their conservation of electricity, thus reducing their payments for infrastructure. Thus the basis for DPU’s fee categorized as “non-payment for infrastructure” is a broader problem than just a few PV providers.
The subject of “net metering” – the practice of local utilities buying the excess power generated by solar customers – is a hot potato. Nearby Jemez Electric has rollover net metering (similar to rollover minutes on a mobile phone plan), which allows solar customers to spread the extra power they generate in a more holistic approach over their entire account, rather than on a month-by-month basis.
As pointed out by Los Alamos solar customer Thomas Shankland, if there is a net annual overproduction by the customer then the annual overproduction is treated at the wholesale rate of seven cents. At present, photovoltaic (PV) homeowners get paid retail rate (10 cents) for any excess electricity delivered. Then annually in February, DPU determines if any cumulated excess exists. If it does, they take back three cents of the 10 cents they paid earlier for each excess kilowatt hour (kWh) – the difference between the retail and wholesale rates. Why does it seem (see table1) that DPU is going out of its way to halt distributed solar electrical energy production?
Why penalize these homeowners (and anyone aspiring to power their home with renewable energy) further? Consider this: a recent installation in Los Alamos would see the time it takes to recoup that investment double if the proposed fee structure goes into effect. Instead of realizing a 5.3 percent return on a capital cost, the new policy would reduce that to 2.9 percent. Customers who had spent as much as tens of thousands of dollars (costs after income tax rebates) have abruptly had their investments devalued. PV installation is a capital cost not paid by DPU that produces energy for Los Alamos consumers at no capital cost to DPU.
The surcharge of $540 per month from the 36 homeowners in Los Alamos represents a pittance of what is actually needed to maintain the grid. Conscientious homeowners who want to move away from dependence on fossil fuels are already assuming all of the cost – and all of the risk – to incorporate solar power in their homes. Fees begin with the permitting costs, which is more involved and complicated in Los Alamos County than neighboring counties.
In return for these investments by individual homeowners, all customers in Los Alamos County benefit by receiving premium energy that is immune to drought, helps reduce the nation’s dependence on fossil fuels (and the ensuing climate problems) and goes to work precisely where it is needed without expensive transmission lines. Every kWh locally produced is one that doesn’t need to be purchased or produced by generators. At the very least, the burden on the infrastructure is lessened by the amount of electricity produced locally and distributed to neighbors, rather than imported long distances over heavily used transmission lines and switching stations.
Instead of taking the broad view and planning for the future, the DPU recommendation is short-sighted and actually takes large steps backwards. The BPU proposes to buy more shares in a dirty San Juan coal facility instead of investing in clean distributed solar generation within the county – an act that seems to go directly against their own strategic objective to achieve environmental sustainability and their own long-term department goal to be a carbon neutral electric provider by 2040.
The Department of Public Utilities (DPU) has put on hold plans for a new 1 MW solar array for Los Alamos County, and there has been slow and inadequate movement in the adoption of solar PV for new and existing Los Alamos County buildings. A full 8.2MWh (megawatt hour) battery storage system is already in place – as described in the County’s “Los Alamos Smart Community” publication, one that would provide stable, clean power at a rate of 25 to 50 percent on a residential neighborhood of 1,600 homes2. This technology has not been utilized to its full potential yet, and it seems that the DPU is willing to put up an air of being progressive and “smart” while actually moving in the opposite direction.
According to Department of Public Utilities (DPU) Manager Tim Glasco, solar power generated from Los Alamos County residents is “a completely uncontrolled source of power coming into our system that we don’t know when it’s going to come in, we don’t know how much is going to come in, and that wreaks havoc with the quality of power, with the scheduling of power, with reliability3.” Currently, the number of homeowners with solar in Los Alamos is so small that they only produce what they use themselves with a modest surplus benefitting their immediate neighbors.
Contrary to popular belief, excess energy produced by rooftop panels stays local. It does not flood the grid, but trickles to neighbors first after the homeowner’s needs have been met. Glasco’s fears on excess power ‘wreaking havoc’ with the grid are not technically defensible, especially in New Mexico where weather forecasts are more accurate than, say, in New England.
The real issue at stake here is that the DPU has aging infrastructure and a trend of under-recovery that hovers around $1 million annually. This means that what the DPU had budgeted for purchasing power was lower than actual costs. While this represents a deficit that must be dealt with, the utility must maintain the grid regardless of how much solar power flows back into it.
The fee structure was initially proposed by Leidos4, a consultancy firm that was hired to conduct a Cost of Service and Rate Design Study (an expense of $65,000). The firm came up with a surcharge without including offsetting benefits of distributed solar for non-PV ratepayers as calculated within other states currently (e.g. Utah, Nevada, California and Minnesota). When the flat-rate surcharge was proposed, no consideration was given to the advantages to all ratepayers of net metering that could reduce utility costs.
These contributions include avoided fuel costs, avoided capital cost of installing new power generation due to the added capacity of the solar PV system, avoided transmission and distribution expenses, line loss savings, fuel price hedge value and a plethora of environmental benefits.
It becomes even harder to see the logic of the BPU after comparing this proposed fee structure with the DPU strategic objectives for FY2016. Within the “customer focus” section, the strategic objective outlined for FY2016 is stated as follows: “Increase community acceptance of the following specific DPU initiatives and programs through targeted public relations efforts; “distributed generation, smart grid technology expansion, the increased use of renewable energy sources, and San Juan-Chama water utilization”, including using variable water flow to balance the feared power variability.
New Mexico’s statewide policy environment has created a domino effect of opportunity for homeowners to adopt renewable energy that allows them access to clean power and protects them from price spikes. Furthermore, there are highly qualified solar installers in northern New Mexico who engage with their clients and facilitate the process every step of the way – from permitting and design to installation and maintenance.
The 300+ days of sun per year here combined with pro-renewable energy leadership at the national level make New Mexico a national model for solar power. This year, Rep. Ben Ray Luján (D-NM) co-sponsored a bill in Congress along with Rep. Peter Welch (D-VT) that would increase renewable energy minimums to 25 percent for utility companies by 2025. This bill supports the President’s Clean Power Plan, which sets limits on power plant carbon emissions. Furthermore, the Department of Energy (DOE) has a mandate to reduce dependence on fossil fuels by 20 percent before the year 2020. As the County’s largest tenant, the DOE has an opportunity to lead by example in this discussion.
The Los Alamos Sustainable Energy Network is generating suggested alternatives that better balance elimination of carbon electricity by 2040 with capital investments in infrastructure. There is no reason that Los Alamos should define itself as so unfriendly to solar producers in its own community and attempt to offset the under-recovery by steep fees on these few individuals.
A public commentary will be held at the regular BPU meeting 5:30-8:30 p.m. Wednesday, Nov. 19. Make your voices heard, Los Alamos residents, and force the BPU to stand in its truth. This proposed fee is coming to a vote at the council meeting Nov. 25. The bottom line is that the BPU should respect the contributions of distributed energy sources and meet Los Alamos customers halfway with a fair valuation of solar resources.
1 Table 3 from DPU Proposal: http://www.losalamosnm.us/gov/Pages/PublicCommentForum.aspx#peak_democracy
2 Los Alamos Smart Community, Hosting the U.S.-Japan Demonstration Smart Grid Facilities, published by Los Alamos Dept. of Public Utilities: http://www.losalamosSmartGrid.info
3 Los Alamos Monitor, Tuesday, October 14, 2014, “Solar Home Units Raise Issues” by Arin McKenna: http://www.lamonitor.com/content/solar-home-units-raise-issues
4 Leidos report: http://www.losalamosnm.us/gov/Pages/PublicCommentForum.aspx
5 Additional resources are available on the topic. Summaries on the controversy for further reading include: http://votesolar.org/2014/10/24/the-problem-is-not-too-much-solar-rethinking-standby-fees-and-fixed-charges/ and http://www.renewableenergyworld.com/rea/news/article/2014/08/the-fantasy-of-distributed-generation-efficiency-and-storage-raising-electric-rates?page=all
