California slashes residential solar feed-in rates

[OVERKILL]

Those deals dont exist anymore in Cali and haven't for quite some time.

It's swung the other way, with the utility getting a phat discount on what I produce and marking it up handsomely to their clients. How convenient for them.

Don't want to pay some equitable amount for my energy - no problem. I wont sell it to you then.

There needs to be sensible and fair incentive to spend the money, or people simply wont.

Eh, the problem presently is lack of storage, hence the duck curve. Incentivizing people to install more systems without storage exasperates the issue and creates even bigger ramps, which require a ton of fast-ramp gas peaker plant capacity to cover. This is all covered in Capacity Value if one looks at it.

Retail rates are (supposed to be) based on the average cost of electricity. The cost of electricity in a market system varies depending on demand and availability of resources as well as the cost of those resources. If you have a glut of solar, it drives down the market price; that solar energy is not worth very much on the market. Later on, when it buggers off, the gas peakers have to fire up and fast-ramp, which is hard on equipment and since they are the only sources able to provide that, they get to bid in at wickedly high prices, and that's again reflected in the market price. These are blended to set consumer rates, which are often either tiered or based on TOU, but even TOU still employs a blending factor.

 

[OVERKILL]

Let's look at Ontario for a minute here to get an idea of what I'm talking about. Today is a cool day, currently 3C. There's very little wind, but it was somewhat windy overnight, when demand was lower. You can see that solar displaces demand in the middle of the day (embedded solar, it doesn't show in the supply mix) and demand ramps up as it buggers off:

You can see market price follows demand:

And since gas capacity will be ramped, quickly, to cover that peak, it drives up the market price from our current $0.04575/kWh to $0.155/kWh. Gas sets the marginal price during the period where it is relied on to satisfy demand unable to be met by the other stack of sources. Follow?

This is also visible from a supply mix perspective:

The lower cost gas plants that don't do peaker duty are currently filling above nuclear and hydro while embedded solar (which is insanely expensive and not reflected in any of the costs we are seeing here) depresses demand, limiting gas capacity. You can also see that in the wee hours of the morning, had we more nuclear capacity online, we'd be spilling hydro, which is why maintenance outages are scheduled for spring/fall, as the capacity simply isn't needed.

So, at about 4PM, that solar capacity is going to roll-off like it did yesterday:

And more, (and more expensive) gas capacity is going to be fired up to fill, driving up the market price. In a true market system (we aren't, our market is a hybrid), this has a very significant impact on the cost, particularly during heat waves and cold snaps when demand is high. And this averaged, plus all the other supply costs like FIT's, NEM charges...etc over the year, is what's used as a foundation to set your rates.

 

[UncleDave]

Totally get the duck curve, why it exists, how it works, and that storage is the key to moderating the load.

There is also a happy medium to be met in a nem contract - move that too far either way it doenst make sense for either party.

I think our NEM2 is mostly fair. Nem 3 isnt and Id expect there to be a major change in the market and laws.

Im not asking for a free ride happy to pay transmission fees, but if the utility wants to stop paying me completely I want to stop giving them my energy and use it myself to charge a battery. car, basically anything but give it to them.

Currently I'm forced to connect to a grid. Id expect that to change with Nem3.

You've seen at least two nem2 contracts - where do you think they sit as far as a fair deal for both parties?

 

[CKN]

Those deals dont exist anymore in Cali and haven't for quite some time.

It's swung the other way, with the utility getting a phat discount on what I produce and marking it up handsomely to their clients. How convenient for them.

Don't want to pay some equitable amount for my energy - no problem. I wont sell it to you then.

There needs to be sensible and fair incentive to spend the money, or people simply wont.

NO. Solar can make sense even with out subsidizes (me paying for your panels) if your electric bill is substantial enough. If not-don't buy them.

 

[ArrestMeRedZ]

California building code requires new residential construction to have solar. Wonder what that will do to the grid as more and more comes online?

Good thing you are in Canada, Overkill. If you came down to the Lower 48, you'd be declared a science denier by people that can't even spell math, much less understand it.

 

[OVERKILL]

Totally get the duck curve, why it exists, how it works, and that storage is the key to moderating the load.

There is also a happy medium to be met in a nem contract - move that too far either way it doenst make sense for either party.

I think our NEM2 is mostly fair. Nem 3 isnt and Id expect there to be a major change in the market and laws.

Im not asking for a free ride happy to pay transmission fees, but if the utility wants to stop paying me completely I want to stop giving them my energy and use it myself to charge a battery. car, basically anything but give it to them.

Currently I'm forced to connect to a grid. Id expect that to change with Nem3.

You've seen at least two nem2 contracts - where do you think they sit as far as a fair deal for both parties?

You probably won't like my answer

I think this most recent revision ($0.05/kWh, if that figure is accurate) is far closer to reflecting the current value of embedded solar than your or Jeff's contracts. In fact, I would argue both of you (and particularly Jeff) are being over-paid for what you send to the grid because of the amount of solar penetration currently in place.

If we look at Cali right now, solar output is doing pretty well, gas output is at around 1/3rd capacity:

This is reflected in the market price:

According to the day-ahead market, electricity, at this time, is worth about $0.056/kWh. Pretty close to that $0.05/kWh figure eh?

So, what we are seeing here is a "recalibration" of solar rates, to more closely resemble market value. Will it make these systems less attractive? Yes, particularly without storage. I expect you will see an additional scheme, and price, for people that do have storage and are willing provide capacity during the ramps when market price is much higher. That capacity has higher value, and so it will (or should) pay better, because of when it is available.

What is perceived as "fair" by the homeowner who wants to buy panels and expects those to yield a reasonable payback if connected to the grid, is not the same as what is "fair" relative to the wholesale market, which, if we are being honest, is what they are participating in. This is a natural evolution of this system and, IMHO, is long overdue, as the over-generous NEM rates have already driven up rates overall; driven up the average cost of electricity, which is then reflected in everybody else's rates.

Going forward, this "recalibration" will work to encourage more people to install storage and discourage the uptake in regular solar, which the market is already quite saturated in.

 

[UncleDave]

NO. Solar can make sense even with out subsidizes (me paying for your panels) if your electric bill is substantial enough. If not-don't buy them.

Let's walk through this.

Whats a subsidy?

I think we can agree a tax credit is a subsidy.

Is an agreement with the power company to purchase anything I export at the price I consume it at a subsidy?

 

[UncleDave]

You probably won't like my answer

I think this most recent revision ($0.05/kWh, if that figure is accurate) is far closer to reflecting the current value of embedded solar than your or Jeff's contracts. In fact, I would argue both of you (and particularly Jeff) are being over-paid for what you send to the grid because of the amount of solar penetration currently in place.

If we look at Cali right now, solar output is doing pretty well, gas output is at around 1/3rd capacity:
View attachment 126196

This is reflected in the market price:
View attachment 126197

According to the day-ahead market, electricity, at this time, is worth about $0.056/kWh. Pretty close to that $0.05/kWh figure eh?

So, what we are seeing here is a "recalibration" of solar rates, to more closely resemble market value. Will it make these systems less attractive? Yes, particularly without storage. I expect you will see an additional scheme, and price, for people that do have storage and are willing provide capacity during the ramps when market price is much higher. That capacity has higher value, and so it will (or should) pay better, because of when it is available.

What is perceived as "fair" by the homeowner who wants to buy panels and expects those to yield a reasonable payback if connected to the grid, is not the same as what is "fair" relative to the wholesale market, which, if we are being honest, is what they are participating in. This is a natural evolution of this system and, IMHO, is long overdue, as the over-generous NEM rates have already driven up rates overall; driven up the average cost of electricity, which is then reflected in everybody else's rates.

Going forward, this "recalibration" will work to encourage more people to install storage and discourage the uptake in regular solar, which the market is already quite saturated in.

Ok let's say my production is worth 5C a KWH. (I only get 3 in an actual sale of any excess exists at year end)

On being in the wholesale market - sort of.
I only participate in the wholesale market in one direction - selling.
I do not purchase wholesale buy rates (today or in your scenario) - hence I pay the same subsidy on top of my investment.

Once I buy storage whats my incentive to feed into the grid at all?

 

[brianl703]

Good thing you are in Canada, Overkill. If you came down to the Lower 48, you'd be declared a science denier by people that can't even spell math, much less understand it.

Always found it interesting that the people TODAY who say "follow the science" seem to be the people who 30 years ago thought it was for nerds and had zero interest in it.

 

[OVERKILL]

Ok let's say my production is worth 5C a KWH. (I only get 3 in an actual sale if any excess exists at year end)

On being in the wholesale market - sort of.
I only participate in the wholesale market in one direction - selling.

Yes, as do all the other participants, including the gas plants, Diablo Canyon...etc.

I do not purchase wholesale rates - hence I pay the same subsidy on top of my investment.

Correct, nobody does except the grid operator.

Once I buy storage whats my incentive to feed into the grid at all?

Well, assuming the system is setup correctly, you'd get paid more for power pulled from your storage during periods where solar output isn't available. So, instead of daytime solar going onto the grid for super cheap, it would go into storage, which would then discharge into the grid at a higher rate, if you had excess.

Of course there's a balance here between off-peak rates and how much your storage output is worth during the ramp periods.
- If you have an over-sized system, say 40kWh of storage capacity but your overnight usage is only 20, then the value of your power matters less, as long as it helps pay for the system.
- If you have an undersized system, say 10kWh of storage and your overnight usage is 20, then the rate paid for your storage output needs to make selling it worth more than what you'll pay for just buying power from the utility.

This is actually more complex than those two examples because currently the highest market rates are paid during the ramps. If you have 4hrs of storage but the ramps are only 2 hours long, you would make money selling into the 2nd ramp of the day (evening) and then pull from the storage during the 1st ramp, running on off-peak rate overnight. This allows you to avoid paying morning peak rate and make some money on the evening peak rate, charging the storage during the day with your panels.

Of course there are other variations of the above, but that's essentially what is likely to be promoted.

 

[UncleDave]

Yes, as do all the other participants, including the gas plants, Diablo Canyon...etc.

Correct, nobody does except the grid operator.

Well, assuming the system is setup correctly, you'd get paid more for power pulled from your storage during periods where solar output isn't available. So, instead of daytime solar going onto the grid for super cheap, it would go into storage, which would then discharge into the grid at a higher rate, if you had excess.

Of course there's a balance here between off-peak rates and how much your storage output is worth during the ramp periods.
- If you have an over-sized system, say 40kWh of storage capacity but your overnight usage is only 20, then the value of your power matters less, as long as it helps pay for the system.
- If you have an undersized system, say 10kWh of storage and your overnight usage is 20, then the rate paid for your storage output needs to make selling it worth more than what you'll pay for just buying power from the utility.

This is actually more complex than those two examples because currently the highest market rates are paid during the ramps. If you have 4hrs of storage but the ramps are only 2 hours long, you would make money selling into the 2nd ramp of the day (evening) and then pull from the storage during the 1st ramp, running on off-peak rate overnight. This allows you to avoid paying morning peak rate and make some money on the evening peak rate, charging the storage during the day with your panels.

Of course there are other variations of the above, but that's essentially what is likely to be promoted.

In a scenario where you only ever export wholesale - and always buy retail I dont see an ROI.(=reason to bother)

The "arbitrage" power scenario assumes I'll get some kind of ROI within the lifecycle of my expensive storage.

It just time shifts the scenario to a consumable with a shorter life than my panels

Dropping off grid completely would be my (and everyone that goes that far) best ROI that way what I produce stays mine.

 

[OVERKILL]

In a scenario where you only ever export wholesale - and always buy retail I dont see an ROI.(=reason to bother)

You aren't factoring a different rate for both of those scenarios unfortunately.

The wholesale rate varies. The price being implemented for solar ($0.05/kWh) aligns quite well with the VALUE of that capacity, when it is produced. That does NOT mean that this will be the rate for electricity drawn from storage, provided during a period whether wholesale rates are much higher because solar has buggered off.

Time of Use retail also uses varied rates. For example, the difference between peak, mid-peak and off-peak here in Ontario is pretty significant:

The "arbitrage" power scenario assumes I'll get some kind of ROI within the lifecycle of my expensive storage.

Yes, if you are stocking that power away during the day, overnight is off-peak and much cheaper (TOU) but you can sell from your storage during the 2nd peak of the day at a much higher wholesale rate because of the VALUE of that power, and then avoid drawing from the grid (instead drawing from your storage) during the first peak of the day, you are leveraging your storage to buy only when retail rates are the cheapest, and, conversely, sell only when wholesale rates are the highest.

Again, this all comes down to Capacity Value of the resource.

It just time shifts the scenario to a consumable with a shorter life than my panels

Which is why the economics of the above still need to be considered. If the batteries cost $10,000, you better be able to make significantly more than that or avoid spending significantly more than that, leveraged in the above manner, for the cost to make sense.

Dropping off grid completely would be my (and everyone that goes that far) best ROI that way what I produce stays mine.

Again, you have to look at how the rates are structured. If they are setup to improve ROI by providing a higher wholesale rate to storage when the grid can use it, the best ROI may come from arbitrage.

This is my impression of the "push" taking place as solar capacity value has tanked due to over-penetration.

 

[UncleDave]

The rates can go all over the time of day (and do) but if you always buy at retail and sell at wholesale as is what you are proposing is fair then there is little no incentive to export as there is likely to be little to no ROI with all the cycling occurring.

My point is that Im ok not participating in any scheme where CKN subsidizes my purchase, I'll live with a non subsidized ROI.

Likewise Im not OK participating in a scheme where I subsidize his either.
His power company doesn't get to take my output and mark it up as they see fit making money off me.

 

[OVERKILL]

The rates can go all over the time of day (and do) but if you always buy at retail and sell at wholesale as is what you are proposing is fair then there is little no incentive to export as there is likely to be little to no ROI with all the cycling occurring.

My point is that Im ok not participating in any scheme where CKN subsidizes my purchase, I'll live with a non subsidized ROI.

Likewise Im not OK participating in a scheme where I subsidize his either.
His power company doesn't get to take my output and mark it up as they see fit making money off me.

OK, let me give this one last shot, these are the market prices (and projected prices) for today:

Pay close attention to hours 17, 18, 19 and 20. That's a 4-hour period. Look at the market price. Now look at the retail prices I showed you in the post you replied to. Which are higher?

So, tonight, I'm paying $0.074/kWh, but the gas plant, getting paid wholesale for hours 17 through 20, will make an average of $0.168/kWh during the aforementioned 4-hour period. If I had a battery, I could discharge that into the grid and get paid that $0.168/kWh if I was a market participant, while also pulling off it for my own usage (avoiding buying from the grid, assuming the battery is large enough) and then pulling from the grid overnight when that electricity is at its cheapest.

Does it make sense for me to sell into the grid during the day when the market price is $0.048/kWh? Nope, not if that's the rate I'm receiving. But if I can store that output and then sell it for $0.168/kWh later, while paying $0.074/kWh for my own usage later on, there's an opportunity for this to work, provided the math proves it out from a CAPEX perspective.

This is what I suspect they are angling toward.

 

[UncleDave]

I understand arbitraging power and the scenario you put up.
Sure it can be made to work.
We're not misaligned here.

Where I think we're misaligned is that I want the ability to opt out and do it myself and will deal with lack of subsidy if I dont like the deal im presented.

The power company simultaneously tells me they dont want my product and that it's only worth "X" while forcing me to sell it to them at a rate less than what I pay. Let me out and I'll do it on my own and suffer whatever loss of subsidy that might occur.

 

[Shannow]

How long are your rate contracts good for Shannow? Under three years obviously, - 1?

We get 20 year deals here in Cali.

The ealy push, where people were getting 60c feed in tarrifs were decades long....now it's between you and your retailer.

Get solar, the cost is reduced by the GHG credits, which the installer pockets, based on the lifetime offset, per a govt formula. So my 6.6kW of panels and 5kW inverter cost just under 4 grand.

The solar input tarrifs aren't fixed, the power purchase has a RRP, which is the "standard" offer that retailers must offer, and to which any discounts are applied...when you agree to an alternate offer, the rate can be changed essentially at any time, to reflect the goings on in the market....even in excess of the RRP...which you can then ask to be put back on at any thime.

RRP has gone up 18% this year, and suspected nearly 60% over the next two, due to various factors.

Find a new retialer, and they might offer up to 20c feed in for two years.

As to wholesale price, the retailers who were offering wholesale plus Tx. plus markup, are all going broke as the wholesale price exceeds the retail price cap most days in the afternoons.

 

[Shannow]

I understand arbitraging power and the scenario you put up.
Sure it can be made to work.
We're not misaligned here.

Where I think we're misaligned is that I want the ability to opt out and do it myself and will deal with lack of subsidy if I dont like the deal im presented.

The power company simultaneously tells me they dont want my product and that it's only worth "X" while forcing me to sell it to them at a rate less than what I pay. Let me out and I'll do it on my own and suffer whatever loss of subsidy that might occur.

Some exciting potentials are being explored down here with smart meters and storage...for e.g. not far off is you seeling your excess solar to a neighbour during the day, and buying their bettery power overnight, the power co taking a fee for the Tx...On e big gentailer offers a solar and battery setup, where you pay retail rates for either your or their power, they use some of yours to offset peak, and after 7 years, it's yours to do with what you please.

 

[UncleDave]

Some exciting potentials are being explored down here with smart meters and storage...for e.g. not far off is you seeling your excess solar to a neighbour during the day, and buying their bettery power overnight, the power co taking a fee for the Tx...On e big gentailer offers a solar and battery setup, where you pay retail rates for either your or their power, they use some of yours to offset peak, and after 7 years, it's yours to do with what you please.

I cant see the guys owning the transmission lines letting us do that for free, but cool stuff.

Are you allowed to disconnect completely in Stralia, or are you forced to maintain a connection?

 

[UncleDave]

OVERKILL​

What's a 10GW nuke plant cost?

 

[OVERKILL]

I understand arbitraging power and the scenario you put up.
Sure it can be made to work.
We're not misaligned here.

Where I think we're misaligned is that I want the ability to opt out and do it myself and will deal with lack of subsidy if I dont like the deal im presented.

The power company simultaneously tells me they dont want my product and that it's only worth "X" while forcing me to sell it to them at a rate less than what I pay. Let me out and I'll do it on my own and suffer whatever loss of subsidy that might occur.

Yeah, I understand totally why you'd want that option, I was just pointing out that the math CAN work, even using wholesale pricing.

So, you guys can't go off-grid completely? IIRC, we have some similar regulation here for some locations, but it is not universal.