Solar Power

It's nearly lights out for PG&E's solar power buybacks

By Aria Pearson
Santa Cruz Sentinel correspondent
California's landmark efforts to increase solar power, supported by environmentalists, state leaders and the governor, could be in peril.

In the next few months, PG&E, the largest utility company in the state, will reach the cap on how much solar energy it will buy back from customers. If the Legislature fails to pass a new bill raising that cap, new solar users in PG&E's territory won't be eligible for the benefits currents users enjoy, which some fear could bring the rise of solar energy in California to a grinding halt.

"It will destroy the industry," said Ken Adelman, a retired high-tech exec and resident of Corralitos who has the largest residential solar power system in the state.

The California Solar Initiative, a top environmental goal of Gov. Arnold Schwarzenegger, was approved in January by the California Public Utilities Commission as a way to bolster the growing solar industry. It allocates $2.8 billion in incentives for solar projects of all sizes over the next 11 years. The objective is to bring 3,000 megawatts of solar energy online, enough to power about 3 million homes.

Many experts say the goals are feasible under current law, which allows individuals and businesses with solar power systems, called photovoltaics, to connect to PG&E's grid and sell back any extra power they generate.

The process is called net metering. The solar power system is fitted with a meter that runs forward and backward. During the middle of the day, when the sun is shining, the solar panels often produce more energy than the customer can use, and the meter runs backward. Then, at night, when the panels are not generating any electricity, the customer takes energy from the grid and the meter runs forward.

At the end of the year, the customer gets one bill, with all the debits and credits tallied up. Though the law says the bill can never end up in the negative, with PG&E owing the customer money, it can equal zero, making solar panels cost effective over time.

But as a compromise to the utility companies, the law also has a cap. When enough photovoltaic systems have been installed that the total capacity reaches 0.5 percent of each utility company's peak demand, then the utilities no longer have to provide net metering to people or businesses who install new systems.

"Yet what's the incentive for a customer if they can't sell back their electricity to the grid?" asks Claudia Chandler, a spokeswoman for the California Energy Commission, an energy policy agency located in Sacramento. The CEC helped develop the California Solar Initiative. "Our position is we need as many net metering systems as we can have out their, so that consumers — homeowners — can see the benefits of purchasing photovoltaic homes or retrofitting their homes with photovoltaics."

For PG&E, the 0.5 percent cap translates to about 95 megawatts of solar generated power. The utility contends the cap is necessary because it can't afford to keep offering a one-to-one swap on energy, which basically means it's buying energy at retail price rather than cost. PG&E officials say they support raising the cap to 2.5 percent but the extra costs will be reflected in rates.

"There should be a recognition that the net energy metering program is a subsidy that is paid for by other PG&E customers," said Paul Moreno, a PG&E spokesman.

He said PG&E supports the development of solar power in the hopes of it becoming self-supporting in the future. The cap is there to ensure the costs born by other customers diminish over time.

"Obviously you can't have an unlimited subsidy," Moreno said.

But Roger Denault, owner of Solar Technologies, a solar installation company in Santa Cruz, said the fact that nonsolar users subsidize solar power is not an issue because around 85 percent of people in California approve the use of solar power.

"If that's a real concern, then let some public interest group, some citizen group, raise that argument. Given the public good, our opinion is that they ought not to have a limit at all," said Denault, who has installed hundreds of photovoltaic systems in Santa Cruz County, and whose business could suffer if the cap is not raised.

A typical home solar system costs about $25,000, Denault said. With rebates from the California Energy Commission, and net metering benefits from PG&E, homeowners can pay that back in about eight years. But without net metering it would take close to 13 years. Net metering is a vital incentive for installing solar power, Denault said.

More that 17,000 grid-connected solar systems have been installed in California so far, with 230 of those in Santa Cruz and 436 in Watsonville. The total solar capacity in California is 136 megawatts, enough power for 136,000 homes. And about half of that wattage comes from systems in PG&E's territory.

In fact, in 2004, more than half the new grid-connected solar systems in the country were installed in PG&E's territory, Moreno said. And he expects the 2005 numbers to be similar.

"That goes to show you that, as a utility, we do wholly support renewable energy and solar energy as a customer choice," he said.

But according to Adelman, PG&E has fought solar power from the beginning. He said the cap was put in place to appease the utility.

"It came about because PG&E screamed bloody murder, saying the world would come to an end if we allowed net metering," he said.

Adelman and his wife looked into putting solar panels on their home in the mid-1990s but found it too expensive. The net metering law, which passed in 1995, helped photovoltaic systems become practical.

Even then, however, there was a limit to how big your system could be. Anything that generated more than 10 kilowatts couldn't be net metered. That limit was later raised to 1 megawatt, or 1,000 kilowatts.

Adelman has a 30-kilowatt system, by far the largest residential system in the state, and since he applied for net metering only two days after the limit was raised, he had to take PG&E to court to get it. He said that demonstrates how much they don't want to allow net metering.

There are reasons why a utility company can't buy back unlimited solar power, however. It has to pay to keep a supply of energy available for solar users in case their systems go down, and it has to build and maintain the wires, towers and substations needed to transport the energy.

Solar users are, "not paying all the costs associated with delivering the power," Moreno said, even though they take power from the grid at night. The money they save helps them pay off the costs of their system faster. But the way the system is set up now, if everyone switched to solar power and was allowed to net meter, the utility companies would be providing those other services for free.

There's no danger of that happening soon, and Adelman thinks there are many ways in which the system could be changed to adapt to solar power generation.

"The problem with utility companies is they have the wrong business model. They still think they're monopoly deliverers of power, when really their business model should be one of insurance," he said. "I'm connected to the grid right now, I'm pumping power in, but I have an insurance from them that if my system fails, I can buy power from them. In reality, that's something I should be paying for."

California Energy Commission spokeswoman Claudia Chandler is also optimistic about the future of solar power in California.

"I think everybody's very aware of how costly conventional energy is," Chandler said, citing the high natural gas prices right now. "When you look at the options out there, what are the alternatives?"

The California Energy Commission urged PG&E in March to support raising its cap. A new bill, AB 2993, authored by Assemblyman Mark Leno, D-San Francisco, is currently under review by the Assembly; it would raise the cap from 96 megawatts to 200 megawatts.

While that won't help for long, the idea is to buy time to come up with a statewide solution to the problem of net-metering caps, solar backers say.