This is Part 3 of a multi-part series about my attempt to install solar panels on my house. For the previous installation, CLICK THIS LINK. For the next installation, CLICK THIS LINK. To start at the beginning, CLICK THIS LINK. Thanks for reading!
Power Line Tug-of-War
Solar owners and electric utility companies have been playing a game of tug of war with power lines, for decades. That’s because of the way solar owners like to “store” their excess electricity.
When the Sun’s out, your panels are pumping out power, and lots of it. Often, it’s a lot more than what you’re using. What do you do with the excess? You don’t want it to go to waste.
You could set up a battery storage system, to store all that excess electricity. But unfortunately, these systems are very expensive. Batteries cost one hell of a lot, plus you need to install expensive controller equipment, and maybe a special inverter.
Probably the best battery is the Tesla Powerwall lithium-ion. It will set you back about $11,500, including installation costs. But it only has a 10-year warranty. Also, it can only store 13.5 kWh of electricity. At our household, that’s only good for about a half day, before we go back to the Dark Ages.
The cost of battery storage is so prohibitive, most solar owners opt for what is called a “grid-tied” system. This system connects your solar array to the grid, which is the infrastructure of power plants, substations, transformers, power lines, and so forth, that the electric company has built.
When your solar panels are producing more electricity than you’re using, the excess power is backfed onto the grid, and made available for your neighbors to use. And your neighbors are charged for it, at the full retail rate.
This eases the burden on your electric company to produce electricity, but in spite of that, they regard this as trespassing. It’s their power lines, after all, and they’ve paid a lot of money to put their lines up. Of course, they won’t complain if you’re willing to give them your electricity for free. But otherwise, you’re trespassing.
But it turns out, solar owners are greedy bastards, and they don’t give a damn if they’re trespassing. Not only do they want to trespass on the electric company’s power lines, but they also want the electric company to pay them for the electricity they backfeed to it.
“Okay, fair enough,” says the electric company. “But you still have to pay a flat monthly fee of about $14.00, for the use of our power lines. Then we’ll pay you what we pay the power plant for our juice.” Wholesale prices, in other words.
Nobody seems to debate the flat monthly fee. It truly does seem fair enough for covering the cost of maintaining the power line infrastructure. But what has been hotly debated is the policy of paying customers the wholesale price for their excess electricity.
The wholesale price is a fraction of the retail price. For instance, we pay 30-cents per kWh, retail, for our electricity. But the wholesale price averages about 5-cents per kWh. So under this arrangement, we’d be selling our excess electricity to the utility for 5-cents. Then, when we need to use it, we’d be buying it back for 30-cents. That’s a great deal for our utility, but it stinks for us.
Naturally, those in the solar industry have protested such arrangements. It discourages people from installing solar arrays. So state governments have stepped in to resolve this tug-of-war over the power lines. They’ve imposed something called Net Energy Metering (NEM).
NEM differs from state-to-state. In some states, you sell your electricity at retail rates, then buy it back at the same rate. But in other states, you sell it for less than retail, but buy it back at retail.
California likes to number their NEM arrangements. NEM 1.0 was the most generous for solar owners. With NEM 1.0, you sold your excess power at full retail rates. But that ended in 2016, with NEM 2.0. With 2.0 (our current arrangement), you sell your excess power for a few pennies below retail rates. The difference in the markdown is set aside to help poor people, by giving them a discount on their electric rates.
Utility companies have not liked NEM 1.0 or 2.0. They’ve pushed hard for a new NEM, where they’ll only pay wholesale rates for excess power generation. And they’re going to get most of what they want. On 12/15/22, the California Public Utility Commission voted to scrap NEM 2.0 and impose NEM 3.0. With NEM 3.0, solar owners will only get a few pennies above wholesale rates for their excess generation, but will have to buy back the electricity they’ve sold, at full retail rates.
So the utility companies in California have mostly won the tug-of-war.
This really sucks, and it makes investment in solar panels far less lucrative. Californians will be feeling more hesitant to install solar on their houses under this arrangement. And that would include my wife and I if it wasn’t for one nice thing about NEM 3.0. That is, it doesn’t take effect until April 14, 2023. If we can get our solar array installed and approved before that date, we’ll be grandfathered into NEM 2.0 for 20 years.
We’ve already signed a contract with a solar installer. We’re now waiting in line behind many others who have also signed contracts, hoping to beat the deadline. But we’ve been promised by our installer that they’ll probably have our system ready by March 31st. If they come through and accomplish this, then we’ll be on the NEM 2.0 plan.
Our fingers are crossed. The race is on.