For the first time in over a hundred years, consumers can choose the source of their home electricity. In fact, with factorial increases in the adoption of solar technologies due to lower costs, technological gains, and policy incentives, some consumers are already generating their full annual electricity needs right at home. Zero carbon emissions, grid autonomy, and fossil fuel independence are joining or replacing low prices and high reliability on consumers’ list of electricity value propositions. Washington state has the potential to be a market leader in properly valuing solar and other renewables.
In this blog post, I’ll review solar’s unique attributes that are not currently captured in the price of solar, as measured through RECRIP and net metering.
Solar Can Provide Resiliency for Vulnerable Groups
Solar has the potential to be the most equitable and accessible energy source of all renewables. The sun’s rays are free, inexhaustible, and, with the right technology and construction applications, can be seamlessly integrated into buildings and devices, thereby providing low-cost electricity to all industries and populations. In the current federal and state-level policy incentive structure however, homeowners, large corporations, utilities, and higher-income residents have primary access to solar. Renters, lower-income residents, and small- and medium-sized businesses have fewer choices and must rely on the traditional grid for electricity.
The state’s solar production incentives require unity of ownership, excluding renters, nonprofits, small businesses… any entity that does not own the property in which it resides or works. Applications to community solar projects have outstripped available spots, with utilities turning away hundreds of interested consumers. Clearly there is a demand for solar outside of homeowners. Renters, on average, spend even more of their income on housing than do homeowners (41.3% renters vs. 28.8% of homeowners spend over 35% of their income on housing costs). “Partially reflecting the level of resources necessary to purchase and maintain a home, respondents who own their home are more likely to report that they are either “doing okay” or “living comfortably” (74 percent) than those who rent (48 percent).” Since approximately 36% of Washington’s residents are renters, this leaves a significant portion of the population without the same market choices that homeowners possess.
Over three-fourths of small businesses say energy costs are in the top five business expenses. Nonprofits and community groups like churches and schools are at a similar disadvantage. These groups do not typically own their properties or have the ability to assume tens of thousands in debt to directly purchase a large-scale solar system. Though some would argue that these groups are the most susceptible to energy price volatility, these consumers are unfairly excluded from the state programs that would help make them more energy- and economically-resilient.
Solar Can Mitigate Household Energy Price Shocks
Two trends emerging in the past decades create another value proposition for solar and other renewables. The first trend is that residents in Washington are increasingly relying on electricity to power their homes. From Commerce’s 2015 Energy Report: “Electricity share of residential energy consumption has grown steadily over the decades and accounted for a bit over half of residential energy consumption in 2012, even though average electricity use per household has declined 25 percent since 1982” (p 50). Electricity is a significant energy source for home heating, cooling, cooking, and water heating. The most recent residential energy survey by the EIA shows that about one-fourth of households with incomes $80,000 and higher use electricity as their main heating source, and one third use it for water heating. In contrast, 39% of households making incomes below $40,000 rely on electricity for primary home heating, and 48% use electricity to heat water. Higher home electricity rates means low-income homeowners are more susceptible to price shocks.
Second, not only are more residents relying on electricity for home energy, those home energy prices are increasing. After adjusting for inflation, from 1998 to 2012, an average household in Washington saw a 26 percent increase in home energy spending. Indeed, home expenses are one of the largest costs for most people. Total costs for end consumers includes energy transmission and distribution, repayment of unfinished new nuclear power plants, and a host of other utility costs recovered through a consumer electric rates. Those rates have been trending up over the past twenty years. “In contrast to oil and natural gas prices, real electricity prices did not decline from the level they reached during the early 1980s. Even though electricity prices in Washington tend to be lower than in other parts of the country, until 2005 electricity was the most expensive primary energy source in Washington (on a Btu basis). Real electricity prices rose in 2000 and 2001 after 15 years of relative stability, and have continued to rise at a slower rate over the past decade.” Even though electricity is commonly referred to in Washington as “cheap,” the true price varies depending on your target audience. Small businesses, low income earners, and non-property owning entities with proportionally higher reliance on the grid encounter more inequality when electricity prices rise. Solar offers a uniquely progressive opportunity to resolve some of these challenges.
For lack of space and scope, this report regrettably does not investigate these issues in full detail. Northwest SEED provides an excellent set of recommendations to advance solar equitably in their publication “Solar PV for Multifamily Affordable Housing in Seattle
Distributed Solar Does Not Fall Into the Utility Generation and Consumption Gap
Washington’s Department of Commerce’s “2015 Biennial Energy Report and State Energy Strategy Update” provides a holistic overview of the energy choices provided to consumers (See Figure 6). According to the report, hydropower comprises 77% of total electricity generation. To account for exports of cheaper hydropower when peak generation exceeds demand, data on consumption are also reviewed. The report states: “Another approach, and perhaps better estimate for the energy sources for electricity in Washington, is the mix of fuels used by utilities to serve customers in the state. …Washington is part of an interconnected, multi-state, regional bulk power system and utilities purchase electricity generated from a variety of sources throughout the region” (p 40). Using the Washington State Fuel Mix Disclosure process, the Commerce report shows 70% of all electricity consumed in 2012 came from hydro, with 4% coming from renewables. Incorporating transportation and industrial and commercial energy use, not just electricity, hydropower shrinks to just 17% and renewables grow to 11% of all energy consumed.
Two notable points arise from this study: 1) Not all hydro-powered energy and wind energy which is generated in state is consumed in state – these cheaper fuels are consistently chosen for sale outside of Washington where clean energy markets offer higher prices; and 2) Transportation and commercial/industrial sectors use a higher percentage of renewables for non-electricity energy. According to the EIA, national consumption follows a similar usage pattern. Though hydroelectricity was the largest renewable energy source of energy in 2014, consumption has continued a downward trend started in the 1990s. Renewables have made up some of that slack. “Within the electric power sector, renewable energy accounted for 13% of energy consumed, higher than its consumption share in any other sector.”
What this means for consumers in Washington is that there is opportunity for increased in state consumption of renewables such as solar, wind, and hydropower. Washington residents have a unique and long-standing culture of environmentalism and fossil fuel independence. In this regard, electricity’s value proposition is likely different here compared to other markets. This becomes important as utilities decide how to sell current and add new and future generating capacity. Regardless of conservation and efficiency efforts, population growth and retirement of current electricity-generating assets will require future investments. Broadly speaking, utilities and consumers in Washington already enjoy lowest-in-the-nation electricity prices. Trusting that consumers will exhibit a higher willingness to pay for clean energy, utilities should be able to invest in renewables and boycott less-green energy generating sources.
Consumers have equal power to affect changes. Rooftop solar is relatively simple – increasing electricity through distributed solar provides a clean energy that is generated and consumed on site. Albeit more difficult to change, centralized energy generation is next. As a state, 14.8% of all utility-provided electricity is powered by coal and 13.1% by natural gas. Puget Sound Energy stands alone in its non-hydro dominant fuel mix – relying on coal and natural gas for 31.3% and 23.3%, respectively. The state government has made laudable efforts to make overall fuel mixes more transparent. Consumers are now in a position of demanding their utilities disclose what fuels are used in state to make the electricity consumed in state. A potential higher willingness to pay for cleaner fuels would provide additional incentive for utilities to not export any clean renewables.