Glendale Water & Power (GWP) likes to say that they don’t get any Renewable Portfolio Standard (RPS) credit for rooftop solar. They use this to downplay rooftop solar but it’s really only half the story.
It turns out that rooftop solar does help the renewable standard but it lowers the utility’s profit margins.
The RPS is California law that requires all utilities in the state to sell a certain percentage of renewable energy to their customers. The law is currently 25% today, 33% by 2020, and 50% by 2030.
Rooftop solar that is not owned by the utility supplies electricity to the home or business without going through the utility and therefore doesn’t count towards the utility’s RPS.
That makes sense on the surface, but let’s do the math. Say a utility provides 1,000,000 megawatt hours (MWh) of power to it’s ratepayers per year. 470,000 MWh of that energy comes from remote renewable sources so the utility is at 47% of renewables for the RPS.
The ratepayers install a bunch of rooftop solar on their own and those panels produce 200,000 MWh in the first year. Now the utility has only supplied 800,000 MWh of energy.
Let’s assume the utility continues to source the same 470,000 MWh of renewable energy to supply that 800,000 MWh of energy. Now they are at 59% of the RPS.
So, under normal conditions rooftop solar actually raises a utility’s RPS percentage even though they don’t get direct credit from the energy.
There is another scenario, the utility leases rooftop solar panels to the customers and sells them the panels’ electricity at a steep discount. This is what the solar leasing companies do for the no money down solar panel plans. Los Angeles Department of Water & Power (LADWP) is doing a similar plan for low income customers.
In this second scenario, the utility is supplying the full 1,000,000 MWh of electricity. It gets RPS credit for the 200,000 MWh of leased rooftop solar plus the 470,000 MWh renewable energy they were already supplying. Now they are at 67% renewables.
Wow, either case is great for the utility, right? Then why is GWP downplaying rooftop solar by saying they won’t get credit for it?
Under scenario one, after the rooftop solar installation, the utility is selling less electricity and is therefore taking in less money. Under scenario two, they are selling more electricity than scenario one but at a lower rate. This means a big shakeup in their budget. For an investor-owned utility, I could understand the concern – they’re in it for a profit after all. But GWP is a public owned utility. According to the California Energy Commission their mission is supposed to be to “Optimize benefits for local customer owners usually in the form of lower energy rates.”
But there is more at play. Both scenario one and two assumed that the utility would continue to provide the 470,000 MWh of renewable energy. But what if the utility had just built a $500 million dollar natural gas plant? Under either scenario it would be cheaper to produce power at that gas plant than import the renewable energy. This will be especially important when their revenues start declining from either scenario.
Keep in mind that legally, they only have to be at 33% renewables in 2020. So, under scenario one, to balance their budget they would reduce the amount of purchased renewables and supplement it with power from their plant. To achieve the 33%, they would produce 616,000 MWh from natural gas and buy only 264,000 of remote renewables rather than the 470,000 MWh they were purchasing.
Under scenario two, they would produce 770,000 MWh from natural gas, 200,000 MWh from leased rooftop solar and buy only 130,000 MWh of remote renewables rather than the 470,000 MWh they were purchasing.
In either case, the decision to build an over-sized gas plant at a time when the law is pushing utilities to increase their renewables percentage seems more and more ill-advised. The more rooftop solar customers install the worse it’ll look for the utility.
In a third scenario where the utility discourages rooftop solar by playing down it’s RPS contribution, under-funding it’s rebate program and making installations more difficult to minimize the growth of rooftop solar. They would start out delivering 1,000,000 MWh with 470,000 MWh purchased renewables and 530,000 MWh of generated power. With the debt burden of the new plant, they will also choose cheaper local generation and produce 770,000 MWh from natural gas and purchase 330,000 MWh of renewables.
Reducing solar installations maximizes the amount of revenue generated by the utility.
Also, when the inevitable reduction of imported renewables starts happening, the minimum rooftop solar option reduces purchased renewables by only 29% whereas scenario 1 reduces purchases by 44% and scenario 2 reduces purchases by 72%. Clearly, reducing imported renewables by only 29% is going to look the best for the utility.
Rooftop solar is a win/win for GWP’s renewable portfolio and the ratepayer’s bottom line. We own the utility and we should hold them accountable to their mission. They are overseen by the Glendale City Council. Join us next Tuesday, April 10 at 5:30pm at Glendale City Hall for a rally to stop the Grayson Expansion and ask for clean energy alternatives. Go here for more information.