The Fairness Argument

The “Fairness” Argument

Opponents of rooftop solar in the electric utility industry use a misleading “fairness” argument to advance policies to slow or halt the advance of distributed solar energy generation. The specific arguments they advance are part of a coordinated nationwide campaign by the Edison Electric Institute (EEI) and the American Legislative Exchange Council (ALEC) to protect traditional electric utilities and the fossil fuel industry from renewable energy competitors. In February 2015, SRP defended its new solar-killing E-27 rate plan by reiterating ALEC and EEI talking points. (SRP has a designated representative to ALEC.) Let’s examine the flaws in this supposed fairness argument.

The anti-solar “fairness” argument goes something like this: Because homeowners with solar panels generate much of their own energy, they pay lower monthly electric bills and therefore do not pay their “fair share” of the costs of maintaining the electric grid, according to the critics. This, they claim, causes an “unfair cost-shift” to non-solar customers. While the argument seems logical on the surface, it doesn’t stand up to scrutiny

First, the supposed “cost-shift” only occurs if (1) a large percentage of homes in a utility’s service area are generating their own power, (2) if that self-generated power does not meet any of the utility’s peak demand, and (3) if the costs of grid maintenance are not included in a set minimum monthly fee. Less than 1% of SRP’s customers have rooftop solar and significant portions of that solar production reduce peak demand on the system. So when SRP adopted the E-27 price plan and forced rooftop solar customers onto that plan, the cost-shift was merely hypothetical, not actual. We would need ten times as much solar on rooftops to even begin to see a cost-shift and the amount of those shifted costs would come to only a few pennies on an average monthly bill. A small price to pay for accelerating the deployment of clean energy that benefits everyone.

Moreover, all customers pay a minimum monthly fee, a portion of which goes to grid maintenance. SRP claims that most of its grid maintenance costs are rolled into the “volumetric charge”–what customers pay for the energy they consume. But nearly all customers with rooftop solar get only a portion of their energy from their solar panels so they normally pay volumetric charges too, especially in the summer and winter. So rooftop solar owners do in fact contribute to maintenance of the grid.

Finally, because rooftop solar customers generate most of their own power and because their excess production is consumed by their immediate neighbors, those customers us only a tiny portion of the full assets of the transmission and distribution grid. Many private and government studies have shown that rooftop solar and other forms of distributed energy generation actually reduce grid maintenance costs and provide significant benefits to the grid, including enhanced flexibility, resilience, and efficiency. One can plausibly argue that rooftop solar customers may in fact be paying more than their fair share of grid maintenance costs.

Even if there was a cost-shift, there are many means for dealing with it other than adopting an unpredictable and largely unmanageable monthly “demand” fee that erases the economic benefit to homeowners of generating electricity from the sunshine that falls on their roofs. SRP’s punitive E-27 rate plan directly and intentionally stymied the growth of rooftop solar and forced customers to remain captive to its centralized grid fed predominantly by fossil fuel-based power plants (coal and natural gas).

Journalist Bill Roth recently offered one additional rebuttal to the spurious fairness argument: “Utility rate-design history is rife with examples of utility-proposed, and commission-approved, examples of unfairness. Utilities and their commissions have consistently offered lower rates to industrial customers to remove the economic attractiveness of self-generation. … To single out customer-owned solar on the issue of fairness is in itself unfair because fairness is really not the issue. The real issue for utilities is revenue preservation. The real customer issue is their ongoing quest to get a lower electricity bill. The state issue is how to enable the adoption of technologies that generate jobs and improve public health by reducing pollution.” From Bill Roth, “How Technology Innovation Will Save Customer-Owned Solar,” in Triple Pundit:

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