Source: Norman Rogers
According to the conventional wisdom, if you install solar panels on your roof you can zero out your electric bill and save pot loads of money. This is actually true if you live in certain states, particularly California. The catch is that everyone that does not have solar panels on their roof is paying for your benefits. For the homeowner that’s a not a problem. It’s a feature.
Solar only works during the day and best in the middle of the day. But residential electricity consumption tends to peak in the evening. A scheme called net metering fixes this problem by allowing the homeowner to “bank” excess midday electricity and then withdraw it from the bank later in the day. The bank is imaginary, an accounting fiction, because it is not easy to store electricity. The bank can even be used to store summer electricity for consumption in the winter, when solar works poorly. The excess solar electricity is fed back to the grid where it is immediately consumed by other customers. There is no bank except in the accounting books.
Residential solar is a disaster for the electric utility. Once the customer installs solar, the utility loses almost all its revenue but keeps nearly all its expenses. The expenses are maintaining a connection to the customer’s house including the distribution system that carries electricity from the generating plants to the customer. The generating plants still have to be ready to provide regular quantities of electricity to each solar homeowner as soon as the sun sets and whenever it is cloudy. The only saving for the electric utility is reduced fuel consumption in its generating plants when fossil fuel electricity is displaced by solar electricity. That expense is minor part of the expenses associated with servicing a typical homeowner. The electric utilities are forced to engage in net metering programs by politicians. The politicians are driven by homeowners looking for a bargain and by the residential solar installation industry.
Residential solar is an extremely expensive method of generating electricity. Even giant, utility scale, solar farms produce very expensive electricity. But, residential solar cost about three times more than utility-scale solar, because each installation lacks economies of scale and has to be custom designed to take into account the particular conditions of each customer’s property. The absurdity of the situation is illustrated by the fact that rooftop electricity, even with subsidies, costs around 20-cents per kWh, but generating electricity in existing natural gas plants costs 1.5 cents per kWh for fuel.
Rooftop solar is most attractive in states, like California, where electricity rates are exorbitant. California has a reverse quantity discount for residential electricity. If you have a large home and consume a lot of electricity, you will end up in a high “tier” where the marginal cost of electricity exceeds 50-cents per kilowatt hour (kWh). Since solar electricity with the federal subsidies can cost around 20-cents, a great deal of money can be saved. California electricity is expensive due to loony tune green schemes. In most other states, electricity costs around 12-cents per kWh and solar is not going to work, even with net metering. Additionally, many other states lack good sunshine.
A concrete case might work like this: A homeowner uses 1500 kWh per month and has an average electric bill of $300 or 20-cents per kWh. He installs a 10-kilowatt (kW) system that costs $36,000, but due to the federal subsidy, he only pays $26,000. He finances the system for 25-years at 6% interest. His monthly payment is $169. With net metering, the 10-kW system is large enough to zero out his electric bill. Instead of paying $300 a month for electricity, he now pays only $169, a savings of $131 each month. The saving will actually be less due to maintenance costs and a typically small connection charge from the electric utility.
But for the electric utility this deal is a disaster. The utility loses $300 per month revenue but saves about $22 in fuel cost. The connection charge in the absence of electricity consumption is typically negligible compared to the expense of maintaining the connection. The utility may not actually suffer reduced profits because it is guaranteed a level of profit related to its capital investment by the public utility commission. But forcing other customers to subsidize solar customers is not sound economics and sooner or later will cause a problem for the utility. So, utilities are typically engaged a rear-guard action to limit the number of solar customers or to charge them more. The problem is that solar has sacred cow status, so for PR reasons the utilities cannot directly attack solar.
Keep in mind that solar is completely fake as to being a realistic source of electricity. It is entirely useless without the costly connection from the electric utility to step in when solar fails, like every evening.
A Modest Proposal
Suppose the utility says to the customer considering solar don’t buy a solar system, instead give us the $26,000 and we will give you free electricity for the next 25-years. That is obviously a better deal for the utility than losing nearly all its revenue and effectively providing free electricity for 25-years, the life of a typical solar system. But the utility is in a position to ask for more than $26,000 because it is a lot more convenient to make a one-time payment than to deal with a solar system for 25-years. Additionally, the federal solar subsidy is scheduled to be phased out by 2022. If the electric utility offers 25-years of free electricity for $36,000 that is worth $234 per month to the electric utility if invested in a 25-year 6% annuity. That is close to the approximate $260 a month the company would lose if the customer installs solar. Of course, the utility would not actually buy an annuity. Utilities are borrowing money all the time so they would just borrow less due to the one-time payments flowing in for not installing solar. The utility could offer various deals, for example free electricity for 10-years, or deals with down payments and fixed monthly payments. The real objective should be to kill the annoying solar industry without being too obvious about it and without giving discounts to customers that have no intention of installing solar.
The objection might be raised that killing solar kills the benefit of reduced CO2 emissions. That objection can be easily answered by purchasing carbon offsets to cancel out the CO2 emissions. It would cost about $6 per month to purchase carbon offsets to cancel out emissions from generating 1500 kWh per month using natural gas, as in our example. Carbon offsets are generated in various ways, such as planting trees to absorb CO2.
From the above discussion it should be obvious that solar is a crooked scheme that only benefits the solar installation industry and homeowners that are participating in the racket. Having solar on your roof can be a burden. California solar users are climbing on their roofs to clean soot from their solar panels due to the recent fires. Having a loan secured by your home equity is a problem when it comes time to sell the house. The industry uses sales tactics similar to the aluminum siding industry or the timeshare industry.