Utilities Launch Campaign Against Home-Based Solar Energy

If you have home solar panels or are considering having them installed, here’s what you need to know.

Home solar panels, not usually a subject of controversy, have become a hot issue in statehouses around the country.

Utilities and advocacy groups have launched a multimillion-dollar campaign to end what they say is an unfair advantage some states give to homeowners with rooftop solar panels.

Writes the Los Angeles Times:

The Koch brothers, anti-tax activist Grover Norquist and some of the nation’s largest power companies have backed efforts in recent months to roll back state policies that favor green energy. The conservative luminaries have pushed campaigns in Kansas, North Carolina and Arizona, with the battle rapidly spreading to other states.

Another group working to repeal solar laws and green energy requirements is the controversial American Legislative Exchange Council or ALEC, which brings conservative state lawmakers together with business and industry representatives to write draft legislation.

ALEC has written model legislation targeting net metering, the LA Times says.

The utilities and allies also are challenging laws in Washington, California and South Carolina.

It’s all about net metering

The campaign centers on a practice called net metering. Laws in many states let solar homes send excess electricity back to the utility. Those homeowners are compensated with credit on their bills.

Carrie Hitt, an official with the Solar Energy Industries Association, an industry group, told Money Talks News that 46 states have some form of net metering.

Some states, like Kansas, require utility companies to get a share of their power from renewable sources.

The utilities claim net metering dumps unfair costs on customers who don’t have solar panels. It leaves fewer households covering the costs of keeping utility systems running, they say.

The state net metering laws and state and federal tax credits for home solar installations are credited with helping reduce the load on the nation’s aging electric system.

The Washington Post wrote about a 2012 report by the American Society of Civil Engineers:

[The report] described the nation’s electrical grid as a patchwork system that ultimately will break down unless $673 billion is invested in it by 2020.

If investment isn’t increased by at least $11 billion a year, the report said, the electrical service interruptions between now and 2020 will cost $197 billion.

A report from the Edison Electric Institute, an industry advocate, however, calls solar panels “threats to the centralized utility business model.”

The score so far

After months of lobbying and debate over the issue in California, the Legislature ordered the state’s public utility commission to act by 2017 to create a plan that examines rate structures and ensures non-solar households don’t pay extra.

Arizona responded to the campaign by allowing utilities to charge solar customers a $5-a-month fee — considerably less than the $50 fee the lobbyists wanted.

Utilities and their allies were unsuccessful in their attempt to repeal a Kansas law that says 20 percent of the state’s electricity must come from renewable sources.

You won’t get rich off of net metering

Are solar households freeloading by sending electricity back to the grid?

The LA Times says:

The arguments over who benefits from net metering, meanwhile, are hotly disputed. Some studies, including one published recently by regulators in Vermont, conclude that solar customers bring enough benefits to a regional power supply to fully defray the cost of the incentive.

Utilities deny that and are spending large sums to greatly scale back the policy.

You’ll never get rich selling your electricity back to the grid. In fact, you can’t make money at all, just credit. Utilities put limits on how much electricity they’ll accept from customers. The best you could possibly do is to reduce your electric bill to zero.

However, without net metering, the LA Times writes, “solar power would be prohibitively expensive.”

Costs and return

The hope of recovering a solar investment eventually with credits is an incentive for many homeowners. It takes 5.6 years on average to break even on the cost of buying and installing a household solar system, according to Boston Solar, an installation and sales company.

Here’s a look at how the costs and returns break down.

Powering a home. At least 8,000 kilowatt-hours a year are needed to supply electricity to a 2,000-square-foot house without electric heat or an electric water heater. It takes about 6.5 kilowatts of solar panel capacity (energy produced at any one time) to meet that need, MSN Real Estate says.

The costs. Trinity Solar, a solar design and install company based in New Jersey, explains how to calculate costs of purchasing and installing a home solar system. According to Trinity Solar’s website, a 6.9 kilowatt rooftop solar system costs roughly $16,800. That includes:

  • $24,000 purchase and installation cost.
  • $7,200 one-time federal tax credit.

The payback. Trinity Solar says this system would earn roughly a 12.5 percent return:

  • $1,242 in electric bill savings annually.
  • $863 more in savings on your bill from net metering, or returning your excess electricity to the utility.

Or, go solar for free

A household’s installation cost can vary enormously from Trinity Solar’s example, depending on state laws and incentives. Also, where it’s available, an option called third-party financing lets homeowners install home systems for a reduced cost or even free.

In exchange, the third-party operator gets the electricity and sells it back to the household at a contracted rate that’s usually lower than the local utility’s, says the website of the Solar Energy Industry Association, an industry trade group.

In these arrangements, a homeowner’s costs are determined by type of agreement. The association’s website says:

Third-party financing of solar energy primarily occurs through two models. A customer can sign a traditional lease and pay for the use of a solar system or the customer can sign a power purchase agreements (PPA) to pay a specific rate for the electricity that is generated each month.

It’s unclear how much the loss of revenue due to third-party providers is spurring the utilities’ campaign. But the association says that, in California and Colorado, third parties have become the dominant way for households to go solar. Forbes describes the third-party industry’s rapid growth.

What’s your experience with home solar panels? What do you think of the arguments that net metering costs non-solar households more? Join the conversation by posting a comment below or at Money Talks News’ Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

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  • Tom

    Koch brothers and ALEC (joined at the right hip) and utilities like Dominion Resources care more about profits than clean energy/weaning us off carbon based fuel. The less we generate with solar or wind the more profits they make from dirty coal and fracked gas. Greed gone wild is slowly killing our planet. There is a pricing model that will have all fairly pay for maintaining the grid while encouraging green energy creation.

    • marketfog

      I wish people would stop vilifying the Koch bros. Soros has been throwing around even larger amounts of $ for a lot longer. His ulterior motive is to open opportunities where he could make even more $ billions.

      • mmariani

        Why, because the Koch’s own much of the coal that the utilities need to produce electricity? Tell me why you’re a fan of theirs. Also after 50 years of solar, your augments against it doesn’t hold much water.

      • Jason

        I’m opposed to billionaires of either party throwing around unlimited campaign contributions to try to get their way. What is good for billionaires isn’t necessarily good for the country.

  • marketfog

    The Trinity Solar example cited in the article about Solar energy is unsound. It supposes a 12.5% annual return, or an 8 year payback if everything goes right. In industry, an 8 year payback is unacceptable unless there is no other choice, 4-5 years would be the cutoff, faster is better. I don’t know how they calculated these returns. Many inexperienced people would look ate this as cutting their electric bill. But, if you look at the itemization on the bill, you see that only the variable costs such as fuel and affiliated costs and pegged taxes will be affected. Time value of money, lost opportunity costs, loss of system efficiency by dirty cells and wear, repair costs, specialized training, and unsightly appearance must also be considered. We see these big solar installations on schools and buildings. Most of these are only “feel good” projects to make the company look good in the public eye. It’s nothing but public relations. Unless its has a very important secondary reason, most of these projects don’t stand economic scrutiny. I know of one school which opted for a large solar panel installation because it received a new multi-million $ roof for free. It needed the roof, not the panels.

    • Jack Mabry

      You sound like a mouth piece for the Koch Bros, and the coal and gas industry. We’re not talking about industry here, we’re talking about homeowners and their needs, as well as the needs of the environment.

      • marketfog

        Imagine you are a homeowner and you are paying for an installation with after tax money. Be realistic. Would you pay 25 to 50 percent more for something because you want to be environmentally correct? Most people can’t afford it. Did you know that an auto dealer needs specially trained technicians and special equipment to work on hybrid cars because the traditional technician might electrocute himself? The same goes for roof panels.

        • Michael Smiley Gawthrop

          Being realistic, half of the service jobs in the country shouldn’t exist. Would you pay twice as much for food just so you didn’t have to cook it? Would you spend 20 times as much for two people to see a movie just because it is on a bigger screen? Would you spend twice as much on a hotel room just because it has a jacuzzi? All of these things make as much logical sense as spending 25 to 50% more to be environmentally friendly, but they are all things that for whatever reason make people either feel better or feel happy (or whatever way you want to phrase it)… if the person has the money to do it, who are we to judge how they spend it? Hell, working in one of those industries that has no logical reason to exist, I quite hope people never get over their emotional need to feel well, because it serves my very logical need to buy food and shelter.

          • marketfog

            The answer to your first question is infrequently. I am trading off the value of prep time for something I wouldn’t otherwise have. The answers to the next 2 questions is no. Perhaps this is why I still have some money for retirement. Your questions are about something that might cost $10 to $50, easily manageable in many people’s budgets.. Let me rephrase my question. Using the Trinity solar example, would you be willing to spend over $16,000 plus undefined future costs to be PC on the environment? You shall receive no improvement in your lifestyle and will be subjecting yourself to a big nuisance when it breaks and you need to get it repaired. The electric company does that for you now. In addition, you shall be asking me to finance your PCness. Without the govt. largess, which comes from my taxes, this is not a viable project. You are right about the half of the service jobs that you claim have no reason to exist. Without Social Security, and the meager retirement benefits it provides, many of the fast food and big box retail jobs wouldn’t exist. SS makes possible the low wage base without which retail prices would be substantially higher.

          • Michael Smiley Gawthrop

            As I understand net metering (and this may vary depending on location), they issue a credit at the same rate they would pay to other electric companies if they needed to buy additional capacity. So, if the power is going to be used anyway, and the utility has to pay for it one way or the other (either by operating their own facility or purchasing it from another company), how is that unduly subsidizing the people who use solar power?
            Also, your original question is why would someone spend 50% more… for the exact same reason as people spend money on anything that isn’t the cheapest possible option, the value added (whatever it is, in this case it is feeling good about using solar power) is more valuable to the person spending the money than the extra that they are spending. For a restaurant it is the extra value of convenience, for a movie theater it is the extra value of the experience, for the hotel suite it is the extra value of being able to use the jacuzzi. Just because for you it isn’t worth it, doesn’t mean it isn’t worth it for everyone. I personally think that people who spend money on expensive hotel rooms are fools throwing away their money on a place that they should be using for sleep and little else if they are on vacation, those same people probably think I’m a fool for enjoying to play black jack because I know that the house will win more often than I do. It all comes down to personal preference.

        • Jason

          I would be more than willing to wait 10 years to break even on a home solar system. Solar panels have a lifespan of 30 to 40 years so a 10 year break-even point still makes a lot of sense and will save money over the life of the system. It is also important to remember that energy costs are only going up.

          I am not a business. The corporations I have worked for won’t invest capital in anything with more than a 2.5 year return on investment. They also do a lot of stupid things chasing quarterly returns and managing the business 3 months at a time.

          • marketfog

            Jason. Add these to the cost of a solar panel installation: increased property taxes; uninstalling and reinstalling by a certified technician when reroofing; additional investment to sell power back to the utility; and repairs, nothing lasts 30 years on the roof: wind, rain, snow, ice, mold, ultraviolet all take their toll. Also consider: who will warrantee the parts, most manufacturers are going under, try to get satisfaction from a Chinese company; and Solar panels lose efficiency over time. Also consider: most people relocate in 5 years or so; The next buyer won’t care about the solar panels, it’s not a selling point; and renters don’t care.

          • Jason

            Yes, solar panels lose efficiency over time. That is built into the estimated 30 year lifespan and even after 30 years they will still work, just at lower than 70% of the original output.

            Reroofing assumes they are installed on a cheap asphalt roof. Over a quality steel roof that won’t be a problem. Tower or ground installation is also an option.

            Whether or not future buyers will be interested in the solar panels depends on the buyer and the region. If one lives in an area with lots of solar installs they will be more accepted than if they are the only installation in town Renters will love them if it means electricity is included in the rent.

            I know people that installed solar panels back in the 80’s when tax credits were offered. Many are still using those panels. Of course while PV solar is all the rage, solar hot water offers a much better return on investment

  • smokefree1988

    ALEC has a history as a workhorse for the tobacco industry and continues its effort to maintain the normalization of smoking in society. Since I do not trust the tobacco industry or its front groups, and promote the removal of any politician who protects the industry such as KY Senator Mitch McConnell and House Speaker John Boehner, I certainly don’t give any credence to ALEC in this issue.

  • I’ll refer to linear thought in print little, while examining the future of solar power.
    A house with solar panels will sell before a house without them.
    Washington Emergency Rule of July 1st2014 de-regulating the installation of solar panels.
    Panels mounted at ground level overtaking those roof mounted.graph, is on-line.
    Brain dead accounting computer programs don’t recognize cutting edge technological advancements that make our lives easier because they are INHUMAN.

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