The free delivery farce in solar
How monopoly utilities are using their captive customers’ money to perpetuate the false claim that large-scale solar costs less than customer-owned solar
By John Farrell, co-director of the Institute for Local Self-Reliance
During the pandemic, we’ve all been ordering more things online, and we’ve come to rely on delivery services more than ever before. We understand that delivery is better than curbside pickup, which is better than going into a store. Delivery is valuable. But when it comes to solar energy, this concept seems to vanish. Instead, utilities and their allies have produced and perpetuated a farce of free delivery by constantly comparing the cost of large-scale solar installations to rooftop solar. It’s a farce playing out at the California Public Utilities Commission right now, where utilities and solar advocates debate the future of compensation for rooftop solar projects.
If you solely look at the cost of generating electrons, it’s true that a 100-acre solar farm with thousands of solar panels will produce electricity at a lower cost than the 15–20 panels on a family’s rooftop. But only if we ignore the delivery cost.
Rooftop solar projects produce power right where folks use it — eliminating delivery fees altogether. It’s the only option that provides generation, transmission, and distribution all in one package. That’s a key reason why the Lawrence Berkeley Labs, which surveys tens of thousands of solar projects each year, concluded that rooftop solar is typically cheaper than utility-provided electricity. The cost of electricity from the average 5 to 6 kilowatt rooftop solar array is 11.1 cents per kilowatt-hour (after the federal tax credit), 14 percent lower than the average U.S. electricity price.
By contrast, Berkeley Labs found that electricity from a typical large-scale solar array cost just 3.3 cents per kilowatt-hour after the federal tax credit. That’s cheap, but only if you ignore the transmission and distribution costs to get to customers. Based on the average electricity rate and the fact that transmission and distribution generally account for two-thirds of utility bills, it costs approximately 8.4 cents to deliver that 3.3-cent large-scale solar power, meaning that, the large-scale solar project costs 11.7 cents to deliver — 5 percent more than power from a rooftop solar project.
How We Got Here
The evidence for small-scale is clear, but monopoly utilities purposefully ignore these facts and drag out the unending large-vs-small debate. Monopoly utilities like San Diego Gas & Electric have regurgitated the myth ad nauseum to protect shareholder profits in a threatened, 100-year-old electricity businesses model. For decades, electric utilities enjoyed protection from competition due to state law. But these laws, meant to give the monopoly access to cheap capital, didn’t anticipate the benefits of customers being able to produce power themselves. Nor do the laws address a perverse problem where the incumbent utility controls the grid access of its competitors. It’s like FedEx owning the roads, and being empowered to slap fees on deliveries from UPS and the U.S. Postal Service.
Utilities have made some highly questionable and costly choices while enjoying this government shield from competitors. In the Southeast, media reports described a $40 billion “bonfire of risky spending” by utilities on failed power plants. In Ohio, utility executives and public regulators have resigned due to evidence of bribery of the state’s House speaker and other lawmakers to prop up failing coal and nuclear power plants. In California, Pacific Gas and Electric cut maintenance spending to boost dividends, allowing climate-induced wildfires to take down their grid. Meanwhile, utilities donate millions to political candidates and often have the largest lobbying team in our state capitols. Every utility bill you pay gives the utility another dollar to spend opposing your right to produce power on your own rooftop.
Solar represents more than just a competitive electricity source. In the hands of customers, it is also a potential means of independence. Nearly two million American homes and businesses (half in California alone) have already declared solar freedom, taking control of their electric bills with their own rooftop power plant. And utilities, shielded from competition for decades, don’t relish the competition from their own customers.
Utilities use your money to perpetuate the farce that large-scale solar costs less than customer-owned solar because it protects their monopolies. It protects a near-guaranteed 10 percent (or higher!) rate of return on every dollar they spend. It protects them from competition from customers wanting a slice of the clean energy economy. It protects their executives from pay cuts to multi-million compensation packages even as the utility cuts off Americans made jobless by the COVID pandemic.
Utilities want to divert us from the many benefits of rooftop solar: resilience in the face of climate change, independence from monopolies, more affordable electricity. Most importantly, they want us to forget the real power of solar to rebalance the injustices of a monopoly fossil fuel system by democratizing the means and the decisions about the energy system. Utilities would rather we not think about that.
John Farrell is co-director of the Institute for Local Self-Reliance.