California’s
three biggest utilities are sparring with their own customers about
systems that store energy from the sun, opening another front in the
battle that’s redefining the mission of electricity generators.
Edison International (EIX), PG&E Corp. and
Sempra Energy (SRE)
said they’re putting up hurdles to some battery backups wired to solar
panels because they can’t be certain the power flowing back to the grid
from the units is actually clean energy.
The dispute threatens
the state’s $2 billion rooftop solar industry and indicates the depth of
utilities’ concerns about consumers producing their own power. People
with rooftop panels are already buying less electricity, and adding
batteries takes them closer to the day they won’t need to buy from the
local grid at all, said Ben Peters, a government affairs analyst at
Mainstream Energy Corp., which installs solar systems.
“The
utilities clearly see rooftop solar as the next threat,” Peters said
from his office in Sunnyvale, California. “They’re trying to limit the
growth.”
California is the largest of the
43 states
encouraging renewables by requiring utilities to buy electricity from
consumer solar installations, typically at the same price that customers
pay for power from the grid. The policy, known as
net metering,
offers a way for households to reduce their bills. It underpinned a 78
percent surge in the state’s residential installations in the second
quarter from a year earlier, according to the Solar Energy Industries
Association.
Battery Costs
Solar systems with
batteries attached have gained a foothold in the market as costs fall,
allowing customers more flexibility for using their own power at night
or when local supplies fail. The systems average about $12,000 to
$16,000, adding about 25 percent to the cost of rooftop
power plants, according to Outback Power Inc., an Arlington, Washington-based provider of battery-backed solar systems.
Matthew Sperling, a
Santa Barbara, California, resident, installed eight panels and eight batteries at his home in April.
“We wanted to have an alternative in case of a blackout to keep the refrigerator running,” he said in an interview.
Southern California
Edison rejected his application to link the system to the grid even
though city inspectors said “it was one of the nicest they’d ever seen,”
he said.
“We’ve installed a $30,000 system and we can’t use it,” Sperling said.
Utilities
say the storage systems open the possibility of fraud. The issue is
whether all the electricity being sold through the net metering program
is generated only by renewable sources, as required. Consumers in theory
can fill the batteries with power from the grid and then send it back
designated as renewable energy. With the solar-battery systems, there’s
no way to determine the source of the energy. Solar suppliers say that’s
not happening.
Storage Rules
Power-market regulations
and the industry’s ability to monitor flows from solar systems haven’t
kept pace with the technology, said
Gary Stern, director of regulatory policy at Southern California Edison, a unit of Edison International.
“Our
rules are not really caught up to effectively include issues with
energy storage,” Stern said in a phone interview from Rosemead,
California.
The company doesn’t want to “discourage solar” and
is working with regulators to come up with “reasonable policies” for
battery-storage systems, said Vanessa McGrady, a Southern California
Edison spokeswoman.
State regulators are aware of the problem
and are working on guidance to offer both solar installers and
utilities, according to Terrie Prosper, a spokeswoman for the California
Public Utilities Commission in
San Francisco.
‘Some Complaints’
“There
have been some complaints from developers in Southern California
Edison’s territory that Edison has inconsistently applied the benefits
of net energy metering to energy-storage projects,” Prosper said in an
e-mail. The commission is working with all three utilities “to provide
formal direction on these issues in the coming months.”
The
utilities said they would approve systems that have panels and batteries
if they had two meters to verify that only solar energy is sold to the
grid. Such a configuration would boost installation costs by at least
$1,300, according to Neal Reardon, the state utility regulator’s interim
supervisor of customer generation.
The dispute is expanding as
California promotes wider use of batteries. Regulators in June proposed
that the top three utilities procure 1.3 gigawatts of storage capacity
by 2020. The state has set a goal of obtaining 33 percent of its power
from renewables by 2020, the nation’s strongest requirement. With more
electricity coming from intermittent sources such as wind and sunlight,
storage systems will be an important tool to manage the grid.
Falling Prices
Demand
for the systems may grow as prices decline. Battery costs are forecast
to fall 57 percent to $807 a kilowatt-hour in 2020 from $1,893 for a
kilowatt-hour of storage capacity now, according to data compiled by
Bloomberg. The global market for solar systems combined with
energy storage will rise to $2.8 billion in 2018 from less than $200 million this year, according to Boston-based Lux Research Inc.
About 391 megawatts of solar panels were
fitted
at customer sites across the state last year, according the California
Solar Initiative. The price to install residential projects has declined
15 percent to $3.71 a watt in the second quarter from $4.35 a year
earlier according to the Washington-based trade group SEIA.
Battery
systems are the latest innovation that’s unraveling the traditional
monopoly utilities have enjoyed in supplying consumers with electricity.
Two decades ago, federal regulators opened the system to independent
power producers, eating away at the utility’s control of generation. The
battery systems will put more customers out of reach.
Rejected Applications
“What
we are seeing now as a fairly rare event may be more common by the end
of the decade,” said Southern California Edison’s Stern.
Mainstream
began hearing in May that Southern California Edison was rejecting some
of its clients from the net metering program. As many as 60 projects
with panels and batteries have been turned down by California utilities,
the company estimated.
PG&E Corp. (PCG),
the owner of California’s biggest utility, has also rejected standard
net metering applications from customers with both panels and batteries,
and referred them to another program that requires an interconnection
fee.
“The key is that the full retail net energy metering
credits and subsidies are only available to renewable facilities,”
Lynsey Paulo, a PG&E spokeswoman, said in an e-mail.
San
Diego Gas & Electric, a unit of Sempra Energy, said it hasn’t
received any such applications, and it would deny them if it did. Sempra
slipped less than 0.1 percent to $85.43 at the close in
New York. PG&E climbed 1.5 percent and Edison gained 1.1 percent.
‘State of Flux’
“Technically,
a customer who now has a combined system that includes both rooftop
solar panels and battery storage, the battery storage may not qualify
for net energy metering under current rules,” said Stephanie Donovan, a
spokeswoman for San Diego Gas & Electric. “The rules are in a state
of flux.”
Mainstream’s Peters said Southern California Edison is
now rejecting systems that are identical to ones it had approved in the
past. The developer had been installing two to three solar-storage
projects a week in Southern California at the start of this year. That’s
dropped to zero in recent weeks, and some orders have been canceled.
“Net
metering is the lifeblood of solar in America,” Peters said. “That’s
why this seemingly inconsequential issue is getting so much attention.”
Solar
panel owners aren’t trying to “game the system,” said Adam Browning,
executive director of the San Francisco-based lobbying group
Vote Solar Initiative. “The next step is that people with solar and batteries will find a way to make it work without utilities.”
To contact the reporters on this story: Ehren Goossens in New York at
egoossens1@bloomberg.net; Mark Chediak in San Francisco at
mchediak@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at
landberg@bloomberg.net
