If the title wasn’t clear enough, I’m feeling surly today. A couple of years ago, I talked with a couple of British personal finance bloggers and I loved the way they casually would say sentences like in title and make it seem normal. This is a family blog, so for today, I’m going to borrow some British language to express how I feel.[Yes, part of the reason why I’m surly is that Le-Vel is suing me for this review. I go out of my way to help consumers make informed choices and they through a frivolous lawsuit at me. That’s a topic for another day.]
I’ve been saving this article for a couple of months now.
There’s a battle going on in the world of solar energy. Even if you don’t have a dog in this fight, I think it is a very interesting debate. Let me set the table so we can get started.
When you have solar panels installed they produce power during the day when the sun is out and not at night. (Yes, this is really basic stuff.) People, however, use power round the clock. You can buy a battery to store the excess energy during the day to use at night. Unfortunately these are expensive and still not very efficient.
The solution to the problem has been something called “net metering.” This means that as your panels produce power it moves the electricity meter backwards as you “sell” power back to the grid. At night, the meter moves forward as you use electricity. So you only pay the electric company for the “net” amount that you use when the production is subtracted.
And this “net metering” solution made everyone happy… until it didn’t.
It turns out that the electric company can’t easily take this produced power and just move it to the next house. There’s a some grid infrastructure stuff that needs to happen. It wasn’t a big deal for a long time because few people had solar. Now that more and more people are getting solar power, include families like ours (read our solar journey), it becomes a big deal.
It’s become enough of a big deal in Nevada, that the Public Utilities Commission (PUC), changed the net metering rules. Instead of being able to “sell” back excess power at an equivalent rate, they’re only going to buy it back for 25 cents on the dollar.
The economics of going solar are fairly straight-forward. People put up an initial investment of tens of thousands of dollars based on analysis that it will save them money in the long run while helping the environment. When we bought our solar panels the math was pretty clear that they’d pay for themselves in year 7 or 8 and after that we’d be saving money.
The federal government encourages people to switch to solar by offering them a 30% tax credit. My state had grants to further lower the cost. The message that I was being sent by both levels of government was pretty clear, “We want consumers to adopt this technology so much we are going to cover half the cost ourselves.”
If my state were to institute the same net metering math of Nevada the panels we bought would break even probably sometime after their 25-year life expectancy passed. We, like most people, made the buying decision based on a hundred factors (such as location of roof, trees blocking the roof, typical sun, cost of local energy, etc.) none of which anticipated a net metering change.
In order to qualify for the state grant, the power company had to tour my home and make sure that we weren’t going to waste the power by using our energy inefficiently (old light bulbs, refrigerators, etc.). I don’t know if Nevada offers (or offered) state grants. At a minimum they should have had a similar process of meeting with the customer and telling them the risk of changing the net metering agreement. As best I can tell this never happened.
Maybe the power companies were blindsided by the problem, but now they are passing it onto consumers. As SolarCity said in the article above, “The Nevada government encouraged these people to go solar, and now the government is putting them at great financial risk.”
That article makes the point that, “The PUC staff has said customers generally understand that utility rates are subject to change, and the state never promised unchanging prices, even if solar companies did during the sales process.”
This is why the Nevada PUC should get stuffed. Everyone expects prices of electricity to change. That’s one of the main reasons why people choose solar. By producing electricity through solar, the cost is zero due to the initial outlay. When the cost of electricity goes up, the value of the power by the solar panels should go up too. This isn’t Nevada changing utility rates. This is changing a core policy. I wonder if the Nevada PUC highlighted this risk when the net metering was entered into. If it was, you’d think they would have said, “We informed all customers entering a net metering agreement that the rates at which you ‘sell’ energy back to us can change to whatever we see fit.”
Imagine if the government next year passes some kind of legislation that amounts to them saying, “We are going to tax all Roth IRA withdrawals at 75%. We don’t expect this to be an issue because the American public generally understands that tax rates change.”
Assuming that the typical Lazy Man and Money reader has been putting money in Roth IRAs for years, I think we’d be pretty upset. I think that’s probably what the solar customers of Nevada must be feeling right now.
And while this article has focused on Nevada, it isn’t just happening in Nevada. Many states have this issue of infrastructure expenses. The result of Nevada’s action has lead to a potential federal law to protect those who have already bought from such changes.
The other hope is that the batteries get better. Tesla has introduced a product it calls the Tesla Powerwall, which has a lot of potential.
I don’t know where all this is going to end up, but as Terrell Owens used to say, “Getcha popcorn, ready!”