This article is posted with permission from the Institute of Energy Economics and Analysis. It was written by Karl Cates and David Schlissel.
The utility and fossil-fuel industries continue to spread a crude canard against the growing popularity of rooftop solar across America.
The lie goes something like this: Households and business that install photovoltaic panels are doing so at the expense of other electricity ratepayers because they are “subsidized” by those that don’t have solar panels.
The truth is this: Rooftop solar provides substantial benefits for everyone, regardless of who installs it. It helps power the homes and shops that adopt it, to be sure, but it has far-reaching benefits for other customers as well. If Jane Doe in Anywhere, USA, puts a solar panel on her roof, every other electricity ratepayer within the footprint of whatever regional grid Jane Doe is tied into will benefit as well.
Honest purveyors of utility-industry fact know this, of course, and say it quite often. So, more and more, does Wall Street. No less a titan than Sanford Burstein & Co., one of the perennially best-rated firms in Institutional Investor’s annual rankings of investment researchers, has studied the issue deeply over the past couple of years and comes away with an unequivocal take on the issue: Rooftop solar, aka photovoltaic solar, means lower peak-hour energy prices for all.
Bernstein lays out the supporting research in a reported published last month that found that the rapid increase in the amount of solar PV available on the electricity grid in California—a seven-fold expansion in only four years, from 0.7 gigawatts in 2010 to 4.8 GW in 2014— had helped reduce system loads so much that peak prices were put off until later in the day, when demand was lower. Lower demand means lower prices.
That report went on to predict that the effect will be amplified inevitably across the state as growth in solar capacity continues. This will probably reduce the value of incremental additions of solar capacity on the California grid, but that’s not the point. The overarching conclusion is that all power consumers in California benefit from lower afternoon power prices, not just those that have rooftop solar PV panels.
The February report builds on earlier important work by Burstein & Co, notably a report the firm distributed to clients in November 2013. Titled “Tilting at Windmills: How Conventional Generators are Losing the Battle with Renewables,” that research found that the rapid growth of solar and wind resources (rooftop solar included) in four of the nation’s major electricity regions had suppressed the output of conventional coal and natural-gas fired generators. That’s good news because the trend also eroded the price at which the output of those conventional generators could be sold. Solar- and wind- powered electricity, in other words, drove market prices down.
This happened—and continues to happen—because renewable resources, which have zero variable costs, have displaced higher-cost conventional generation, lowering the marginal cost of supplying power competitively in wholesale markets or in states that do not regulate the retail price of electricity.
That particular Bernstein & Co. research also noted that by suppressing the output of conventional power plants, solar and wind generation had reduced demand for coal and natural gas. The firm estimated that some 52 million megawatt-hours of coal-fired generation and 42 million megawatt-hours of gas-fired generation was displaced in 2012 alone by wind and solar resources in the four regions it studied. This translates into a reduction of “coal burn” by approximately 30 million tons and “gas burn” by approximately .07 billion cubic feet/day. Bernstein & Co. also said this trend will continue too.
But back to rooftop solar for a second. In addition to driving energy market prices down, it brings environmental benefits by reducing dependence on fossil fuels, and it acts as a hedge against fossil-fuel price spikes.
It’s in every ratepayers best interest. And that’s the truth.