New Study Assesses Consequences of Solar Power on Utility Costs
By Martin Learn,
As you can imagine, with the rapid growth of solar power, utility companies and Public Utility Commissions are concerned as to what effects they might feel as a result. Various studies have tried to get a handle on what the potential costs and benefits might be, but the results have differed greatly. Some studies reveal that solar power will provide a net benefit to utilities, while others report that there could be billions of dollars in sales lost due to more customers generating their own power.
One of the biggest factors that studies have tried to understand is the necessary investment in infrastructure to keep the national utility grids reliable and stable in the face of varied availability of solar and wind power that may very widely within minutes.
Recently, three National Labs (Argonne, Lawrence Berkeley, National Renewable Energy Lab) have partnered with the University of Chicago and the Arizona Public Service (one of the largest utility companies) to conduct what should be a definitive study.
What they found is that if utilities are more flexible, including ramping down output of nuclear power plants to 50% of capacity due to day-ahead forecasts and an hourly tracking of weather patterns, the costs incurred are quite small. The costs would translate to 0.2 – 0.4 cents per kilowatt hour. This means that the rapid adoption of solar power in California would affect prices of power at about 1-2%.
Utility companies have tried to balance the return to their shareholders with the sensitivity of rate increases to their customers. They have also been regulated thus far by Public Utility Commissions with mixed effectiveness from state to state. And because utilities have allowed a fixed rate of return no matter what, they are encouraged to invest large sums in infrastructure, such as smart meters and distribution and transmission equipment. Unfortunately what this hundred year old business model does, is leave the utilities with zero penalties for overspending and poor decisions. These will simply be added to the rate-base and passed along to customers.
An example of this can be seen in the decommissioning of San Onofre and the damages done by the Witch Creek fire which was allegedly due to inadequate maintenance and construction of Sunrise Power Link. The utilities will simply recover these costs.
It will be interesting to see what effect this authoritative study will have on utilities. But one thing is for certain, and that is that solar power and households generating their own power is here and it’s continuing to rise. If you want to discuss the benefits solar power can have on your home and utility bill, please contact us at
or give us a call at 619.692.2015.