Summer Solar Power

(Photo: Living Off Grid)

The City of Austin has given us a windfall:  As of October 1, it will pay 12.8 cents per kilowatt-hour for power generated by our new solar system instead of the previous 3 cents/kwh.  Of course, this seems fairer to me—but it also reflects more closely the value of the power we generate for the grid.  Demand varies over the day and season, and the city prices higher when more power is used (in summers, mostly for air conditioning)—it engages in peak-load pricing, a form of price discrimination.  Supply is limited by capacity, and in some cases in summer the capacity constraint is reached.  The power we produce is storable, presumably for release during the peak times when its opportunity cost is highest.  Thus the increased price paid to us reflects the value of what we generate.  Regrettably, my joy at this windfall is tempered by the simultaneous substantially increased price when we must purchase power because our system fails to generate enough for our needs!

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  1. Jack says:

    What you fail to note in your lament is that a big part of your electrical bill is overhead for the electric company (administration, maintenance and capital improvement of the electrical network) and so your solar production should not be rewarded at the same rate you pay for consumption.

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    • Joe says:

      At least on my bill, those two (overhead and power cost) are billed separately.

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    • 3rdWorldPeasant says:

      Ah, but since the solar is distributed generation (energy created where it is used), it costs much less to transport. Much power is lost when it is sent via high-voltage power lines to substations that step it down to a wattage that is usable in our households.

      If it costs the same amount to generate energy in two different places, the power that is created where it is going to be used has the most value.

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  2. Joe says:

    Since the city of Austin has nothing to ‘give’ except what it takes from citizens (or borrows and obligates them to pay later), who did they take this windfall from?

    If you figure it out, send them a thank you note.

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    • Ian Woollard says:

      It’s not some great socialist/governmental conspiracy; the power company charged it to people that bought the energy that he generated. AFAIK the City of Austin only regulate the power market, they don’t get the money or pay the money.

      And if he hadn’t generated it, a peaker plant somewhere would probably have kicked in, or kicked in harder; and those guys get paid several times that much!

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  3. Angelo says:

    Unfortunately a part of the post seems uncorrect. In principle electricity can’t be stored if you haven’t batteries. And this isn’t normally the case in distribution grids, due to several reasons. What is produced has to be consumed simultaneously somewhere else. Nevertheless solar energy is at ite peak when the request is at its peak, meaning that the advantage for the grid is still there…

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  4. Rob says:

    I echo Joe’s comments somewhat.. I think this is probably a good response to the current marginal price of electricity in the city, it but it can’t be taken as an indicator of the long-term viability of the scheme, as the cost of transmission and such can’t be eternally paid by conventional sources alone.

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  5. Michael K. says:

    First, while I’m not familiar with power prices in the city of Austin in particular, I am familiar with ERCOT. $128/MWh is an outrageously high price to pay for energy. The simple average of real time prices in Houston across all hours was about $43/MWh in 2011 and about $36/MWh in 2010. While, admittedly, solar produces disproportionately during peak hours, taking the highest 50% of hours to be a reasonable approximation of peak still only results in an average Houston price of $64/MWh in 2011 and $51/MWh in 2010.

    Second, while your power may be ‘storable’, I’m almost certain it’s only storable for a few hours. The vast majority of price inflation occurs during a few hours of the summer (or, during unexpected events like February of last year). The minimal storage capacity you probably provide would allow very little flexibility to wait to use your energy during peak demand.

    So, in short, there’s no way you aren’t getting overpaid for energy.

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  6. artemis says:

    The residential price for electricity in Austin is between 3.55 and 6.05 cents per kilowatt hour. That’s retail rate, not what the generator receives. For some reason the city of Austin has decided to pay you double the *retail* rate of electricity.

    What Austin has done is mandated a benefit to you by arbitrarily increasing the cost that others pay more to enjoy the luxuries of modern living (like air conditioning).

    It’s pretty easy to determine who is most likely to be on the paying side (the poor) and who is most likely to be on the receiving side (those with enough wealth to afford to salve their environmental conscience with a solar array)

    Call it what you will, but it’s still wealth transfer. The vehicle is market manipulation instead of taxes, but that’s where the distinction ends.

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    • Russell Harris says:

      What I see here is the City of Austin providing incentives to offset high-cost peaking generation plant.

      But more generally I’m also astounded at the retail rates of electricity published here – they are extremely low, and barely cover the Short Run Margin Cost (let alone the Long Run MC) of a generator, let alone the transmission and distribution network. There’s market manipulation all right, but in favour of the poor.

      Poorer people are disproportionately penalised for rising electricity costs, as they spend a greater proportion of their income on energy.

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  7. Jason says:

    Actually the power you produce is almost certainly not stored. Energy storage is extremely expensive, so much so that in the generation market the spot price for electricity will briefly go to zero, or even negative. In places with pumped hydro (basically pumping water from the bottom of the dam to the top in order to store energy in off-peak times) spot prices have a higher floor since the reservoir is already paid for.

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  8. David says:

    I’m ok with compensating him more than the standard rate since the power is coming in at peak hours, and produces no air pollution. The “peaker” power plants that come online just to serve peak hours tend to be the dirtiest and most expensive to operate:

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    • method1220 says:

      The article you link states: “In the US peaker plants are generally gas turbines that burn natural gas.” Gas is expensive, but its relatively clean (CO2 aside). The solar panels have little or no environmental impact during operation, but what about during manufacture and installation? (Presumably, the higher rate is to encourage more people to install panels, and not simply to reward those who already have them.)

      Have the overall environmental impacts of solar panel manufacture and installation been weighed against the environmental impacts of operating existing peaker plants around Austin (and whether sufficient peak capacity exists) to determine how much of a premium to pay over the peak rate for excess solar power? Or is this just a warm, fuzzy measure? Maybe I’m too cynical.

      Two things are certain: if the current number makes sense, then the old number was terrible; and the extra money is completely wasted on those who decided to install their systems at the old price. (Why not keep the rates the same, and give an upfront bonus to people who would install new systems?)

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    • Rick says:

      You are mistaken. Solar produces just as much air pollution as any other form of power, it just produces it in someone elses neighborhood. Solar cell manufacturing is horribly polluting, some of the chemicals left behind are magnitudes more damaging then carbon. The aluminum frames, copper wires and all the other components that go into a solar array likewise produce a lot of pollution and use a lot of energy to create.

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      • Autumn says:

        @Rick, that’s technically incorrect. *If* you are replacing the solar panels every 3 to 4 years, then yes, the energy and waste to create them is canceled out by the energy they produce and the dirty energy sources they replace. But given a life of 20 – 30 years (or more, I’ve seen up to 50), you come out ahead in the long run. Even in extremely polluting manufacturing processes like those we see in China, those panels break and come out ahead before they need replacing.

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