The Grid Charge

Here in Arizona, there has been a slow, but steady adoption of rooftop solar, or what the utility company calls “self-generation customers”. Apparently, enough adoption that SRP, one of the local power utilities, has taken notice, and is changing their pricing structure.

In addition to paying for the energy you use, they intend to charge rooftop solar customers a new “Grid Charge”. SRP explains why they are separating the Grid Charge from the energy charge:

For years, customers paid for power based on how much energy they used. The cost of using the grid was “rolled in” to the cost of electricity through the per-kWh, or energy charge. However when customers generate some of their own power, they don’t pay an equal share for the fixed costs of enhancing and maintaining the grid, even though they use the grid to both buy and sell electricity.

Makes sense. Then they describe how the Grid Charge works:

What is a Grid Charge?
This is what we call a demand charge. The demand charge measures the monthly maximum amount of energy a customer uses at any one time during peak hours, when demand is highest.

Wait. I thought the Grid Charge is supposed to be for using the grid, but it’s based on peak demand. All of a sudden it doesn’t make so much sense any more.

SRP does disclose a glimpse about how they really think about all of this.

Do the customer generation price plans only apply to solar customers?
No. The price plans are intended to send the proper price signal to customers so that they may employ technologies of their choosing. Solar customers are currently those that are primarily impacted, but other technologies such as fuel cells may be viable in the future and would also be placed on the customer generation price plan.

Let me guess what the “proper price signal” really means. SRP wants to add surcharges for anybody who buys less of their electricity. “Technologies of their choosing” really means that SRP wants to make it super expensive for you to choose technologies that are not theirs.

This is the first sign I have seen that the utility companies think that alternative energy is a real threat to their business. The words are expertly crafted to veil the intent, but the meaning is clear: SRP plans to do everything in their power to make it economically impossible for you to not be their customer. If you think you can buy less electricity, they will charge you a premium for the electricity you do purchase. And they will also charge you for the privilege of selling them electricity.

I understand their position. The facts of utility scale power generation are inescapable. Power utilities require large capital investments with long depreciation schedules. Maintenance and upgrades on uncountable miles of wires is expensive. Meaningful production elasticity is measured in decades, not days (Sunflower Electric Power Corp. has been trying to build a new coal plant Kansas since 2001. They have not yet broken ground on construction). The uncompetitive, highly regulated public utility markets in the United States have been designed to support companies who have to operate within these constraints.

Those public utility markets are poised for massive disruption. If Ray Kurzweil is right, and solar power generation is growing on an exponential curve, not a linear curve, the public utilities are destined for the scrap heap. In 2013, solar was only 0.23% of total US electricity generation. The trends in the data seem to support Kurzweil’s prediction. For the last 14 years, global solar photovoltaic production has doubled each year. On that trajectory, one third of our electricity will come from solar in less than 10 years.

Solar power generation capability is also much more easily distributed (unlike current nuclear or coal technology), dramatically reducing the need for an expensive transmission grid. As photovoltaics get more efficient, the need for transmission goes down, because peak power needs can be met by solar generation at higher and higher latitudes. When customers can efficiently generate their own power, who needs a power utility company?

At least SRP has the good sense to see their own demise, even though that can’t really do anything about it. I’m sure SRP will get the Grid Charge approved by the Arizona Corporation Commission. But when my kids are my age, SRP won’t exist.