How Electricity Pricing Can Boost Distributed Solar – Part 1A
Note: In Part 1, I looked at this pricing method in Los Angeles. For Part 1A, we examine San Francisco
What if electricity cost more when the sun was shining?
Many utilities are using new electronic "smart meters" to adjust the price of electricity as often as every 15 minutes, to reflect supply and demand. And charging more when electricity is in short supply can be good news, making investments in distributed solar power pay off faster.
Time-of-use (TOU) pricing is a different billing method for electricity, where the customer pays based on the time of day of using electricity rather than a flat rate per kilowatt-hour consumed. The premise is that electricity is more expensive when in high demand (e.g. by air conditioners in the afternoon on hot, sunny days) and that pricing accordingly will help reduce demand.
For example, customers in San Francisco on a TOU pricing plan pay more for electricity during peak hours (12 PM to 6 PM). In the cold months (November through April), the peak rate is 11.1 cents per kilowatt-hour (kWh), compared to 8.3 cents during non-peak hours. But in the warm months (May through October), electricity used from 12 PM to 6 PM costs 31 cents per kilowatt-hour (kWh), while off-peak electricity is 7.9 cents per kWh.
This pricing scheme can act as an incentive to go solar, because solar panels tend to operate at their highest capacity during summer months. The following chart shows the solar radiation falling on San Francisco during the "winter" and "summer" seasons (as defined by the utility). The average insolation during the summer is 6.42 kWh per sq. meter per day, compared to 4.46 in the non-peak season.
Solar panels also tend to have higher output during the peak hours of the day. In fact, the California Public Utilities Commission found that solar tends to have a 60% capacity factor (produce 60% of its maximum) during peak electricity periods. The following chart from SolarStik illustrates:
The Economics of Time-of-Use Pricing for Solar
So what will a time-of-use pricing plan mean for the economics of solar in San Francisco? It means solar customers save more money.
Just over a quarter of a solar panel's output comes at the summer peak period, when the value of electricity is over 30 cents per kWh. A further 18% happens during the winter peak, when prices are a third higher (at 11 cents) than off-peak rates).
On average, year-round, the cost of grid electricity on a TOU plan is 14.6 cents during the daylight hours a rooftop solar array is producing, 80% higher than the 8.3 cents customers pay in the off-peak period and 14% more than customers pay on a flat rate plan.
Time-of-use electricity pricing may not be a panacea, but it's a good policy for helping finance distributed solar.
Note: For the levelized cost of solar in San Francisco, we used an installed cost of $4.40 per Watt, 80% financed over 10 years, with a 25-year project life.
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Comments
E-7 Time of Use vs E-6 Time of use rate schedules PG&E
Morning John,
I have a Time of Use rate schedule with PG&E. Our time of use residential rate schedule is E-7. PG&E no longer allows it's customers to select an E-7 time of use rate schedule. They allow an E-6 rate schedule these days for residential customers. The e-6 rate schedule has three summer time periods per day (vs. the two noted in your example) 1) off peak 2) partial peak and 3)peak.
Details on rate options are noted here- http://www.pge.com/tariffs/ERS.SHTML#ERS
The table below notes the time of use periods-
E-6 Time-of-Use Periods
Summer (May-October)
Peak: 1:00 pm to 7:00 pm Monday through Friday
Partial-Peak: 10:00 am to 1:00 pm Monday through Friday
7:00 pm to 9:00 pm Monday through Friday
5:00 pm to 8:00 pm Saturday and Sunday
Off-Peak: All Other Hours Including Holidays
Winter (November-April)
Partial Peak: 5:00 pm to 8:00 pm Monday through Friday
Off-Peak: All Other Hours Including Holidays
January 25 post on same subject
I can't consistently reproduce your percentage of energy usage relaced by solar arrays in the three cases listed in your January 25 post. Case one and two are internally consistent with one another; I can't figure out how case three is.
Also, you explain how you determine the cost of the renewable energy ($4.40 per watt, 80% financed, etc) in some of the earlier posts in this thread, but I'm not perceptive to know what price/cost that is in the text. Would you be able to direct me to that number?
PV and Time of Use experience
Afternoon Bruce A.
I have a 6.12 kw STS DC rated, 5.22 CEC (AC output), system in place in the SF area (about 90 miles to the east of the SF city center). Like the folks in SF and the Bay Area I obtain my electrical energy from PG&E. I have friends who live in west Daly City, about 10 from the SF city center, and in the central valley city of Stockton (about 30 miles south of Sacramento and 65 miles east of SF). We are all in PG&E's service territory and we all get about the same maximum potential solar radiation as we are all at the same (give or take a few miles) longitude/latitude. John's "Average Solar Isolation by Season" is the same for all of us. As my friends will attest too it can be rather foggy in their locations at different times of the year (foggy in the summer for Daly City and foggy in Stockton in the winter months). I live in the Sierra foothills so I am out of the fog 99% of the time. I do get a bit of snow occasionally and that will effect my PV systems output rather dramatically if the snow level is greater then about 3". Luckily for me this almost never happens in my foothill location. PG&E has different temperature zones for each of us (as our needs for power are different based on our micro climates). For me, there is no question that a PV system enabled me to then take the risk of going with a time of use meter. As John's graph article notes a, my, PV system's maximum output matches the higher rates for the time of use rate structure.
I am not sure how you did your estimates of benefits for PV and/or TOU smart meters/rate schedules. I have found that a few of the investment grade PV hardware providers (Sharp and Mitsubishi) have pretty good websites that their potential customers can use to enter in some site specific information that will estimate the output of a PV system fairly well. It is amazing the difference on payback, and the effect on your monthly bill from PG&E, depending on the different rate schedules you select (time of use, E-1, etc.). If you haven't tried out these web sites I highly recommend doing so. These sites have built in values for the baseline amounts for the different zones that you have to have to determine overall costs and benefits of a PV system with or without Time of Use metering. A few years back I came across a few posts by Andy Black that I found very helpful in trying to decide to go with TOU, PV or a combination of both. Andy had a post of 2009 that I found helpful. http://www.ongrid.net/papers/PaybackOnSolarSERG.pdf .
Your asked about John's "$4.40 per watt cost" estimate for PV. I can't speak for John, but from my experience PV hardware costs and installation charges are lot like the cost estimates you can get to have a 60K check up/maintenance performed on your car. If you happen to live in CA, there is a web site that the state updates frequently on what residents in the state have paid to have PV put in. The site is located here http://www.californiasolarstatistics.ca.gov/reports/cost_per_watt/ and you can sort the data by lots of different inputs (system size, AC or DC rating, service provider, year installed, etc).
The price of panels have come down over the years. I purchased and had installed my 6.12 kw PV system for $44K (before rebates and tax credits) back in 2006. Installation costs have gone up from $1.10/watt to $1.3/watt per a discussion I had with the wholesale PV supplier I purchased my panels, racking, etc. from. You could purchase and install an equivalent system to mine for $31435. before rebates and tax credits. http://www.gridtiesolarkits.com/mitsubishi-5232-watt-solar-power-systeme... currently. That works out to $5135 per kw (sts rating). With the 30% tax credit this works out to $3596 kw sts rating, or $4215 kw cec (AC) rating).
Mark
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