SMUD's new Grid Access Charge will destroy solar panel economics

Published on 12 Apr, 2019 by Michael Bishop

Categories: Solar economics


UPDATE: Thanks to a major effort by clean-energy advocates, SMUD withdrew this solar fee on April 22nd! Hooray! The article below is still worth reading — it explains SMUD's rationale for the solar fee, and outlines a better path forward for SMUD and other utilities.

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The publicly-owned Sacramento Municipal Utilities District (SMUD) has played an important role in the success of the U.S. rooftop solar industry. They were one of the first utilities in the country to offer a rebate for rooftop solar (in the late 1990s). That rebate covered about 30% of the system's cost. Early rebate programs like SMUD's helped the solar industry get off the ground, and that support brought us a dramatically lower cost of solar today.

Since then, SMUD and other utilities across the country have offered "net metering" to solar customers. Net metering gives solar customers retail credit for any extra solar energy sent to the grid.

SMUD's leadership on rooftop solar just came to an abrupt end

Up until now, going solar in SMUD territory was a good financial decision for homes with adequate sunshine and moderate to high energy use. But SMUD's new "Grid Access Charge" brings that to an end. Fortunately, there's still time to get this Grid Access Charge blocked (see below).


What's the Grid Access Charge?

Under most utilities, there's no fee to have solar panels. SMUD recently announced that they'll start charging new solar homes $24 per month (assuming the typical 4-kilowatt solar system size) — just to have solar panels on their roofs.

SMUD's Grid Access Charge
Image source: SMUD

Yup, that's right — SMUD has gone from incentivizing solar panels to penalizing them.


Why will SMUD penalize new solar homes?

SMUD argues that solar homes aren't paying their fair share for keeping up the electric grid. This includes: costs to move electricity around safely, costs to increase the amount of electricity the grid can handle, and costs for special programs that support the Sacramento-area community.

SMUD argues that solar homes rely on the electric grid at least as much as other SMUD customers, so should pay their fair share. They argue that customers without solar currently have to cover those costs. And they argue (with charts) that those burdened customers tend to have lower incomes while solar customers tend to have higher incomes.


Is there a rebuttal to SMUD's argument?

Yup, there's a geeky rebuttal. Fom their big "transmission" lines, SMUD channels electricity into smaller "distribution" lines that serve different neighborhoods. If more homes are built in a neighborhood, SMUD might need to invest in transmission or distribution line improvements to support those new homes. Some of that infrastructure investment wouldn't be necessary if it weren't for the extra summer-afternoon air conditioning.

Rooftop solar to the rescue! Solar panels generate a lot of energy on sunny afternoons. So in some situations, rooftop solar can help SMUD avoid new utility infrastructure costs (if SMUD is willing to account for the rooftop solar, as a legitimate grid resource). Unfortunately, SMUD gave rooftop solar no value on this front when justifying their Grid Access Charge.


What should SMUD do instead?

Rooftop solar does have grid benefits (whether the utilities acknowledge it or not). With that said, I don't personally think those benefits fully offset the publicly-shared cost of giving solar homes full retail-rate credit for every solar kilowatt-hour they send to the grid (whether or not it's needed).

But penalizing solar customers with an unavoidable fee isn't the right approach. Instead, SMUD could and should give new solar homes the financial opportunity to help support a better electric grid. By combining solar panels with batteries, homes can provide grid services that would help solve some of SMUD's current problems. With batteries, solar homes can store their solar energy until SMUD needs it. They can help SMUD manage their distribution line's voltage. There's even an argument that batteries can help reduce utility-caused wildfires (more energy in wires causes them to heat up -> hotter wires sag more -> sagging wires are closer to flammable objects... so less energy in wires thanks to rooftop solar plus batteries reduces this wildfire risk). There are other geekier grid-service opportunities for solar plus batteries that we won't go into here.

We think solar customers should have the opportunity to completely eliminate their energy bill — if they're willing to contribute to a better energy grid. But instead of supporting this win-win partnership, SMUD is treating new solar homes as opponents. ...Opponents to be squashed with a minimum $44 per month energy bill no matter how much they invest in grid-supporting clean energy ($44 is the ~$24 Grid Access Charge plus the standard $20 fixed charge that all homes pay).


How do the solar economics look, with and without the Grid Access Charge?

Stay tuned — that'll be the topic of an upcoming CutMyBill article.


Can we block the Grid Access Charge?

Maybe! SMUD's board won't vote on this until June 20th. A public hearing is scheduled for June 4th at 6pm. As a SMUD customer and as a supporter of a cleaner lower-cost more-reliable electric grid, your voice matters! For more information from SMUD on getting involved, see the "Public Workshops and Hearings" section of this SMUD webpage.

And to hedge your bets, consider sending a solar application to SMUD by July 1st to avoid paying the Grid Access Charge for the first 10 years of your solar system's lifetime. You can find and connect with top-rated Sacramento-area solar installers at SolarReviews.com.



Author: Michael Bishop

Michael's core purpose is to improve the customer experience around going solar. He primarily pursues this by writing articles and software at CutMyBill.