Nevada shutters its residential rooftop market

Print Friendly



Over the past month, the state of Nevada has been at the center of a national debate about how utilities treat customers with solar PV—and for all the wrong reasons. Through about Q3 2015, Nevada had been a leading state for solar PV. But in late December, Nevada’s regulators—reinforced by a controversial public utilities commission decision earlier this week—effectively pulled the rug out from under the state’s residential rooftop solar market.

A booming solar market

Thanks to its previous retail rate net metering and abundant sunshine, Nevada has had a booming solar market. In 2013 it generated more of its power from solar than any other state, according to U.S. EIA data. Through the end of 2014, Nevada ranked fifth in the nation for cumulative installed solar PV capacity and that year ranked third for new installed solar capacity, according to the Solar Energy Industries Association (SEIA).

Much of that solar growth in Nevada has been in the state’s residential rooftop segment. It is the tenth-largest market for installed residential solar capacity in the nation, and its Q3 2015 residential installations quadrupled compared to Q2, according to GTM Research and SEIA’s Solar Market Insights 2015 Q3.

And of course Nevada is famously the location for Tesla and Panasonic’s new lithium-ion battery “Gigafactory.”

But then, in late Q4 2015, Nevada turned all this positive momentum on its head.

New rate structures spurn solar customers

On December 22, regulators approved a new solar tariff structure that dealt a powerful blow to the state’s residential rooftop market in what amounted to a one-two punch: a) a substantial increase to the fixed charges solar customers, coupled with b) a substantial decrease to the compensation they’d receive for net exported generation. The net effect is it sinks the economics for grid-connected rooftop solar in the state.

More specifically, under the old rate structure, solar customers paid a fixed charge of $12.75 a month (the same as non-solar customers). Under the new structure, the charge jumps to $17.90 a month in 2016, then increases by $5.15 each year until it reaches $38.51 a month in 2020. (Customers who do not have solar will continue to pay the old, $12.75 fixed charge.) Meanwhile, the rate that solar customers pay for grid-supplied power declines slightly from 10.8 cents per kWh in 2016 to 9.9 cents, while the rate they are paid for excess power delivered to the grid falls sharply from 9.2 cents to 2.6 cents, or from roughly the retail rate to the wholesale rate.

The new rates took effect on January 1, and—incredibly—will retroactively apply to all solar customers, even those who bought their systems under the old tariffs. (Such customers are typically grandfathered in.)

The new rate plan was a response to the complaints of the utility NV Energy, which has a monopoly in the state. The utility claimed that the old net metering tariff shifted roughly $16 million in costs annually from Nevada’s roughly 17,000 solar customers to non-solar customers.

Strong backlash, but Nevada hold firm

Industry representatives, solar customers, and advocacy groups protested vehemently, calling the decision regressive, illegal, and even unconstitutional for changing the terms of the existing solar customers’ contracts, which typically run for 20 years or more. Top solar companies, including SolarCity, Sunrun, and Vivint, immediately ceased operations in the stateand laid off hundreds of workers, promising legal action. In all, roughly 6,000 solar jobs in the state are now at risk.

After a day-long hearing on Wednesday, in which hundreds of solar customers testified before the commission and around one thousand people protested, including actor and climate activist Mark Ruffalo, the Nevada PUC rejected appeals by solar customers and industry advocates to stay the implementation of the new rate plan pending a reassessment of its impacts.

The result? According to Greg Ferrante, who founded the Nevada Solar Owners Association in response to the PUC decision, instead of seeing a return on his solar PV investment in 7 years, it will now take 18 years. And the days of opening his monthly power bill and seeing a charge of $56 instead of the $690 he had before installing the system are over.

Demand flexibility helps, bit is no panacea

So what do Nevada solar customers—existing and potentially new—do now?

In our October 2015 report The Economics of Demand Flexibility, we analyzed similar situations in Hawaii and Arizona where utilities changed the rules for new PV customers by introducing less-favorable rates. We found that customers in those two states could cost-effectively install PV even under the new, less-friendly tariffs if they also took advantage of demand flexibility, shifting their electricity demand to coincide with the output of their solar systems and thus increase self-consumption and decrease exposure to reduced export compensation.

For example, by programming their air conditioners, water heaters, and EV chargers to run when the sun is shining, a customer could consume their self-generated solar power and reduce their peak-hour demand, effectively getting the retail rate credit for their PV energy (and in the case of Arizona, reducing demand charges).

According to our calculations, by exercising demand flexibility in this way, a Nevada solar customer could increase the amount of the self-generated power they consume from an estimated 50 percent to nearly 70 percent, and reduce the impact of the new tariffs by 25 percent. For customers who want to go solar anyway in the face of Nevada’s new rate structure, this is good news. But the bigger picture isn’t so rosy. Because of the sizeable and unavoidable fixed charge and severely reduced compensation for remaining exported solar generation, even with demand flexibility, it is unlikely that solar PV will be cost-effective for residential customers under the new tariff.


The spector of grid defection?

What customers may ultimately choose to do, however, is divorce their systems from the grid entirely, in what we have called grid defection. While this may not be cost-effective today for most Nevada customers, some PV owners are already considering it.

As we explored in our 2014 study The Economics of Grid Defection and its 2015 follow-on The Economics of Load Defection, the confluence of rising utility rates and declining costs of solar-plus-battery systems may lead some customers to cost-effectively disconnect from the grid, or in the case where they don’t disconnect, shift a large majority of their own load to these behind-the-meter resources.

What could this mean for the grid? Instead of building a grid that integrates customer-owned, behind-the-meter resources, policies that encourage grid defection may lead to a Balkanized grid in which thousands of customers simply generate and consume their own power, with increasing unit costs for any energy served by the existing grid.

The electricity grid is at a fork in the road, and Nevada chooses a path

In the long run, grid defection is likely bad for everyone. Every stakeholder in our electricity system should recognize that the electricity system is at a fork in the road, and that decisions we make today around how distributed energy resources are integrated into the grid will have long-term impacts on the decisions that customers make and the shape of our electricity system in the future.


The Nevada Public Utilities Commission, by pursuing high fixed charges and very low export compensation for customer-owned PV, may be setting the state on a path towards grid defection, and forgoing the significant benefits of pursuing an integrated grid—one where all resources, central and distributed alike, are fully leveraged to enable a clean, low-cost, and reliable electricity system for all customers.

Nevada’s decision comes at a time when more states than ever are choosing their path—from New York’s Reforming the Energy Vision proceeding, to California’s More Than Smart initiativeand net metering successor tariffs, to Hawaii’s recent move to post-net metering solar rate structures. These reforms are complex and full of nuance, as states strive to quantify the true costs and benefits of distributed PV and reflect those values in rates. There is room for debate across many dimensions of these issues, and getting the answer right may look different across the country.

As of late 2015, 27 states were considering changes that would reduce the attractiveness of their net-metering policies, according to a report by the N.C. Clean Energy Technology Center. But until now, no state has retroactively changed the terms of existing solar customers’ long-term contracts with the utility. If Nevada sticks with this strategy, it will surely face legal challenges. For now it remains a controversial cautionary tale, and other states and their utilities should think very carefully before following suit.

Source: RMI. Reproduced with permission.  

RenewEconomy Free Daily Newsletter

Share this:

  • Chris Fraser

    A rational person would have thought the NPUC had enough on-board technical advice to assure that utilising behind-the-meter-resources would be smarter than removing the FiT and hiking connection costs for solar. But now they have retrospectively committed to this. I’ve got a feeling they’re not bothered with the benefits, they’ve simply submitted to the politics of it.

    • Jim Young

      I’m sure you mean corrupted politics, not the politics supported by most of us.

  • dhw

    I’m afraid I have to suggest the opposite, submitting to the politics of it would mean taking a strategy to appease the many solar PV owners as opposed to addressing the very genuine issue of cross subsidies. We have exactly the same issue here in Aus. Renewables and solar are the future, but selling something to the network (a kWh of energy) at 30c which is only worth 5c is an economic distortion that has to be addressed somehow. If buying back the networks is off the table then truly cost reflective tariffs must be rolled out, and this surely includes higher fixed charges. Sorry rooftop PV but the tariff distortion (energy based pricing) that gives rise to your viability must be addressed.

    • Chris Drongers

      Dhw “Sorry rooftop PV but the tariff distortion (energy based pricing) that gives rise to your viability must be addressed.”
      Separation of the supply charge (poles and wires) from the energy charge (electricity kWhrs) is certainly needed for clarity and from there on it is a matter of adjusting subsidies.
      However, allowances must be made for reductions in overall electricity demand and decreases in peak network and house/business capacity demand. As rooftop PV doesn’t look any different to a gentailer than switching off appliances it does not make sense to charge PV greater standing charges than non-PV users.
      So retailers/distributors/transmitters/generators get less money – nothing will speed up increasing the overall efficiency of those entities more than dropping costs (as long as they are not compensated by governments responding to lobbying)

    • Chris Fraser

      Haha – the thought of solar owners having more political power than fossil fuel lobbyists was not so very convincing … But even so, the portending issue of balancing FiT with the market worth of the energy must be addressed. As we know, PV popularity requires evolving adjustments to FiTs from time to time. In fairness they can’t be applied restrospectively to early adopters who helped pave the way for new economies, and who believed assurances given in firm government Policy.

      • Jim Young

        My understanding is the grid scale Solar PV suppliers are favored since they can provide enough “Solar” power to fulfill the percentage goals for Nevada at lower wholesale prices.

        The problem appears to be like Germany and the Czech Republic where the prices promised to homeowners to encourage them to invest in their own solar was a retail rate. That brought in a lot of homeowners whom I think should at the very least be grandfathered until they have recovered their investment. In the future, a more rational plan may be to essentially quit making unsustainable promises then reneging on them as even cheaper sources (the large grid connected suppliers taking advantage of lower-priced, better performing big arrays that can blow the homeowners out of the market (except to keep selling their excess to the grid at the much lower , and decreasing lowest possible wholesale price).

        That could have been done from the start, with the only shock coming from the far greater and increasing costs per month to connect to the grid grid for back up or to sell any excess.

        Since they are inflicting steep and rising price increases to even connect to the grid, I’d be encouraged to defect from the grid as soon as possible, try to share any excess power with neighbors, or sell what they can to friends that can use them off grid or in states that don’t screw their customers, and then rip them a new one at the polls for the swindle they pulled as they transferred all the advantage to the big Solar suppliers.

        I do appreciate the much greater percentage of solar, even from the big suppliers, but detest their power grab for all the benefits and continued entrapment of their customers.

  • Ian

    Talk about over- reacting. Nevada’s population is 2.8 million and they act to discourage home solar when there are only 17000 systems installed, it makes queensland’s utilities look like corporate saints!

    As previously raised in discussions of anti-solar tariffs. The homeowner’s options are 1. Don’t bother installing solar
    2. Suck up the tariff bullying
    3. Go completely off grid
    4. Go partly off grid
    4.1 grid connection with separate off grid supply to some loads
    4.2 grid connection with non- feed in solar system
    4.3 feed in solar system with separate second system feeding certain non-critical

    5.other shared connections to utilities. These could be neighbour sharing, suburb sharing or larger clusters of consumers negotiating with grid electricity suppliers.

    How these different sorts of arrangements evolve will be interesting.

    A place like Nevada would be air conditioner country, a partial off grid solution would be an opening for those solar installers that have fled that state.

    It’s amazing that the solar installer army took flight at the first Boo! from the utilities, hopefully that’s not an example of general American backbone.

  • Geoff

    Isn’t that the intention to go off grid? If people want to use the grid supply for electricity they can’t get from their panels then surely they are prepared to pay for the very good backup supply. They can always get a small generator to charge their batteries if they want to go completely off the grid. Trouble is consumers invariably over estimate the performance of solar panels.

    • Jim Young

      My bills are usually only $22 to a high of about $65 with no solar, just using what we need.

      I’ve learned that telling the solar sales people (before they start their pitch) how little I use, causes almost all of them to runaway as fast as possible. I do want to go solar, but it seems I have to pick a time when I can do it totally off grid, since the connection monthly fees would be so high for the little I would need from them.

      Buying or renting an emergency generator from those that bought so many when they were scared by the overblown Y2K threat is a consideration, as is buying one from an RV dismantler. If they jack the simple connection fee up so high and the Net metering or FiT so low that few but the wholesale suppliers (vs. individual home systems that would only get a tiny fraction) would get enough of a return on their investment.

      So for me, I’d do better avoiding the monthly connection fee. The convenience and reliability the grid is great at providing is worth something, but not an absurd amount.