Taxing Solar Energy

[Stumble]

Originally Posted by jwing

Stumble:

Here's an exercise for you - I've already done it several times, but I could be mistaken. I'd like to see somebody else's figures.

Take the amount of energy that is used annually by an office building, or a typical building on a university campus. Those numbers are readily available online. Compare to the amount of insolation on the roof of the building you are considering. For the sake of the exercise, assume a solar energy system that has collection/conversion efficiency of 100%. Reconcile the results. For extra credit, calculate the acreage of surrounding land needed for the mythical perfect system in order to supply 100% of the facility's electricity. Then for grins, divide your results by a real-life system efficiency estimate.

Notice that money is not part of this exercise.

I have actually done this. One factory I work for was investigating adding solar, we ran thru the numbers, and while they couldn't produce all the power they needed it was a pretty substantial amount. I would have to pull the proposal for the details, but it was a 300,000 sqft array producing 36,000kwh/day (@6 hours/day) for a cost of $3.9m and offsetting $750,000 per year in electricity bills (it wasn't their entire usage but it was a big chunk).

Loan repayment at 4% (commercial secured) over 10 years works out to about $400k/year. So installing the system would save about $350,000/year. Assuming net metering.

The company looked at these numbers and decided to proceed. They are in the middle of installing a smaller test system or about 1,000kw/day as we speak.


The major issue we hit... The electric company rated a system this size as a commercial producer, so going with the larger system requires a lot of paperwork. The smaller one is the largest they could install without going thru that hassle. Luckily the factory has 12 power meters and they can install a 1,000kw system on each meter before needing regulatory approval. So there the debate now is do they install one big system or 12 small ones.


Edit to add: one of the advantages of rooftop solar, and why it can be cheaper than utility power is that the land cost is already paid for. If a utility wants to add solar power they have to buy land, keep it maintained, and eat those expenses. When looking at rooftop on a wharehouse or plant the setting is pretty close to ideal. Flat roofs, no obstructions, the marginal cost to instal the panels is next to nothing and you likely have a maintenance guy on hand already to cover that.

In this case the large solar array would produce about 50% of the total plants energy use. If they wanted (and could) expand it to produce all of their power they have the parking lot space to do that already.

[valhalla360]

Originally Posted by DotDun

Where? Not California, surplus solar power is purchased @ ~$.03kwh (there are some older rate plans paying more, but those are in process of being phased out)

"The state of Nevada implemented net metering in 1997.[53] Up until 2016, utility companies in Nevada paid the retail electricity rate to net metering consumers.[54] Nevada’s utilities pay net metering customers an average of $623 per year in southern Nevada and $471 per year in northern Nevada.[54] (The major utility company in Nevada is NV Energy)"

The story was from Nevada. Above is the Nevada policy which includes full retail rates.

10yrs ago when solar made up less than 0.1% of production, utilities could largely ignore the issue as it had no significant impact. Once you get above 5-10%, it's starts having an impact on utility companies and they start pushing back for solar producers to pay their fair share.

As far as taxing the production, what would you say if a utility company put in a huge solar system and claimed that the money they made selling that electricity shouldn't count as profit? When residential solar systems sell the electricity back to the utility, they are essentially a small utility company.

[valhalla360]

Originally Posted by Stumble

That may be a reasonable way to price it. The more I learn about the situation the more complicated I think it is.

The fairest way I think to do it would be to assign a cost for the grid seperate from the recurring energy delivery cost (overhead, repairs, profit, customer service, etc). Then divide that by the number of consumers and have every customer pay an equal flat rate for the use of the grid. Then net meter the solar panels.

Don't forget the power plants in grid charge. The problem is the actual power is a relatively small percentage of the cost of a KWH. As someone else mentioned, wholesale rate of $0.03/KWH when people are paying $0.16/KWH (it varies based on location and what the power sources are). I expect most people would laugh at buying solar if all they get is a $0.03/KWH return.

Admittedly solar tends to all turn on at the same time, but that is also the point of maximum demand on the grid so it tends to work out. Though some European countries with solar penetration about 20% are starting have to shuffle supply around to use all the power.

Actually, peak is early evening. You might have 20 people in 2000sft of office space but only 2 or 3 in a 2000sft house. Late afternoon (after the sun is too low for good solar output), thermostats kick on the air/con to cool houses, then around 6pm, lights and electric stoves kick on. The net effect is the daily peak is usually around 5-7pm.

In just a few years this time dependent over supply will get better as utility scale storage (water pumping and thermal mass storage) start to come on line.

Storage is still the big challenge and to address it in any meaningful manner is a long way off. Utility scale storage is horribly expensive and not cost effective.

[DotDun]

Originally Posted by valhalla360

"The state of Nevada implemented net metering in 1997.[53] Up until 2016, utility companies in Nevada paid the retail electricity rate to net metering consumers.[54] Nevada’s utilities pay net metering customers an average of $623 per year in southern Nevada and $471 per year in northern Nevada.[54] (The major utility company in Nevada is NV Energy)"

The story was from Nevada. Above is the Nevada policy which includes full retail rates.

10yrs ago when solar made up less than 0.1% of production, utilities could largely ignore the issue as it had no significant impact. Once you get above 5-10%, it's starts having an impact on utility companies and they start pushing back for solar producers to pay their fair share.

As far as taxing the production, what would you say if a utility company put in a huge solar system and claimed that the money they made selling that electricity shouldn't count as profit? When residential solar systems sell the electricity back to the utility, they are essentially a small utility company.

IMO, Nevada's Regulatory Agency is stupid for forcing utilities to pay retail for surplus power from a consumer solar system.

First, a net-metering system should be designed such that surplus doesn't exist or is a very small amount. I don't understand why a residential consumer even wants to be in the power selling business.

And yes, IMO, a consumer that is net-metering should pay to support their fair share of the grid. What is fair share will be debated for a long time. But net-metering vs. total off-grid has many advantages to the consumer and they should pay for that value. Like I stated earlier, California is allowing PG&E to charge residential consumers ~$13/month. IMO, there is room for that to increase and still be of value to the consumer. How much? $20/month? $30/month? I'm not sure where the top end of that should be.

[jwing]

Stumble,

That's an interesting example, thanks.

It is however, not very relatable to the exercise that I proposed. And you did immediately boil it down to financial considerations that depend on net metering. If you are part of the factory's decision-making team, you owe it to the company to warn them that net-metering will probably be gone before the factory retires it's debt on the PV system and that, even after the debt is retired the maintenance costs are not insignificant (as they are with utility-sourced power). And in your most aggressive scenario, you are getting only 50% of your power needs. Meaning you still need the utility's grid and generating capacity. You can't eliminate your parking lot, and building the structure to support the PV array over the parking lot will throw your finances way off. I worked on the design of a project where the PV support structure killed the project. We were all surprised how expensive that was. 300,000 square feet is over 6 acres; not many places have that much unused land to dedicate to energy production and those land costs must be factored in, as you already mentioned.

Anyway, the physics do favor single story buildings with large footprints, but multi-story buildings are a different story entirely. Even at 100% conversion efficiency, there is not enough insolation to power these buildings. I've worked on three 5-story day-use only office buildings that each have their roofs covered with PV arrays. Assuming no breakdowns and optimal performance, the owners are expecting solar to displace 10-15% of the utility power. Of course, there have been breakdowns; those power conditioning units (aka inverters) are very complex and notoriously prone to breakdowns.

[jwing]

From valhalla360:
Actually, peak is early evening. You might have 20 people in 2000sft of office space but only 2 or 3 in a 2000sft house. Late afternoon (after the sun is too low for good solar output), thermostats kick on the air/con to cool houses, then around 6pm, lights and electric stoves kick on. The net effect is the daily peak is usually around 5-7pm.

Yes, that jives with my knowledge. Additionally, if one disregards the peak due to residential usage, he will find that non-residential load peaks are early on winter mornings when building are getting warmed up after night setback, and around 1600 in the summer, when cooling loads are the highest. Neither occurs at peak solar insolation, which happens at solar noon - sometime around 1300 in places that observe daylight savings time.

[a64pilot]

What I think could happen and look forward to.
1. Houses become much more efficient, sort of like our boats, each Watt Hour counts on our boats cause we don't have an unlimited supply, so we have become efficient.
2. Our Automobiles could become generators and storage devices, OK we want Solar to carry the majority of the load, but a Volt type of vehicle could conceivably get us through intermittent periods when Solar alone couldn't, it's even possible for electric vehicles to become part of the grid, although I don't think I'll live to see that, but in the near term Hybrid vehicles could help in an off grid situation, Many Prius have been modified to become standby generators, they can make a surprising amount of power.

[DeepFrz]

I have been following this thread with great interest. One idea that has sprung to mind is that the price of net metering could factor in the method of generating the grid power. ie: Coal generated, natural gas generated, nuclear generated, solar generated.

[Cheechako]

My understanding is you can produce energy and if you have excess the utility has to buy it. That would be income, and taxable like anything else theoretically. But producing just your own energy and being taxed because you do is a bit of a stretch if you ask me. If you have a water well but a PUD water line runs in front of your house, would you be taxed for the water from your well?

[crabcake]

“There are only two things worse then an empty canvas: death and taxes.”
― Ragnar Tørnquist

[valhalla360]

Originally Posted by Cheechako

My understanding is you can produce energy and if you have excess the utility has to buy it. That would be income, and taxable like anything else theoretically. But producing just your own energy and being taxed because you do is a bit of a stretch if you ask me. If you have a water well but a PUD water line runs in front of your house, would you be taxed for the water from your well?

If you have a city waterline running across your property, you typically aren't allowed to sink a well. Grandfathering methods vary but eventually, they will get you on city water. It's not really a tax but more of a service fee.

It's a similar principal. It costs a lot to put in the water system and if people start disconnecting, the per household cost for the remaining households goes up, which in turn encourages more people to drill their own wells until only the poorest are on the city system and it has to be heavily subsidized. Then the guys who disconnected complain about the subsidy.

[DeepFrz]

“There are only two things worse then an empty canvas: death and taxes.”
― Ragnar Tørnquist

A catchy phrase for the unthinking, IMO. Where would our society be without taxes? No community road or sidewalks or public health facilities...just a beginning. However, misuse of taxes takes us in a different direction.

[a64pilot]

Originally Posted by valhalla360

If you have a city waterline running across your property, you typically aren't allowed to sink a well. Grandfathering methods vary but eventually, they will get you on city water. It's not really a tax but more of a service fee.

It's a similar principal. It costs a lot to put in the water system and if people start disconnecting, the per household cost for the remaining households goes up, which in turn encourages more people to drill their own wells until only the poorest are on the city system and it has to be heavily subsidized. Then the guys who disconnected complain about the subsidy.

Pretty much nails it.
Last house I just sold was on a septic tank, house was 100 yds from the road, on the other side of the road was a sewage line.
By law if my septic system malfunctioned, I could not repair or replace it, I would have had to run 100 yds of line and pay to have it put under the road and pay for a man hole etc, so that I could tie into pipe.
Cost I believe would exceed the cost of an expensive luxury automobile, but that was the law.
I lived on 100 Acres of land, out in the country, but within the City Limits.
While I was rebuilding the house we lived in our 5th Wheel, which I found out was illegal, you can't do that, even if you have 100 acres and are out in the country.


I believe in the State of Florida it is illegal to live in a house and not be connected to the Grid, now I'm not sure of that, but I believe I read that somewhere, take it like I read that Aliens have a base on the moon too, OK?

[Schooner Chandlery]

Originally Posted by tomfl

I am not sure how to interpret what you said.

Here is an example of what I was talking about. Tallahassee is the capitol of Florida. As such it is the home to the headquarters for state agencies. In addition there are two large state universities and a large community college. These institutions have a very large footprint in the downtown area of Tallahassee; and more to the point are all exempt from real estate taxes which has a negative effect on the tax base of the city. As a result the City of Tallahassee owned the electric company and based its rate structure to try and recoup some of the taxes it would be able to collect if the tax exempt real estate was paying taxes. This is not the only example of a government owned electric company structuring its rates to create a profit center.

Just as an aside here is one of today's headlines that may be of interest. Total Collapse of PR Electric System.

The point I was trying to make is just like maintaining our boats maintaining and expanding electric systems is a non trivial task.

1. Interpret it as it was provided. My bias is towards government-run utilities rather than privately-owned/run ones. Period.

With you, it seems best to not provide explanations because that gets you running down multiple unintended paths.

Extreme cases are typically not good "case in point" and you appear to be citing oddball extremes as examples to make your discussion points. Market conditions break down at extremes as you are likely well aware and aren't worthy of general discussion but rather only if you'd like to discuss that particular case and it's peculiarities away from the normal.

Have a nice day.

[Cottontop]

Self-supplied solar will never be the answer for everybody. They don't have enough roof, or it doesn't face south, or they have trees, or live in apartments, or on sailboats in a marina, or don't have room for batteries. Zillions of offices, hospitals, businesses of all types, manufacturing.

We will always need a grid. The question is how to fairly allocate the cost. Not an easy question to answer and given how our system works (US), bound to be messy.

Utilities are, for the most part, required to provide service to everyone. They recover their capital costs over many years. Now, suddenly, 2 million customers, who have enjoyed service all of their lives, drop off the grid. The remaining grid customers have to pay for the portion of the grid abandoned? That doesn't seem the fair answer.