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Should Solar Panel Users Pay a Fee for Reverse Meters?

Posted on the 15 March 2015 by Smallivy


There are stories going around about big utilities and solar panel users that go something like this:

Solar panels are getting cheaper, which is causing big problems for utilities.  Due to legislation in place in many areas, utilities are required to allow reverse metering, where  they must pay the customers who have solar panels at least retail power rates for excess power the customer generates and feeds back to the utility.  Big utilities have gotten together with wealthy individuals to oppose reverse metering through local legislatures, or add a fee for reverse metering since they say they need money to pay for upkeep of the grid.

At first you might think, “Those greedy utilities.  They have been soaking us for years and now that people are starting to be able to get away from the utilities, they are doing what they can to keep their monopoly and kill solar.  They are also backed by big oil and big coal who don’t want to see their grip on society loosened.  I could care less if the grid deteriorates.  Who needs it?”

 Now let me say that I’m certainly not a fan of regulated monopolies.  I find that a lack of competition tends to result in higher prices.  Even regulations, which are supposed to protect the consumer and keep prices low, can actually increase rates by requiring all sorts of work to comply with regulations.  Many of these regulation may make no sense and require all sorts of work to create paperwork that is then reviewed, stamped, and filed somewhere.  You would like to think that some experts were studying how much sulfur dioxide can be released into the air until it becomes dangerous to people nearby, or how much nitrous oxide can be exhausted, but you quickly discover that there are few experts involved in the process and it is really more about filing the right paperwork.  The utility then just pays for the expense by increasing costs for the customers, so they don’t tend to fight it too hard.

So I love the idea of dispersed power generation where maybe power producers have small generating facilities located near the population centers, such that different companies would compete to supply your home.  Even better would be personal power generation where you buy a generator that sits in your backyard near your air conditioner or solar panels that sit on your roof.  They even now have a solar panel in the form of a bendable plastic that can be made to look like the leaves of a tree.

But before you throw the utilities to the wolves, realize that in this case they have a valid point.  Solar energy has a big problem, as do virtually all forms of renewable energy, and that is storage.  You need to have the ability to store the excess energy that you make to use when you aren’t making enough  Being connected to the grid is about the best possible way to store solar energy since you convert it into cash that you can then use to pay for power when needed.  Otherwise, homeowners would need to have large battery banks which can be corrosive, expensive to maintain, possibly explosive, and let’s face it, not remotely green.  Luckily, utilities need more power when the sun is shining bright and temperatures are hot since that is when everyone turns their air conditioners on.

Homeowners with solar panels and reversible meters depend on the grid every bit as much as those who do not and they should want to keep it around as much as anyone.  Their homes would be just as dark at night if a tree takes out a power line leading to their neighborhood as the next person, and they count on the utility to send their people out in the storm to get power flowing again.    They should also be paying for its upkeep.  Now we’re talking about expensive stuff here, with a 161 KV line costing tens of thousands of dollars per foot to construct.  The issue is the way in which utilities have traditionally charged customers for use of the electric grid:  They set their retail rates based on their costs, including the cost of maintenance of high voltage lines and the poles around town, and then charge customers by the kilowatt that flows forward through the meter at that rate.  

When the solar panel user gets paid for reverse flow through the meter, they get paid the retail rate, which means they are cancelling out the fees they were paying to maintain the grid when power was flowing forward.  Not only that, if they generate enough power, the power company, by paying the customer the retail rate (and sometimes an additional surcharge), might be paying the customer the charge for maintaining the grid, yet the power company then needs to go out and maintain the grid!  The solar panel user gets to use the grid for free, leaving other customers to pay more for the upkeep.  More and more people could fight back by getting their own solar panels, but that would leave those who can’t afford to get solar panels or aren’t in a situation where solar panels are practical – including the poor living in apartments or small homes-to subsidize the others.

To give an analogy, imagine if restaurants were required to pay customers retail menu prices if they brought raw food and gave it to the restaurant.  You could go into a steak house, have a nice steak with a baked potato and a salad, then hand them a bag of groceries.  You would have enjoyed their tables and chairs, used their cutlery, dirtied their silverware and glasses, used the work of their cooks and wait staff, yet you would be paying only for the food you were eating, and then in a less useful form.  If you gave them an extra few steaks and they had to pay you at the menu price, they would need to pay you for all of the things listed above that the restaurant provides to you when you get a meal, yet you would be providing none of those things to them.  If enough people started paying in groceries, how long do you think restaurants would stay open?

So what would be fair?  Well, one idea would be to reduce the rates paid by the utilities to customers with reverse meters for the power they generate.  It should be at least low enough to remove the amount retail customers pay for maintenance of the grid since the homeowner isn’t providing that service to the power company.  The rate should probably reduced still further to account for maintaining the grid as the power flows back from the home to the power company.  I’m sure that solar panel owners would complain that hey had to buy these expensive solar panels and now it will take fifty years or more to make back their money, if then, but the only reason they are making back their money so quickly now is because they are getting subsidized by their neighbors.  You can drive your car more cheaply if you steal gasoline out of your neighbor’s car, but that doesn’t mean you have the right to do so.

Another idea to pay for the upkeep of the grid would be to simply have a fee for being connected to the grid that covers its maintenance.  The fee could be scaled by how much usage the customer does, including flow in both directions for those with solar panels.  For example, a mining operation would pay a much higher fee than a homeowner with a 2000 square foot home.

So before you get on the band wagon and start saying that it is just greedy big power colluding with greedy big oil and big coal, look at the facts.  I’d love to get away from the grid, but I’m sure glad I have it at this point.  You’ll miss it when it’s gone.

Your investing questions are wanted. Please send to [email protected] or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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