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Why Sun-Soaked Arizona Is Killing Solar Power

When it comes to energy and how you power your home… fear not, the government has you covered.

That is, until it’s no longer financially beneficial to do so.

Take the solar industry, for example.

With all the tax credits, subsidies, and risky government-backed loans to solar companies and consumers, you’d think the government wants you to install solar panels on your house immediately.

But that’s not always the case…

When the prospect of consumers saving money threatens the government’s bottom line, officials are quick to protect their interests.

And Arizona is the latest culprit…

Arizona’s Consumer-Crushing Rate Plan

I don’t know what they’re smoking in Arizona… but it seems to have triggered both money-grubbing and insanity.

First, the greed…

Salt River Project (SRP), the utility for the Phoenix area, just proposed a new rate plan. Specifically, one that hammers well-meaning, energy-conscious solar customers with an average rate hike of $600 per year.

SRP’s increase has three parts:

Rate Increase Part #1: Solar Penny-Pinching. Solar homes often generate more power than they use at the time, and utilities are required to buy any excess solar power that homes generate. Homeowners return the power to the utility for credit against their bill.

So basically, most solar customers actually make a little money during the week when the sun is shining and they’re not home running their air conditioners and dryers. And they’re spending money with the utility at night and on weekends.

Here’s the deal, though: Home solar generators currently receive up to $0.10 per kilowatt hour that they sell to the utility… but SRP wants to reduce that to $0.04. That’s less than SRP will be paying to generate solar power at its own new massive plant. This will effectively increase solar customers’ bills.

Rate Increase Part #2: Grid Access. SRP is raising the flat fee that it charges to access the electric grid.

Rate Increase Part #3: Demand Surcharge. There’s a maximum-draw surcharge that depends on each user’s peak demand.

Now, here’s where the real insanity comes in…

Salt River’s Insane Solar Demands

Incredibly, SRP says users can reduce their peak-demand fee by placing the solar panels on their roofs to face west, so they’ll generate maximum energy as demand peaks in the afternoon and evening.

That’s all very well… but the utility must know that customers would already do this if they can.

More to the point… what if homes don’t face east-west? Do they expect customers to dig up the foundations and rotate their houses?

Failing that, customers can also reduce their charges by installing technologies that barely exist at the consumer level, such as massive batteries. How thoughtful!

Blinded by the (Sun) Light

To be sure, SRP’s proposal reflects some hard realities that utilities will have to face in the future, as more people reduce their dependence on monopolistic utilities and the government for their needs.

For utilities, because most of their costs are fixed, they have to recover them somehow. Indeed, SRP’s rate proposal makes a big deal of noting that 73% of its costs are fixed, while 88% of its revenue is variable.

But in that case, why not move regular customers to a plan that reflects the utility’s cost balance?

Where’s the proposal to make all ratepayers pay a fixed fee of 73% of the utility’s costs?

There isn’t one.

The rate plan also doesn’t address the point that increased solar usage will actually reduce the utility’s fixed costs by reducing the peak electricity capacity it needs.

Instead, customers are left with the false impression that reducing electricity usage can result in meaningful savings on their electricity bills over the long term.

Sun-Drenched Arizona Killing Residential Solar Power

The bottom line here seems to be that SRP is trying to kill energy independence and residential solar.

It’s a bit like the old Henry Ford saying, “You can have any color as long as it’s black.”

SRP is saying, “You can use solar power… but only if you buy it from us, and don’t generate it yourself.”

Sadly, this is a recurring theme in some tech areas. Governments and huge corporations are constantly trying to twist developing technologies in directions that are favorable to them… but at the expense of the average consumer.

For now, utilities are winning the battle. But in the long run, they’ll lose the war.

As the cost of solar panels – and even installation costs – continue to decline, solar will become a viable option for more homeowners.

Good investing,

Greg Miller

Greg Miller

, Senior Analyst

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