Energy + Environmental Economics, an energy consulting firm commissioned by SMUD to study the value of solar in its service territory, released an independent study that evaluated the value of solar in the Sacramento area.
The study evaluated the value of solar, the value of solar + storage when managed by SMUD or a customer and the value of the societal benefits derived from solar power. The study was commissioned to help inform SMUD’s solar pricing structure moving forward based on valuation criteria from the rooftop solar industry, environmentalists, economists and community members.
“Our independent analysis carefully evaluated the benefits and costs of customer solar and storage systems to SMUD’s entire customer base under its current Net Energy Metering program,” said Arne Olson, senior partner at Energy + Environmental Economics. “While net-metered solar provides benefits, the study shows that it causes electric rates to increase for other customers. Moreover, most of the environmental benefits associated with customer solar can be achieved much more cost-effectively with other means, such as utility-scale solar,” said Olson.
The study found that the value of solar is 7 cents per kWh in 2020 and steadily declines through 2030, as additional solar hits the market. SMUD currently pays its solar customers retail rates for their solar generation — 12 cents per kWh on average — creating a cost shift to non-solar customers in the amount of $25 to $41 million annually. This amounts to $26 to $45 per customer, per year and disproportionately impacts low-income customers. That will continue to grow exponentially to $94 million or $92 per customer, per year by 2030 if not addressed.
“Our goal is to deliver the cleanest energy at the most cost-effective rate to our customers,” said SMUD CEO and general manager Arlen Orchard. “To do that, we must find a solution that is fair and equitable to both our rooftop and non-solar customers. We will continue conversations with a broad range of stakeholders in the coming months as we work toward a comprehensive solution that’s fair to all of our customers.”
The study showed the following results:
- The value of rooftop solar in 2020 is 3-7 cents per kWh, depending upon how you calculate the benefits of rooftop solar. The value drops significantly by 2030 to 3-4 cents per kWh because of the expected growth of solar in California
- SMUD pays retail rates of 12 cents per kWh, on average, for rooftop solar generation, creating a cost shift that is passed on to non-solar customers in the amount of $25 to $41 million in 2020 or $26 to $45 per customer per year. That cost-shift grows to $94 million in 2030 or $92 per customer per year. This cost-shift is reflected in customers’ bills.
- Value of rooftop solar increases with energy storage. Value is highest when the utility can optimize the storage to the benefit of all SMUD customers.
- Declining value of solar over the next decade is due to substantial new utility-scale and rooftop solar being installed over the next decade.
In an attempt to right-size its rates for both solar and non-solar customers, SMUD will consider options for a new rooftop solar rate that fairly compensates rooftop solar customers for the benefits of their systems. As part of this process, SMUD will ensure there are substantial opportunities for stakeholders and customers to provide input on this important issue.
News item from SMUD
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