Rethinking Virginia’s energy infrastructure.

In planning to construct our home, I’ve recently had to do a great deal of math on the fiscal merits of solar energy and, in doing so, I think I’ve come up with a simple, (relatively) free-market incentive to get more families and businesses to build active solar components into their buildings. Anybody familiar with the mechanics and laws behind net metering can skip the next half-dozen paragraphs, all of which exist to set up the idea.

Four PV arrays
One Canadian home’s new photovoltaic array. By Christopher Porter.

Unlike petrochemicals, solar enjoys the benefits of no state or federal subsidies. This most local (and yet interstellar) source of energy must stand on its own, despite being in earliest days of development, when it could benefit most from a boost from the public sector. The excellent Findsolar.com tells me that, in order to satisfy 50% of my planned home’s electrical needs, I will require 3kW of peak power, for which I will have to cough up $25,000 for the hardware and installation costs. Over the course of the life of this system I will recoup 62% of that cost through reduced need to buy electricity from Dominion Power, assuming a 3.78% annual utility inflation rate.

So, basically, I’d be paying $9,500 to be a mensch. That’s a lot of money. That’s enough to add a nice wrap-around covered porch to the front of the house. Or increase the size of the house by fifty square feet. Or bury our half-mile power line. Or cover seven months of mortgage payments. Or, better yet, money that we simply wouldn’t spend on the house.

Some states recognize the enormous benefit of having a distributed source of clean, domestically-produced energy, and so offer tax credits to individuals who take the plunge. When the tax credit is enough to make up the gap between capital outlay and savings ($9,500, in my case), that’s enough incentive for some people to make the jump to making their own energy. Virginia doesn’t have that much sense. We offer no incentives. The best we can muster is allowing localities to offer property tax exemptions for solar, something that I’m glad to see that my home of Albemarle County offers.

Virginia also requires many power companies to allow net metering, which is certainly nothing special, but it’s a start. Net metering means that your electrical meter can spin either forwards or backwards. In the middle of a summer day, when nobody’s home (so very little power is being used) but a lot of energy is being collected, that power flows back out to the grid, and customers are credited for that energy. But at night, when no power is being generated by the home, the energy flows back in from the power company. In essence, the power company is used like a bank — they can keep my excess electricity for me, earn interest on it, and give it back to me when I need it.

The trouble is that Dominion Power, my power company, handles net metering in the way that is most favorable to them and least favorable to me. (Their terms are available on their website.) If I buy 100 kWh in a month and sell them back 400 kWh, they pay me…nothing. I simply have a tiny little power bill, in which I pay only for the privilege of being connected to their grid. So I have just donated 300 kWh to Dominion Power. (That’s the only thing I could do that would be less likely than spending $9,500 on a solar setup that I’ll never recoup the investment in.) They’ve recently changed the rules to let me apply that 300 kWh to future billing cycles, but at the end of a year, they just keep it. This is like my bank requiring that I spend all of my money each year; any money I just can’t blow by January 1, they’ll just keep.

It’s for this reason that many people who generate electricity at home invest in enormous banks of batteries, which they use to store their excess power. The electrical equivalent of keeping one’s savings in one’s mattress, this prevents anybody else from benefiting from that excess electricity in the interim, and turns the whole thing from an ongoing business opportunity into something more like electrical isolationism.

Now, I’m a guy who would really like to buy clean energy. Our current house is staggeringly energy-hungry, requiring 9.2 BTU/ft2/kWh, which is only moderately more efficient than stringing up tarps under a bridge. So long as we continue to occupy this house, I’d love to buy some of our juice from renewable resources. If just 10% of our 1,200 kWh of monthly energy came from wind, water, or solar, that would be something I’d pay a premium for. Right now I pay an annual average of $0.0601/kWh for my juice, and I bet I’d be willing to pay at least twice as much for clean power. That would raise my average monthly power bill from $75 to $82.50. I’ll warrant that there are many thousands of households in the state who would also happily pay more for clean power.

Likewise, I’ll bet that there are thousands of households in Virginia who would be very happy to sell that power to me. And there’s the rub.

Inverter
An inverter, monitor, and related electrical equipment in a straw bale house. By Jeremy Knope.

Clean power generated by home and business owners is more valuable than coal-generated power, to the estimation of a great many consumers. So it stands to reason that it should demand a higher dollar. Yet Dominion credits net metering customers at the same rate that they charge for power from coal plants. This doesn’t make any sense. If the going rate for coal-generated power is $0.0601/kWh, perhaps Dominion should buy back clean power for $0.10/kWh, a two-thirds markup. Then they can sell that clean power to other customers for a higher rate (such as $0.1202, as I suggested). This makes clean power a profitable business both for Joe Solar Power and for Dominion. If I can generate a surplus of 263 kWh each month, that’ll leave me with $9,500 at the end of my system’s life, enough to make the whole thing a break-even proposition. And that’s assuming that the price of energy won’t increase in the next few decades.

Dominion made so clear during this last General Assembly session that they are desperate — desperate — to be regulated, and since the state obliged, so having the state dictate the amount that they’ll buy and sell power for is something that they’re down with. But I don’t doubt that Dominion will surely oppose this anyway. It creates the potential for thousands of competitors, and reduces demand for their own services. But what Dominion doesn’t understand is that, in fact, it puts them in an excellent position. Clean, distributed power generation is our future. But we cannot actually share that power without an intermediary, and the intermediary is whoever owns the power grid. That leaves Dominion in an enormously powerful position, and an enormously profitable position. As Google is to the internet (they don’t have information, they just index it), Dominion could be to power in Virginia (they don’t make power, they just provide access to it), and that’s a business model that is working out very nicely for Google. More important, Dominion has successfully argued that their business, right down to the rates that they charge, should be subject to standards established by the state, so even if they don’t see the wisdom of this, that’s OK, they don’t need to.

I suspect that this proposal would be considered mundane in some portions of the U.S. It’s pretty obvious. But I don’t live in other portions of the U.S., I live in Virginia, where I’ve never heard it suggested. Our General Assembly would do well to guide Dominion power to do the right thing and enact legislation that would help to create a new form of income for thousands of Virginians, make the United States more energy independent, and reduce pollution from power plants.

11 thoughts on “Rethinking Virginia’s energy infrastructure.”

  1. Honestly, I’d be interested to see how much the actual additional kWh are worth to Dominion. After all, Dominion not only promises to provide you with power for a certain price, but there’s the understanding that that power WILL be available to you at most times. That is, if everyone is running solar panels, and every day is sunny enough to power their homes, plus some, what good is it for Dominion to purchase all that energy by day, and then have to sell it back, plus give you some more at night? How much is that daytime excess worth in that case? What are the costs of storing that energy, or should the state just pay to ground it because that’s more cost effective than storing it? In a more foreseeable example, what would it do to operating costs of the power plants if demand fluctuated wildly based on cloud cover, and from day to night? My guess is that it would increase them, though I doubt it’d be easy to give any exact figures without a bit of R&D, since our current energy grid is not built with residential producers in mind.

    That’s not really to discount much of what you’ve said. I’m just musing on the relative value of a kWh that I know will be there when I need it, versus a fair-weather kWh, and what the storage costs of those fair-weather kWh would be.

  2. An impressive calculation of your options, and costs. Have you considered the value of having your own source of reliable, surge-free power? For example, do you despair so about the lost value of your automobile as it rusts and yields to entropy? Those things never really pay for themselves, yet provide value that we find financially acceptable.

    Other considerations:
    -You didn’t include the tax benefits of rolling your solar system purchase into your mortgage – that will allow you to recoup costs through mortgage interest tax deductions. Same thing for the more expensive appliances that will allow you to better leverage those precious solar kw h’s.

    -Much of the installation work is just labor; installing panel mounts, trenching wire, pulling wire, building system enclosures, that you can do yourself. Act as your own GC and you can purchase the components yourself.

    -Go solar for your base load needs and augment with utility power for peak loads. Base load would be lighting, control circuitry, water, telecom, computer etc. Build in system expandability and assume that panels and incentives economics will improve in coming years.

    -Until the nation, and Virginia in particular, decides that clean energy is a valuable option worthy of incentive, you are under no obligation to personally fund clean, sensible energy policy. Isolationist is just another word for “pioneer spirit”. Wagons Ho!

  3. What are the costs of storing that energy, or should the state just pay to ground it because that’s more cost effective than storing it? In a more foreseeable example, what would it do to operating costs of the power plants if demand fluctuated wildly based on cloud cover, and from day to night?

    Ben, these problems (and the others you describe) are actually already dealt with by power plants. (I made a project of learning about Virginia Tech’s power system while I was a student there, and the head of their plant explained to me that it’s all an analog for how power worked on a larger scale.) The amount of juice that’s demanded constantly fluctuates, though there’s certainly patterns to it. The entire state will not simultaneously become cloudy but, rather, demand will ramp up steadily, presumably from west to east. Even the supply of power fluctuates, as different qualities of coal are burned and boilers are fired up or shut down, depending on demand. And storage of electricity is actually a construct; demand will always exceed the home-generation capacity, so it will simply be redistributed into the network and consumed immediately.

    Have you considered the value of having your own source of reliable, surge-free power? For example, do you despair so about the lost value of your automobile as it rusts and yields to entropy? Those things never really pay for themselves, yet provide value that we find financially acceptable.

    Bubby, yup, I’ve done all of that math, but it seemed a bit tedious to explain it here. :) I know you’ve been there, done that with all of this, so I can’t see that you’ll learn much from my plans here as they unfold. :) A premise of all of this is that 50% number that I’d mentioned early on, wanting to only provide for the base load, and not attempt to allow for the peaks. Though, really, if I could resell this stuff, I’d move up from a 2-3kW to a 5-10kW setup — sort of the electrical equivalent of raising some goats and chickens to sell at the farmer’s market. :)

    What’s tempting to me right now is, as a part of the house construct, build in only the inverter and some wiring to eventually switch some of our major appliance to DC. Then we’ll add the PV arrays gradually. I’d rather add them gradually, anyhow, because I don’t want $15k of arrays to all age out at once.

  4. Waldo,

    I’m aware that demand of course fluctuates, and fluctuates greatly. As I perhaps did a poor job of explaining in my original post, what I’m interested in are the differences that would influence the price of the power if active solar (and wind and what-not) became truly ubiquitous. Would it appreciably increase the demand fluctuations? If it did, that would mean either larger batteries or more reactors/furnaces/solar collectors going unused at off-peak hours, and each of those comes with a significant cost.

    Even in this scenario, the costs might be made up by having the distance that energy travels at most times decreased. I really have no idea. I just think it’s interesting to ponder.

  5. Well, what I imagine would help with the whole affair is that solar power is at its most plentiful when demand is highest: sunny summer days. It may well be that the power that would come of this scheme would be enough to shave off the peak, a peak that would currently require that backup boilers be brought online or, worse yet, rolling brownouts be instituted.

    It’s often said that the bulk of the power is the cheap, easy part: it’s that last bit of demand that’s enormously expensive to provide. That requires firing up (and owning) additional equipment that’s only used a handful of times each year. The cost savings of no longer having to maintain (or acquire) that equipment could be enormous.

  6. I never get tired of alternative energy tech-talk. In the years that I have dabbled in solar PV the components that have depreciated the most are the controllers and inverters. I have some old (1983) Carrizo Plains panels that are still putting out 85% of their original 100 Watts after these many years (and I bought them used). These panels were part of a huge Arco installation and were cooked by concentrating mirrors to boot. Unless you are considering amorphous film PV, I wouldn’t worry about aging.

    I find it most useful to design/build by task. So the next installation will likely be a stand-alone PV system to pump potable groundwater. It will be a modest system that assures the flow of water and uses tank storage as a sort of buffer for the hours of no solar. So regardless of technology advances the task of providing water is complete.

  7. Y’know, I’m glad you mentioned that about water. I do believe that the very first application that I intend for our solar setup is going to be for the well. Rarely does a year go by where I don’t have at least a few days without power. Folks who live in the city can grin and bear it, but those of us who live in the country don’t have water. And that’s terrible. It’s unsanitary, and it’s enormously unpleasant. We keep two 9 gallon containers of water in the house at all times for that very reason, and when a serious storm is coming (ice storm, heavy snow or hurricane), we fill up the bathtub for flushing water.

    To know that we’ll never again be without water is enormously valuable. Not only would I pay a premium for that, I will.

  8. I think you might be wrong about subsidies for solar energy.

    The subsidies within the realm of this topic — home installed solar energy — consist of just one, and it’s not actually much of a subsidy, just a tax credit. There’s a $2,000 tax credit available for the installation of a home solar generation setup, and that ceases to exist come December 31.

  9. Listened to an interesting Kojo Nnamdi show (WAMU.org) on the matter yesterday, and one of the pro-alt energy group reps on there indicated that they were making headway with lifting the $2k cap. Apparently, for developers, the 30% deduction for solar installations has no cap – and this group is seeking to make it the same for resident-initiated installations.

  10. I’m ok with Dominion Power refusing to purchase excess power from people’s homes. So long as Dominion Power is ok with me ordering them to remove the massive set of power lines and towers that cross the side of my property and prevent me from building anything in that meadow. I make some sacrifices to allow them to do business and so they should be required to make some sacrifices to allow others to do business. This sort of thing should be the natural consequence of demanding and receiving public right-of-way that intrudes on the property rights of the general public.

Comments are closed.