By Larissa Koehler and Jamie Fine
California has worked hard to build up a nation-leading clean energy portfolio. And the state has been hugely successful in adding renewable energy, especially solar, to the electric grid. However, having too much solar energy on the grid relative to energy demand can lead to grid operators turning off that clean power. This is costly for customers and makes it harder to meet our clean energy goals. One solution? By putting price signals in place, such as time-of-use (or TOU) rates, we can encourage customers to use energy at times when solar or wind power is abundant.
TOU pricing does this by making electricity cheaper when the supply of electricity exceeds demand. Times of day when solar panels across the state are generating power will align with predictable low prices. If done right, TOU pricing can give Californians control over their energy bills, avoid pollution from fossil-fuel power plants, and maximize the production of renewable energy without additional cost.
The California Public Utilities Commission – the body that regulates utilities in the state – supports this strategy. In 2015 it decided to transition residential customers to a default TOU rate, with the explicit goal of integrating more renewable energy. Unfortunately, Southern California Edison (SCE) – a utility that serves electricity to over 3 million Californians – is proposing to delay putting some or all of their customers on these rates. This setback could have negative economic and environmental impacts.
Southern California Edison dragging its feet
SCE claims they need more time to update their billing system to handle the switch to TOU rates. For this reason, they propose to transition approximately half of their customers in 2018, with the rest to follow in 2020. Alternatively, they propose transitioning all of their customers in 2020.
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Environmental Defense Fund recently protested this delay for four reasons:
- The delays will result in undesirable economic and environmental impacts – namely a mismatch between low energy prices and times when renewable energy is abundant. Without TOU rates, most Californians will continue to use energy at times when it is provided by fossil fuels or when the grid is stressed, instead of using the opportunity to maximize the use of the renewables we already have. This can lead to curtailment – switching-off our clean resources – which puts unnecessary costs on customers.
- Waiting until 2020 to transition some or all of SCE’s customers is against the spirit of the commission’s 2015 decision, which we interpret to establish a transition of all customers in 2019.
- The commission should not excuse SCE’s poor planning. When California started deploying advanced metering, or smart meters, over a decade ago, regulators and utilities explicitly contemplated an eventual transition to TOU rates. What’s more, it’s been over two years since the clear direction to transition to TOU rates came from the commission.
- SCE’s proposal sets a bad precedent. If the commission permits SCE to go down this path, it would empower the other investor-owned utilities – Pacific Gas & Electric and San Diego Gas & Electric – to seek the same sort of delay. This would throw a critical piece of meeting California’s clean energy targets into disarray.
Meaningful price signals
Additionally, the structure of SCE’s TOU rate itself does not present a strong enough price signal for customers to adapt the way they use energy. It may even prompt people to avoid using power at night, when wind is available. That’s why we’ve been advocating that the commission and the utilities test a wider variety of rates and more meaningful price differences, in order to provide greater incentives for customers who are able to shift some of their energy use.
If done right, TOU pricing can give Californians control over their energy bills.
SCE gets bill protections right
There is one aspect of SCE’s plan EDF supports: bill protections for customers. We are aware – and concerned – that certain customers, including low-income customers and customers in disadvantaged communities, may find it harder to adapt their energy usage to this new pricing. As such, we fully support bill protections for vulnerable customers.
However, SCE also needs to actively think of ways to help those customers once it removes bill protections. For example, SCE should pursue the following:
- Allow customers to select their own best rate from a suite of options. This is something we’re calling, “personalized default” and it can help people start out with a rate that aligns with their preferences.
- Present personalized solutions. Utilities are equipped to do this using data they already have.
- Allow third party solutions providers access to anonymized data. Armed with this information, energy innovators – like demand response companies – can offer appropriate customer solutions.
SCE has a golden opportunity to show how a sunny California can translate to better economics, a more reliable grid, and a cleaner environment. EDF will be one persistent voice ensuring SCE takes full advantage of this opportunity.
6 Comments
I am baffled by this article.
TOU rates put the cheapest energy in the middle of the night, the highest rates in the evening (typically 2-8), and middle-priced energy at all other hours – including the peak output hours for solar.
TOU rates are a problem for residential solar since homeowners receive less under net metering for the bulk of their solar production, and pay the highest prices in the evening when solar is not producing at all.
While TOU rates will be a boon for intelligent storage – shifting that peak production away from the grid and making it available to offset more expensive energy during peak rates – that adds considerable cost to the homeowner.
Suggesting that TOU rates are “solar friendly” only makes sense if the peak rate was from 10-2!
Regards…
Jim Jenal, Founder & CEO, Run on Sun
Thanks so much for your comment. While the structure of some TOU rates put the cheapest times in the middle of the night, EDF is advocating at the California Public Utilities Commission for policies requiring California utilities to line up cheap times when there is an abundance of renewable energy on the grid, including when solar is most available. What’s more, those cheap nighttime hours do help integrate wind power. We have expressed this view in multiple fora at the commission
There are plenty of other, lower cost solutions outside of storage that some people can use to help shift some of their energy usage such as energy efficiency, using big appliances during off-peak times, or pre-cooling or pre-heating with the help of a smart thermostat.
Finally, rooftop solar is utilized by only a very small percentage of customers. Only about 20 percent of customers will ever own rooftop solar for very basic reasons: 80 percent of Americans live in cities where rooftop solar installation is necessarily limited, many customers don’t live in single family homes or own their homes, and many rooftops have trees that block the sun.
If you’re interested in learning more about how TOU will change the return on investment of rooftop solar, you can find more information here: http://blogs.edf.org/energyexchange/wp-content/blogs.dir/38/files/2014/09/SolaROI-White-paper-with-appendix.pdf.
These rates are anything but renewable-friendly. TOU rates with TOU periods later in the day reduce the savings from solar systems because the value of electricity is lower during the day when solar produces more. Period. Sending price signals to customers is not renewable-friendly it is utility-friendly by requiring customers to change their habits or pay more while protecting the utility from cheap abundant electricity from solar during the day. These TOU rates reduce the savings from solar and require existing customers to change their habits. How is that a renewable-friendly solution?
Thanks for your comment. EDF is advocating at the California Public Utilities Commission for policies requiring California utilities to line up cheap times when there is an abundance of renewable energy on the grid, including when solar is most available. What’s more, those cheap nighttime hours do help integrate wind power. We have expressed this view in multiple fora at the Commission. This way, we can get the most out of the big, utility-scale solar resources we already have and can manage our renewable resources efficiently in order to make room for even more of them instead of relying on fossil fuels.
SCE respectfully disagrees with EDF’s claims. We are fully committed to integrating more renewables onto the grid, and rather than delaying implementation, SCE is enrolling customers today onto “renewable-friendly” TOU rate plans on an opt-in basis. Customers can enroll right now in a voluntary TOU pilot by calling SCE at 1-800-655-4555. Nearly all of SCE’s 600,000+ non-residential customers are already served via TOU rate plans. SCE plans to communicate its available rate options (including TOU rates) to customers through a mass marketing campaign later this year.
SCE has proposed to the CPUC a plan to migrate one million-plus residential customers in 2018. We believe this would be the largest such customer migration to TOU rates in California history. We intend to migrate 400,000 customers to TOU rates in March 2018 (more than the state’s other two IOUs combined) and another two million before other state utilities begins their full migrations. The only “delay” is a planned hiatus between two customer migration waves so SCE can complete substantial, previously planned IT upgrades.
We are working with multiple parties and the CPUC to ensure TOU rates are communicated and implemented effectively; if they aren’t, customers will opt-out and avoid the important benefits of TOU rates. SCE looks forward to partnering with EDF and other organizations to ensure the benefits of TOU rate plans are fully realized throughout our service area.
~ Ron Gales, Senior Communications Project Manager, Southern California Edison
Thanks so much for your comment. We know SCE is committed to renewables, as evidenced by the fact that the utility went above and beyond the storage mandate and has committed to ensuring energy demand from electric vehicles is managed in a way that helps integrate renewables. What’s more, we are very supportive and pleased about the success of your opt-in TOU programs. However, actual opt-in program numbers are unclear from your comment; as well, whether SCE has engaged in sufficient marketing, education, and outreach to maximize participation. We all want to work towards a cleaner and healthier energy system for California and we look forward to working with SCE and other stakeholders at the California Public Utilities Commission to get there.