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PG&E may have found a way of killing residential solar for good
PG&E was floating an earlier proposal to kill residential solar. There was much pushback. And, I gather they abandoned this first proposal.
But, PG&E is at it again. Now, they are proposing to shift much of their electricity fees from volume-driven to fixed charges.
PG&E's proposed rate structure would decrease electricity rates by 33%. That sounds great until you think it through. If you reduce electricity rates by that much, you stimulate higher electricity consumption & demand just at a time when electricity demand will go through the roof for a combination of several factors specific to California.
These include the electrification of both the housing and transportation sectors and all auto sales will have to be EVs by 2035. All new homes will have electric furnaces and water heaters by 2030. This will cause a surge in electricity demand. Additionally, the Diablo Canyon nuclear plant that provides 9% of the state's electricity will most probably be decommissioned for good by 2030. The early 2030s look like a California-engineered electricity crisis.
At such a time, electricity demand will be far higher than now. Electricity supply will be restricted. There are no plans to build any new nuclear plants, any other type of power plants, and no damns. So, how is the California electricity market going to balance out with a surge in demand and a restricted supply? Not well.
California will have to rely increasingly on electricity imports from other states. Given the tense relationship, California has with many of its neighboring States (Colorado River water issues, etc.), we can't expect to get much of a fair shake on the upcoming rise in electricity import prices.
One way that California could abate the severity of the upcoming electricity crisis would be to support residential solar. However, PG&E's recent proposal just about kills it. The economics of residential solar, especially when including a battery, is already marginal. Now, if PG&E charges hefty fixed charges combined with a 33% reduction in rates, it increases the long-term cost of residential solar and reduces its income stream by 33%. Residential solar will be dead upon this proposal's implementation.
The proposed PG&E fixed charges structure uses politically correct income-tiered pricing never used before for the selling of a utility commodity. Tiered pricing is acceptable when dealing with housing (affordable housing) and education (scholarships, financial aid, etc.). But, now charging different prices for electricity based on income? What's next? Charging different prices based on income for water, sewer, and garbage?
How about California imposing tiered pricing based on income for commercial services? If you are a low-income household you would pay only $15 for Netflix. But, if your household makes above $180,000 you would pay $92 for Netflix. That sounds incredulous. But, that is exactly what the PG&E proposal is doing with electricity.
You laugh. But, PG&E's tiered pricing based on income may be honey to Sacramento. If PG&E's proposal passes, which I intuit is very likely, watch this income-tiered pricing spreading all over California.
Now, here is PG&E's actual income-tiered pricing proposal.
- For a household that makes up to $28,000, the monthly fixed charge is $15 or $180 a year.
- For a household that makes up to $69,000, the monthly fixed charge is $30 or $360 a year.
- For a household that makes up more than $69,000 but less than $180,000 the monthly fixed charge is $51 or $612 a year.
- For a household that makes up more than $180,000 the monthly fixed charge is $92 or $1,104 a year.
I view the above as a done deal. That's because this proposal is so tuned into the current California political culture.
The proposal is great if you are strictly focused on affordability for the low-income community. For California's civilization at large, this proposal is a disaster for all the mentioned reasons. As stated, it also may turn into a dangerous precedent that could spread and cause havoc in other public and private sectors of the California economy.