Unpacking the Solar Cost Shift Fallacy: How Pro-Utility Groups in CA Mislead the Public
In case anyone is looking for a simple way to explain the flaws in the CPUC's Avoided Cost Calculator (ACC), here is a summary of a few key points about how the ACC does not fully capture the real value of solar energy and other renewable resources:
1. Underestimates Grid Value
- Problem: The ACC tends to underestimate the value of solar in supporting grid reliability. Solar energy reduces the need for expensive fossil fuel plants, especially during peak demand hours (like hot summer afternoons), but the ACC doesn’t always account for how much solar helps reduce grid stress or how it can be paired with storage to provide power when it's needed most.
- Why it matters: This leads to an undervaluation of solar's grid services, like providing backup power and avoiding blackouts.
2. Ignores Long-Term Savings
- Problem: The calculator primarily focuses on short-term avoided costs, like the immediate cost of power generation and infrastructure. It doesn’t fully capture long-term savings from cleaner, more sustainable energy systems, which could reduce future costs related to climate change and pollution.
- Why it matters: The failure to include long-term environmental and health benefits (such as cleaner air and avoided climate change impacts) means the ACC doesn't reflect the full value that solar brings to society.
3. Outdated Assumptions
- Problem: The ACC uses static assumptions about energy prices, technological advancements, and market conditions. For example, it might not properly reflect the rapidly declining costs of solar panels and energy storage or the increasing value of decentralized power generation.
- Why it matters: This means the ACC may underestimate how much solar power will cost in the future and how much it will help avoid the need for fossil fuels and new infrastructure.
4. Doesn’t Account for Non-Energy Benefits
- Problem: The ACC mainly focuses on economic factors, like the cost of electricity generation, but it overlooks other important benefits of solar, such as job creation, health benefits from reduced pollution, and the economic development benefits of local, renewable energy.
- Why it matters: By not factoring in these broader, non-energy benefits, the ACC doesn’t reflect the full societal value of solar energy.
5. Excludes Certain Grid Costs
- Problem: The ACC may ignore or understate certain grid integration costs of renewables. While it accounts for some integration costs (like balancing supply and demand), it may not fully account for costs related to managing more intermittent renewables or how they interact with energy storage.
- Why it matters: Solar's role in supporting the grid with smart technology or energy storage (which stores solar for later use) isn't always valued properly in the ACC.
Conclusion:
In simple terms, the Avoided Cost Calculator sometimes underestimates the true value of solar energy because it focuses too narrowly on short-term costs and doesn’t fully account for long-term benefits, grid support, and non-energy advantages like job creation and cleaner air. It also tends to use outdated assumptions that don’t reflect how rapidly solar technology is improving. This can lead to lower compensation for solar customers and missed opportunities to promote a cleaner, more resilient energy system.