Changes to California's Utility Rates are Disrupting the Economics of Commercial and Industrial Solar

Large Solar Panel Installation
California Energy Use Chart

The duck curve creates several challenges for utilities. The first is accommodating the late-afternoon spike in demand. This often requires a reliance on natural gas peaker plants, which can generate power quickly but are expensive to operate on a regular basis. Compounding the cost problem is that much of this early evening spike in demand falls outside of the traditional on-peak hours when utilities could expect to make up the high cost of delivering power.

In addition to the high costs, the reduction in midday demand has depressed a traditional source of revenue for natural gas generators, while high levels of solar production have decreased electricity prices, sometimes leading to negative prices.

In response, California’s utilities have begun adjusting their TOU rate schedules to account for the duck curve.

San Diego Gas & Electric (SDG&E) shifted on-peak hours for its summer season to 4 pm-9 pm, from its previous schedule of 11 am-6 pm. Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) are expected to implement the same schedule for on-peak hours in 2019.

California Energy Use Timing

Under these new schedules, the utilities apply on-peak rates when demand for natural gas spikes in the late afternoon to early evening hours, helping them adapt to the economic realities of the duck curve. For the state’s large energy consumers, meanwhile, the shift disrupts the economics of behind-the-meter solar PV and energy storage.

California Energy Use Charts

For additional insight into how these changes affect the business case for standalone solar PV and combined solar-plus-storage systems, download the whitepaper from Microgrid Knowledge.

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