I am big into solar energy. My company works with utilities across the country to develop large innovative solar projects. Personally and professionally, I am an environmentalist.
I also consider CPS Energy a leader in renewable energy and innovation and believe in the social compact between municipal utilities and citizens. So it may seem odd to hear this from a solar industry professional, but somebody has to say it: CPS Energy needs to stop subsidizing solar.
Two facts inform this perspective. First, we can achieve climate action goals without subsidies because solar equipment costs have declined dramatically. Second and more importantly, solar subsidies are deteriorating the financial stability of CPS Energy. Few realize it, but CPS Energy’s current solar subsidies will ultimately cost the utility over $1 billion. Still worse, its customers (particularly the less affluent) will bear the brunt. For all of our intentions toward equity, these solar subsidies are deeply regressive and inequitable. Something needs to change.
Specifically, CPS Energy needs to stop subsidizing customers who purchase solar panels. Since 2007, CPS Energy has paid more than $159 million in upfront cash rebates to homeowners and businesses to purchase solar panels. That’s an average of $6,100 paid by your public utility to approximately 26,000 private solar owners (representing only 3% of CPS Energy’s customer base). A residential solar installation typically ranges in price from $20,000 to over $30,000, so solar owners tend to be more affluent.
In addition to solar rebates, another CPS Energy policy known as Net Energy Metering (NEM) allows private solar owners to avoid paying for electricity and services they receive from the utility. Although they still rely on the grid for electricity, they now pay much less, if anything, to CPS Energy. In fact, these private solar customers are paying $40 million less annually to CPS Energy than before, resulting in a permanent $1 billion reduction in revenues (from 2007-2046). The City of San Antonio, which receives a substantial amount of its general fund from its ownership of CPS Energy, will similarly forgo over $140 million during this same period as a result.
To put a fine point on it, 97% of CPS Energy’s customers, including lower-income households and renters, have unknowingly paid a small number of (often wealthier) customers over $159 million so that those customers could enjoy a permanent and significant reduction in their CPS Energy bills, saving them (and costing you) $1 billion. If that doesn’t seem fair, you are not alone.
The financial, operating and socioeconomic problems created by NEM and rebates are not mysteries to utilities. Nine years ago, CPS Energy proposed changes to net metering. The following year the utility’s executives again tried unsuccessfully to recover some lost NEM revenues. There has been no discussion about altering NEM since then.
Regardless, NEM remains a big problem and topic of debate for utilities across the country, spurred by potential changes in California and Florida. Closer to home, Pedernales Electric Cooperative, the country’s largest electric co-op serving the Hill Country, recently eliminated its NEM subsidy, based on a Value of Solar Study. The universal conclusion has been that NEM and other solar subsidies create an inequitable cost shift onto those who cannot afford to own solar.
At its February 2022 meeting, the CPS Energy board of trustees received an analysis of its STEP program, including solar rebates. The report recommended that CPS Energy “reevaluate the solar program and whether it meets its program objectives,” noting that the costs far exceed the benefits. In short, the data is in, and it doesn’t look good.
CPS Energy’s own experiences in 2013-14 show that changes to solar programs are often fraught with politics and blowback. Nobody wants to be seen as against renewable energy. However, we shouldn’t let good but flawed intentions prevent sensible and equitable action.
In February 2021, through its FlexPower Bundle RFP, CPS Energy received over 650 proposals from more than 100 global and local companies seeking to provide 900 megawatts of solar, batteries and firming capacity. All types of solar resources have been proposed, including rooftop solar options. Given the steep decline in the cost of solar, CPS Energy will be able to purchase this power with no upfront costs or subsidies, and will likely make a small profit.
The purpose of the FlexPower Bundle is to replace coal and gas generators with renewables and “firming capacity,” which fills in the times of day when the sun doesn’t shine. It’s the right strategy because it is highly competitive and it incorporates global and local state-of-the-art costs and technology.
Incentives such as NEM and rebates originated more than 15 years ago to spur a nascent solar industry and to promote environmentalism. Solar in Texas has accelerated in recent years to now place the state at No. 2 in the country, despite the absence of statewide incentives and largely due to the decline in equipment costs.
Because solar is now so inexpensive and because the FlexPower Bundle RFP has been a highly competitive process, it should result in lower costs of electricity to all customers, without subsidies. While the current solar subsidies will ultimately cost CPS Energy and its paying customers well over $1 billion for only 214 megawatts of power, the FlexPower Bundle will generate over four times that amount but without subsidies and at competitive prices.
It’s time for CPS Energy to join other utilities and states by dumping solar rebates and NEM. Neither subsidy is necessary to meet our community’s climate and economic goals, and both violate the principles of fairness that we all hold dear.