8 Facts That Explain SDG&E’s Complicated Relationship With Rooftop Solar

Despite San Diego’s reputation as a solar mecca, San Diego Gas & Electric and the rooftop solar industry are consistently at odds.

In some ways, the game is rigged for these two to be foes: Rooftop solar has grown rapidly with the help of incentives and mandates, forcing SDG&E to integrate it. State requirements have ensured disagreements between the two play out publicly at the statehouse and at the Public Utilities Commission.

SDG&E has long argued, for example, that solar customers aren’t paying their fair share for use of the power grid, an argument being pushed by utilities across the nation. The solar industry and its supporters say SDG&E’s missing the big picture and discounting the value of rooftop solar, which allows everyday San Diegans to help the region reduce its greenhouse gas emissions.

That’s far from the only dispute, though.

Here’s a breakdown of the realities contributing to SDG&E’s strained relationship with the solar industry.

More rooftop solar means more unique pressures for the grid.

Power from rooftop solar panels isn’t as predictable as power from traditional sources. It’s intermittent. Sometimes there’s not much of it. Sometimes there’s even too much of it.

Too much power can cause voltage swings that can damage home appliances, speed wear and tear on circuits and in the worst case, even lead to power shutoffs. SDG&E hasn’t reported major solar-powered challenges like those in Hawaii, where the state’s biggest utility temporarily halted installations. But SDG&E says it is seeing some problems, particularly in far-flung areas with lots of solar.

SDG&E and other California utilities – and thus, ratepayers – in the state have sunk hundreds of millions of dollars into upgrades that help prevent those damaging fluctuations.

Dave Geier, SDG&E’s vice president of electric transmission and system engineering, said the utility’s updated nearly all its circuits. The work’s continuing.

“It’s gonna help us accommodate more solar,” Geier said.

The utility’s now in the process of analyzing each of its circuits to assess whether additional upgrades are needed and how much more solar power could be added before issues crop up.

SDG&E’s also gotten better at forecasting the region’s daily energy needs and rooftop solar production.

SDG&E helped successfully push for a new state requirement that all new solar systems be outfitted with so-called smart inverters, which help smooth voltage issues.

Investments meant to allow for more rooftop solar won’t slow anytime soon. The state has mandated grid updates and more focus on distributed energy resources like rooftop solar.

SDG&E likes what it can control, and it can’t control some crucial components of rooftop solar.

Traditional power plants are predictable. SDG&E gets a say in how much power they produce, when they produce it and where they are.

Not so much with rooftop solar. Solar customers, not SDG&E, decide to install rooftop solar and then how much power their systems should produce.  As of the end of July, SDG&E had the equivalent of more than 60,000 independent power plants at homes and businesses across the region.

Large clusters of solar customers in certain areas can create those voltage issues. Plus, SDG&E can’t direct those systems to produce power when it’d be most helpful to the utility and the grid.

Solar power peaks during the day, offsetting power SDG&E would’ve had to purchase to serve homes and businesses. But without battery storage, the grid has to absorb excess energy rooftop solar customers produce. It can’t save it for later.

SDG&E says that additional power can be helpful, particularly if it’s produced in denser commercial areas like downtown, where there are many businesses whose energy needs often peak around 1 or 2 p.m.

But Jim Avery, SDG&E’s chief development officer, said residential customers consistently demand the most electricity around 8 p.m., when solar arrays aren’t producing power. Nearly all solar customers rely on the grid after dark, meaning they contribute to demand rather than offset it.

Absent battery storage, Avery maintains rooftop solar isn’t helping SDG&E address its highest-need period for residential customers.

SDG&E’s in the process of rolling out its vision for a power grid with far more renewable resources. It’s suggested incentives for customer-owned storage tied to the grid and discussions with the solar and storage industry about solutions in areas with lots of rooftop solar, and parts of the region where rooftop solar hasn’t taken off as much.

SDG&E spokeswoman Amber Albrecht said the utility’s also pushing for future solar deal structures that give customers a greater incentive to install solar panels in a west-facing direction, which would allow for greater power production later in the day when it’s more valuable.

SDG&E also believes rates based on the time of day, which are set to be phased in by 2019, will help encourage solar customers to produce more power when there’s more demand for it.

Rooftop solar customers are getting a great deal – one SDG&E argues comes at the expense of its other customers.

Most San Diegans who go solar aren’t just excited to help fight climate change. They’re also thrilled to slash their SDG&E bills.

The current arrangement under which they’re billed, called net energy metering, gives solar customers retail credit for the power their panels produce, meaning they can offset their energy bills at a rate of up to 42 cents a kilowatt hour.

The solar industry’s found this deal crucial to its success.

But a state-mandated overhaul backed by SDG&E and other utilities will almost certainly require solar customers to pay more.

Now the heated debate is over the value of the power that solar customers produce and how much they should be credited for it. The state Public Utilities Commission is set to decide on the arrangement for future solar customers by early next year.

SDG&E and the solar industry diverge dramatically on what the arrangement should look like.

SDG&E says it now must shift about $100 million annually in costs tied to solar customers to non-solar ones. The subsidy will only increase under the current deal, utility executives say.

But a 2013 study by Berkeley-based researcher Tom Beach, which was bankrolled by a lobbying group Vote Solar, found non-solar customers will see an annual $20.6 million benefit once SDG&E reaches the net metering cap, which it’s expected to hit within the next year. Beach’s study found business customers with solar provided a far greater benefit to the utility than residential ones.

SDG&E mostly makes money building things, not selling power.

Energy wonks and enviros often talk about the possibility of a utility death spiral, where more customers go solar and leave SDG&E with reduced profits and increased costs. But SDG&E wouldn’t necessarily stumble based on reduced power sales alone.

California officials long ago decoupled investor-owned utilities’ profits from the power they sell. Instead, they’re guaranteed a certain rate of return – usually around 10 percent – from infrastructure projects such as transmission lines and energy efficiency investments.

That means the utility makes money from big projects like the Sunrise Powerlink, which transports renewable power from Imperial County to San Diego, not retail sales.

So if there’s a smaller pool of customers the folks left behind will have to pay more, which, in turn, could motivate more of them to go solar.

But SDG&E could face an indirect hit over the long haul absent regulatory changes.

Its ability to make investments is mostly driven by the peak demand it needs to serve. If its peak demand grows, ostensibly it’d need to make more infrastructure investments. Rooftop solar, on the other hand, requires substantially less infrastructure investment than traditional utility lines and power plants and can help reduce SDG&E’s peak demand.

For now, SDG&E maintains substantial infrastructure upgrades will be needed to allow for more renewables.

Rooftop solar doesn’t directly help SDG&E meet a key state mandate meant to encourage renewable investments.

California’s most talked-about energy mandate requires the state to get 33 percent of its energy from renewable sources by 2020.

But that equation essentially doesn’t include rooftop solar – and that gives SDG&E and other utilities less incentive to support it.

SDG&E says it’s reached the target by relying on large-scale solar installations, most of them far outside San Diego.

Earlier this year, however, Gov. Jerry Brown declared he’d like to see the state hit a 50 percent renewable target by 2030 and some unlikely allies emerged. Utility giants Pacific Gas & Electric and SoCal Edison, plus at least two solar industry groups, are now lobbying for rooftop solar to be part of the future mix.

The solar industry thinks it’s under siege.

The rooftop solar industry’s benefited from both state and federal incentives that helped both reduce the cost of going solar and bolstered the industry.

Now rooftop solar is at a crossroads, and industry leaders say state utilities like SDG&E potentially stand in the way of their continued success.

But SDG&E and other utilities have been the loudest voices calling for coming changes to net energy metering and current utility rate structures, both of which made rooftop solar such a boon.

“You put all of those things together at the same time, it completely changes things,” said Brad Heavner, policy director for the California Solar Energy Industries Association.

Daniel Sullivan, president of Sullivan Solar Power, said SDG&E’s consistently given less credence to the value of rooftop solar than other utilities in the state.

“The truth of the matter is that at every opportunity I’ve seen in my 11 years in this industry, SDG&E works to undermine rooftop solar’s growth,” said Sullivan, whose company is one of the largest solar firms in the region.

SDG&E’s proposing new gas plants solar advocates argue it doesn’t need.

SDG&E claims more renewable power sources like rooftop solar necessitate more natural gas power.

The utility says that’s thanks to the shuttering of the San Onofre Nuclear Generating Station and the necessity for a power source that can quickly ramp up to address evening demand.

It’s successfully pushed for a new Otay Mesa gas plant and power-purchase agreement with NRG Energy for a new natural gas facility in Carlsbad – a deal that requires SDG&E and its ratepayers to pay for the power the facility produces. Plans for new natural gas lines infrastructure are also in the works.

“Since renewable resources do not produce energy at the time it is needed most, we still need traditional sources of power like natural gas to bridge the gap to ensure the lights stay on when the sun isn’t shining and the wind isn’t blowing,” said Albrecht, the SDG&E spokeswoman.

Solar advocates are skeptical. They believe solar and developing storage technologies should get a closer look and they’re suspicious of both SDG&E’s affiliation with its parent company, natural gas giant Sempra Energy, and its ability to secure profits from the natural gas investments.

Bill Powers, a San Diego-based electrical engineer and solar advocate, argues power from small and large-scale rooftop solar arrays within SDG&E territory reduce the need for those investments.

SDG&E’s actually good at connecting rooftop solar customers.

There’s a clear irony in SDG&E’s relationship with rooftop solar.

It’s pushed to charge rooftop solar customers more and gripes about the costs to serve them. Yet it’s nationally recognized for its work integrating rooftop solar into its grid.

As a result, Sullivan and other insiders who are quick to dub SDG&E Public Enemy No. 1 acknowledge it’s also made life easier for them.

For one, SDG&E connects rooftop solar systems to the grid faster on average than PG&E or SoCal Edison. It’s also got a fast-track program that allows solar customers to get connected to the grid the same day their city or county signs off on permits.

SDG&E’s online interconnection system, which relies on solar companies to enter data, has worked so well it’s been copied by other utilities, said Michael Powers, co-founder of Stellar Solar, a local solar installer.

The utility’s also preparing to offer a renewable meter adapter system that would eliminate the need for some customers to make substantial home upgrades before they go solar.

Massoud Amin, a University of Minnesota electrical and computer engineering professor who’s been dubbed the “father of the smart grid,” said SDG&E’s approach has been impressive.

Amin reviewed SDG&E’s latest report on smart grid infrastructure report and other documents at Voice of San Diego’s request.

His takeaway: “San Diego Gas & Electric is the pioneer having dealt with this now, regardless of the politics,” Amin said. “They have done one of the best jobs at assessing the impacts and the options of what to do.”

This is part of our quest on whether solar will pay off for San Diego. Check out our previous post, For Solar-Powered Schools, SDG&E Is a Dark Cloud Always Looming, here.