Russell Wangersky: Power to the people — but at what cost?


Published on March 20, 2017

Solar panels

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A lot can happen in 40 years. I vaguely remember the world of 40 years ago, a world without plasma screen colour televisions and an endless supply of channels, a world where telephone were always connected to wires and personal computers didn’t exist.

Russell Wangersky
File photo

Well, 40 years from now, or somewhere in that range, we’ll be done paying for Muskrat Falls — unless, as has happened already, the world has changed and changed again.

I’ve got a little bad news.

The world is changing right now.

Last Wednesday, the U.S. General Accounting Office — a branch of government that audits a broad range of issues connected to governance — issued report GAO-17-142. Now, the GAO loves long titles for its reports, in this case, the 15-word mouthful “Electricity: Status of Residential Deployment of Solar and Other Technologies and Potential Benefits and Challenges.”

Here’s a little of what the report has to say: “For more than 100 years, electricity suppliers — including electric utilities — have provided residential customers with reliable access to electricity by planning, building and operating power plants and transmission and distribution lines. Under this traditional model, the electricity grid operates by moving electricity in one direction, with electricity suppliers delivering electricity generated at large, centralized power plants to customers’ homes and businesses.”

But: “The traditional model for generating and selling electricity is changing. In recent years, new technologies have become increasingly available to residential customers that allow them to generate, store and better manage their consumption of electricity.”

So far, nothing all that new; nationwide in the U.S., only some 0.7 per cent of households have solar systems, though some states have much more — Hawaii, 14 per cent, California, four per cent, and Arizona with 3 per cent. (Interesting, though, is the overall seven-fold per cent growth in the number of homes installing solar arrays over the last five years, a system with a generation capacity of more than 5,000 megawatts.)

Even with low usage, solar power adaption by residential customers is enough that some utilities are having to redesign their grids to accommodate the power. And that’s the thin edge of the wedge.

“Under the traditional business model, electricity suppliers earn revenue when they sell electricity to customers. Customers who install solar systems use less electricity from the grid, and this decline in usage can reduce electricity supplier revenues, according to several reports we reviewed,” the GAO writes.

“However, several electricity suppliers we interviewed told us that many of their costs — such as costs associated with investments they previously made to build and maintain power plants and transmission and distribution lines — are fixed in the short term and will not decline even if solar customers use less electricity from the grid. To the extent that reduced electricity supplier revenues exceed any cost savings from customers’ use of solar systems, suppliers may collect insufficient revenues to cover the costs of operating and maintaining the grid, and they may earn a lower financial return.”

The problem? If costs stay, they get pushed onto those least able to pay.

“According to several reports we reviewed from multiple sources, the greater use of residential storage and electricity management technologies — particularly storage systems — in combination with significantly expanded deployment of solar systems, could lead to a cycle of reduced electricity consumption, declining supplier revenues, and increasing electricity prices, potentially creating long-term financial challenges for electricity suppliers,” the report says.

That causes a new cascade: richer customers who can afford new systems install them, reducing their consumption and pouring power into the grid, at the same time shifting more and more of the fixed costs of the existing infrastructure onto the backs of poorer customers.

And that’s is only what’s happening right now. We’ve got 40 more years of bills to pay to cover the Muskrat.

And 40 more years of change to come. Buckle up.

Russell Wangersky is TC Media’s Atlantic regional columnist. He can be reached at russell.wangersky@tc.tc — Twitter: @Wangersky.