Solar company plans to build off-grid area in California

For more than a century, governments have given power companies monopoly rights to sell electricity to homes and businesses, as long as they agree to serve everyone and comply with regulations.

But that simple arrangement became more complicated as homeowners started installing solar panels and batteries. This has led to a fierce battle between utility companies and the relatively young solar operators selling and installing rooftop systems for home and business use.

On Thursday, Sunnova Energy, one of the largest U.S. rooftop solar companies, told the California Public Utilities Commission that it plans to build new homes as private “micro-utilities” in direct competition with investor-owned utilities. Requested permission to provide power to homes in development. An illegal business model in most of the United States.

The company said it would provide these residents with electricity that is up to 20% cheaper than rates charged by investor-owned utilities such as Pacific Gas and Electric and Southern California Edison. If so, micro-utility models, also known as microgrids, could undermine the growth of these large-scale utilities by depriving them of access to new housing or lowering rates to keep businesses going. there is.

Sannova management claims the approach they are seeking approval for was approved under a California law passed for resorts just south of Lake Tahoe nearly 20 years ago. increase. Additionally, advances in solar and battery technology will allow neighborhoods to be designed to generate enough power to meet local needs at a lower cost than relying on the grid, the company said.

If they don’t want to choose me, that should be their right. If they don’t want to pick you, that should be their right, too,” said Sunnova CEO John Berger.

As the cost of solar panels and batteries has dropped, a small number of homeowners have moved off the grid. However, it may be difficult or impossible to do so. Some local governments are denying off-grid housing permits for health and safety reasons, arguing that grid connection is essential.

But connecting a single home to the grid can cost tens of thousands, or even hundreds of thousands of dollars. So off-grid systems can actually be cheaper. Significant upgrades will be required to serve more homes.

The off-grid setup is also appealing. Once a system is reclaimed, its operating and maintenance costs are often modest and predictable, while utility charges can rise sharply. Electricity bills are skyrocketing because prices have skyrocketed. According to the Energy Information Administration, the national average retail electricity price rose 11% in June from a year earlier.

But even the kind of micro-utilities Sunnova is trying to create have their problems. The utopian vision of generating electricity where it is used often faces maintenance and other issues. Many small utilities created under such a model in the United States and Canada were later swallowed up by the larger utilities.

In California, the Kirkwood Mountain Resort near Lake Tahoe used micro-utilities to power residents and visitors for years. But the power it produces can cost him up to 70 cents per kilowatt-hour, or three to five times more than what the larger utilities in the state charge. Eventually, the town of Kirkwood took over the utility and connected it to the state’s electrical grid.

Sunnova’s microgrid approach could suffer a similar fate. But the cost of solar panels and batteries has fallen over the past decade, making the energy produced by the off-grid system much more affordable than when Kirkwood’s diesel-based system was built.

Sunnova is asking the state’s public utility commission to allow it to become a small utility under the same state law that allowed it in Kirkwood. Berger said his company will work with developers to install solar panels and batteries as part of home construction in developments of less than 2,000 units.

The company is readying support from at least one major homebuilder, Lennar, which said it would consider using Sunnova’s microgrid if regulators approve it.

Stuart Miller, Executive Chairman of Lennar, said: “We appreciate the current grid and are interested in new microgrid solutions that complement and support traditional grids and help solve reliability issues during extreme weather and peak demand. ”

Solar panels and batteries will be installed in each home and common areas such as the clubhouse. Sunnova executives say all these devices will be combined. The company expects such a microgrid to experience 30 minutes or less of power outage per year, compared to an average of two hours per year for utilities owned by large investors in California.

Consumers receive a single, simplified electricity bill that shows how much power the system has generated, how much power they have used, and their net benefit or cost on their property.

New homes and developments offer the most realistic opportunity to create a microgrid, as existing housing is usually already supplied by investor-owned municipal or cooperative utilities.

Sunnova said its systems will never be fully isolated. We plan to connect them to a larger statewide grid so that surplus electricity can be sent to other utilities or energy can be drawn in an emergency. But that system will not be owned or operated by his three major power companies in the state: Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric.

Based on the state’s average electricity bill in June, consumers’ electricity bills will be cut by as much as $60 a month for a typical California home, Sannova said. Berger said the recent rise in interest rates is a testament to Sannova’s approach.

“People aren’t just being charged bigger and bigger electricity bills every quarter,” he said. “That politics will demand change.”

Still, energy experts said the odds are stacked against Sunnova.

The utility industry and its regulators, including California’s Public Utility Commission, have a strong interest in maintaining the status quo. These companies are typically much larger and more politically influential than rooftop solar installers such as Sunnova and Sunrun, the country’s largest rooftop solar business.

Bernard McNamee is a former member of the Federal Energy Regulatory Commission, which regulates power lines, gas pipelines, and other parts of the energy industry. He said the traditional regulated utility monopoly model may seem outdated, but it has made it possible for everyone, regardless of income, to have access to a generally reliable power grid.

McNamee, partner at law firm McGuireWoods, said: “People swing things like competition and markets. They’re all complex.”

However, McNamee acknowledged that regulators need to understand how to treat common new technologies such as residential solar and battery systems.Time.

“Regulators are struggling with how to integrate these new technologies,” said McNamee. “This is something we need to work on as a country, as a state.”

Utilities have put pressure on regulators to reduce the compensation homeowners receive for excess solar energy that is channeled from rooftop systems to the grid. The companies argue that customers using solar panels are being offered generous credits for electricity because they don’t contribute enough to the cost of maintaining power lines and other grid equipment. increase.

California’s Public Utilities Commission will soon release a proposal for rooftop solar compensation after scrapping previous proposals that many rooftop companies and homeowners criticized for being too friendly to utilities.

Rooftop solar businesses, which have grown rapidly in recent years, face unique challenges, especially in finding ways to be consistently profitable. Many of them rely on tax credits provided by the federal government to encourage the use of renewable energy. The Inflation Reduction Act recently signed into law by President Biden expanded and extended those credits.

Building and operating a microgrid has the potential to provide a steady stream of income for companies like Sunnova. It could essentially turn rooftop solar companies into the kind of utility they’ve been fighting for so long.

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