Seen on reddit and other sources:
https://old.reddit.com/r/fresno/comments/1hxqlx7/the_more_i_try_to_save_energy_the_higher_the/
Its already 50c or more per kilowatt hour… https://www.pge.com/assets/pge/docs/account/rate-plans/residential-electric-rate-plan-pricing.pdf
On top of the “The Electric Home Rate Plan includes a $15-per-month Base Services Charge”… because people were starting to get 100% of their power from solar and it was “unfair”.
We took profit for decades from letting our infrastructure decay. Now we still want that same amount of profit, so you have to pay more for us to fix all the problems that should have been fixed with that profit money in the past.
I’m all for eating the rich, but I’m still going to point out why exactly this can make sense.
Let’s say you have an energy company that owns a solar farm, you’re not looking to turn a profit, just provide clean energy to the world: You produce electricity at effectively zero cost.
However, your solar farm needs to be paid down within its lifetime of ≈30 years, which is independent of energy consumption. So you decide to charge a rate that ensures 1/30th of your production costs are paid back each year, so that you can replace the solar farm after 30 years.
This effectively means you are charging a constant rate for access to energy supply, independent of consumption. This again means that the rate per kWh goes up if average consumption goes down.
Individual customers can still save money by reducing consumption relative to the other customers, but nobody saves money if everyone reduces consumption. This makes complete sense when your “marginal cost” (i.e. the cost of producing energy) is negligible compared to the initial investment of building the power plant, and also applies more or less to nuclear, hydropower, and wind power as well.
Given that this is not an ideal organisation though, I wouldn’t put it past them to increase the rate such that it more than offsets the decrease in consumption, thereby increasing their profit. In that case: Fuck them.
I just think we should be aware that our current understanding of energy prices as linked to day-to-day consumption (because the primary expense for a thermal power plant is the cost of fuel), will become outdated as we move to clean energy sources. At some point, we should be paying a near-flat rate for “access to power”, rather than a rate for each unit of power consumed.
That example breaks down with electricity sources with a fuel cost. But it makes more sense as the grid moves to more energy sources without fuel.
But also, if energy supply is higher than demand on a large grid, they can decrease investments into new solar plants so they fall below the replacement rate from facilities aging out. In your example there’s only one solar farm, but in reality there’s many being built on a grid at any time.
I’d say their example is just an oversimplification to keep it understandable. Ultimately fuel based energy has a lot of the same concerns. That natural gas facility costs money to keep viable even if, hypothetically, zero fuel were being burned in some given week. The power lines need repairs, maintenance, upgrades, and expansion over the potential capacity, not actual usage. You have fixed costs alongside the marginal costs. The marginal costs certainly make sense to map directly to usage based rate, but fixed costs are significantly covered by those usage rates as well rather than bumping up the “basic charge” sort of line item on a power bill.
Seems like in such a case, it should be a different mix of base fixed monthly bill versus usage based rates, to more accurately reflect the cost structure in play.
For example, in my area it’s about $15 a month even if you use absolutely no electricity, that’s just the base charge ostensibly for the infrastructure required to deliver power, should you want it. It might make sense for this number to be increased rather than raising $/kwh rates.
Suppose the counter would be that at least with the rate increase, folks in more dire circumstances can cut back to avoid the increasing costs (which might be a bit of a feedback loop…)
But the size of the array, and therefore the cost of the array, are intimately tied to the production of said array. So there can’t be flat rate unless consumption never surpasses production, which is of course will when you have zero marginal cost.
This is definitely a simplification, which is why I pointed out the possibility of distributing costs among the consumers based on how much of the total consumption each consumer is responsible for.
I think the major point still stands though: In order to take advantage of production at scale, you need to build some minimal size production facility. For stuff like hydropower, that minimum can be quite high, depending on available geography.
If marginal cost is zero, it makes most sense to charge some form of flat rate to have access to power, rather than a consumption-based price, because it’s not necessarily feasible to downscale the facility, even if there’s low demand (in that sense, hydro or nuclear would be better examples than solar).
The details of how this more or less flat rate should be distributed among consumers is a discussion in itself (should those living further away pay more since they require more power lines? etc.)
Marginal cost is never zero though. That would imply truly free unlimited energy. There is a cost to build solar, wind, storage, etc. that needs to be amortized. We also want to incentivize folks to not waste energy, so a reasonably strong link between usage and price is helpful.
It’s going to be interesting to see how this all plays out for gas infrastructure as folks electrify and cut their gas service. Once the spiral starts, fixed costs will grow for the remaining customers and push more people to cancel their service.
It’s so absurd to me that the Energy Star stickers on appliances at the store say “Estimated based on $.13 per kW/h” and we have to pay around 5x that much.
Yep. And they are talking about more increases this year.
That’s not really what it’s saying.
It’s saying if they sell less power then the cost per unit of power goes up. This is how all businesses work due to economies of scale. If you sell a lot of stuff then you can sell the stuff for less money and still make more money.
If you personally use less power then that won’t increase your price per unit enough to offset the savings you made by using less power.
It’s not how all businesses work. Many businesses lower prices when there is a surplus. Consider filling up at the gas station for example.
It’s ridiculous that energy prices would go up when they are spending less on natural gas, coal, or whatever they are using to create the power.
Honestly crap like this is just going to encourage those that can afford it to install solar panels and backup batteries to load up on cheap electricity. Then the power company is really going to throw a hissy.
I thought energy in the U.S. was laughably cheap, but those prices are surprisingly expensive compared to my feel-good-all-hydro-and-wind plan at 0,35€/kWh
My UK rates are about £0.26/kWh for the day rate, £0.07/kWh for the night rate which is when things like car charging is done. Excess solar generation makes me £0.15/kWh I send back to the grid although not much of that going on in the winter ;-)
We also pay a daily standing charge for the grid connection.
That’s California though, where everything is expensive. In the east coast I paid around $0.20 this summer which includes peak hours. Although it has steadily gone up in the last few years. It used to be $0.12-$0.14.
Both California and Texas have struggles with energy costs. California with their constantly high rates, and Texas with their spot pricing occasionally royally screwing people.
My utility company spams me with warnings to reduce consumption to save them money in surge events while also shaming people for being in the top 40th percentile of consumption because they’ve got all these empty houses not using power to compare to.
At what point is it cheaper to disconnect from the grid and just use solar with a back up generator? 50 cents+ per kWh is insane.
You cant legally disconnect a residential residence in CA from the grid unless you get some HEAVY permits. Thats one of the reasons PGE introduced the minimum fee, people with solar. Some people were making a profit pushing electricity into the grid so they make it 0.03c per kwh credit instead of wholesale.
Half the houses over here have solar now when you drive down the street. Im thinking of getting it too.
Interesting, that they’ll buy back energy at a fraction of the cost they’re charging for energy
Its hitting a lot of people that were relying on the sale of their solar in order to offset their loans for the systems.
Gee it seems like they could come up with a simple algorithm to protect low income people who are conserving.
Aaaand why aren’t costs going down as usage goes down?
Plenty of costs don’t depend on how much usage there is. If a tree falls and takes out a power line it cosrs the same whether that line was being used at 1% capacity or 100%
True, true. Other costs should track with usage though, like fuel. If they had said “when usage falls, costs don’t fall AS MUCH due to fixed costs” then I would totally get it. The way they phrased it makes it sound like costs going down just isn’t a thing that happens. Maybe that’s me.
