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The Net Loss of Net Metering

Because of the way the electric grid works, net metering is wrong

By Kermit Frosch  |  April 15, 2016

For every complex problem there is an answer that is clear, simple, and wrong.

H. L. Mencken

Let's assume for purposes of discussion that rooftop solar power generation is such a Good Thing that it should be encouraged with subsidies.  Solar subsidies can be overdone as the Germans found when businesses started opening factories and creating jobs in other countries because they couldn't afford German electricity prices.  It's important to get subsidy programs right.

Rooftop solar systems receive two subsidies in the United States.  The federal government offers tax credits when solar systems are installed, and many states force electric companies to buy surplus electricity from homeowners and other solar sources at full retail price.  This is called "net metering."

If a homeowner pays, say, 10 cents per kilowatt-hour, and his solar cells push a kilowatt-hour of power back through the meter into the grid, why shouldn't the power company pay what they'd charge the homeowner for it?

This is clear and simple.  Because of the way the electric grid works, however, net metering is wrong.

Electric Grid Made Simple

A few formulas will show why net metering is wrong.  The formula for electric power is P = V · I where P is the electric power in watts (W), V is the voltage in volts (V), and I is the current in amps (A).

Your laptop power brick, rated 5 volts at 5 amps, supplies 25 watts, 5 volts times 5 amps.  Your electric meter tells the electric company how many watts you've used and for how long.  If you run a one kilowatt load for one hour, you've used one kilowatt-hour of power and pay accordingly.

The electric company worries a lot about power because that's what you pay for, but they worry nearly as much about power loss in their wires.  They can't bill for lost electricity, which is distasteful.  Power loss through a transmission cable is (I2R) where I is current in amps and R is electrical resistance in ohms.  Loss is the current squared times the resistance of the wire.

If you cut resistance in half by using a better conductor, you cut power loss in half.  Most electric wires are made of copper because copper offers the least resistance of any wire power companies can afford.  Gold and silver wires have less resistance, but they're a bit pricey when bought by the mile.

Electric companies work hard to find just the right alloy to minimize resistance while being strong enough not to break, but the real payback comes from cutting current.  Power loss is proportional to the square of current.  If you cut current in half, you reduce loss by 75%.

That's why power companies transmit power at much higher voltages than you find in your house.  Suppose your subdivision needs a certain amount of power P.  The formula is P = V · I.  If you need 100 watts of power and you transmit it at 10 volts, you'll need to send 10 amps; 10 volts times 10 amps is 100 watts.  That will lose power at 100 (10 squared) times the resistance of your wire.

If you transmit at 100 volts, you'll need only one amp to transmit 100 watts; 100 volts times 1 amp is 100 watts.  Loss will be 1 (1 amp squared) times the resistance.  Raising the voltage cut your losses by a factor of 100, and you can use a thinner wire because there's less current flowing.  All you need is better insulation to protect people against the higher voltage.

Long distance transmission lines run at millions of volts.  Once power gets near a neighborhood, it's stepped down to 20,000 volts.  The company puts transformers on poles to step 20,000 volts down to the 110 volts your house needs.  One transformer serves 3-5 houses depending on their load.

Net Metering's Achilles Heel

Suppose your solar panels feed one kilowatt-hour back through your meter and the other houses which are fed by your transformer have no solar power.  Your power flows through the wires to their houses, but there are losses along the way so the power company loses money on the deal.  Although they can charge your neighbor retail prices for the delivered part of kilowatt-hour they bought from you, they have to make up the losses in the power line to sell an entire kilowatt-hour to your neighbor.

It's worse if your neighbors also have solar cells.  Suppose you and they together have a 10 kilowatt-hour surplus.  The power company can't sell it to other users on your transformer, so the power has to go backward through their transformer onto the 20,000 volt line.

Utility pole transformers have been lovingly redesigned over the last century or so to step 20,000 volts down to 110 as efficiently as possible.  The Energy Information Administration estimates that about 5% of all American electric power is lost in transmission, so pole transformers are pretty efficient when stepping down.

When stepping up, however, they aren't nearly as efficient because they weren't designed to do that.  The power company takes a much worse hit due to power loss when you and your green neighbors run their transformer backward to step up your 110 volt power for the 20,000 volt line.

What's worse, power loss translates into heat.  The power losses the company suffers when you run their transformers backward make the transformers hotter than expected.

When does this happen the most?  At the height of summer, when your solar system is cranking and the transformers are being warmed by sun shining on them.  Like any electrical appliance, if it fries, it dies.

Power companies are correct in saying that net metering requires that people who are rich enough to afford solar cells get a free ride at the expense of everybody else.  Utilities are happy to buy the power, but argue that they should pay no more than the wholesale price they pay other generating companies.

Battle of the Billionaires

Solar City was started by Elon Musk to install rooftop solar energy systems.  It's grown to about $350 million in annual revenue.  Between the federal tax credit and selling surplus power at retail prices based on net metering, Solar City can install systems without charging homeowners anything.  Solar gets the tax credits and customers buy less electricity.

This was working so well that the Nevada power company, which is owned by Warren Buffett, fought back.  After much lobbying, the power company won price changes that made it uneconomical to install new solar systems and made existing installations liable for as much as $11,000 in additional payments over the next two decades.  Solar City stock took a big hit.

Greens and Elon Musk are outraged, the power company is happy, and the bulk of customers who haven't gone solar and didn't understand what was going to happen to their electric rates as more rooftop solar went in don't much care.  Both Warren Buffet and Elon Musk have much wampum; the lawyers are licking their chops in anticipation of long-running lawsuits.

Rides for the Rich

Like net metering, all green subsidies are designed to transfer wealth from low-income taxpayers to high income political donors.  Consider Mr. Musk's Tesla, an all-electric automobile that sells for north of $100,000.  Rich people who drive Teslas bask in feeling good about saving the planet while collecting tax rebates, discount parking, HOV use, and free battery charging, but the British have shown that this is an illusion.  Although the car itself doesn't pollute, the electricity comes from somewhere, and most electrical generators pollute.

In China, because their coal power plants are so dirty, electric cars make local air much worse: in Shanghai, pollution from more electric-powered cars would be nearly three-times as deadly as more petrol-powered ones.

It gets worse when you take manufacturing into account.

Over a 150,000 km lifetime, the top-line Tesla S [in Britain] will emit about 13 tonnes of CO2. But the production of its batteries alone will emit 14 tonnes, along with seven more from the rest of its production and eventual decommissioning.

Compare this with the diesel-powered, but similarly performing, Audi A7 Sportback, which uses about seven litres per 100km, so about 10,500 litres over its lifetime. This makes 26 tonnes of CO2. The Audi will also emit slightly more than 7 tons in production and end-of-life. In total, the Tesla will emit 34 tonnes and the Audi 35. So over a decade, the Tesla will save the world 1.2 tonnes of CO2.

Reducing 1.2 tonnes of CO2 on the EU emissions trading system costs £5; but instead, the UK Government subsidises each car with £4,500.

Sure enough: green regulations are nothing more than schemes for transferring money from middle-class taxpayers to rich greens who want to feel good about themselves regardless of the facts.  Mr. Musk isn't saving the planet with either Tesla or Solar City, he's exploiting an artificial market which was created solely by government fiat.  His business is just another boondoggle, it's not a moral imperative.

At least his exploits haven't cost citizens anything besides money.  We're fortunate that we haven't been forced to install complex home heating systems which leave people freezing in the dark as happened in England.