The photo voltaic power trade took a serious blow earlier this week when The Alabama Public Service Fee voted to not solely uphold a controversial price on photo voltaic house owners, but in addition authorised to lift this price by 8%.
The price, which critics name the ‘photo voltaic tax’, is billed month-to-month to energy firm Alabama Energy’s clients who set up photo voltaic panels to generate their very own electrical energy. With the photo voltaic tax now coming in at $5.41 per kilowatt (kW) of rooftop photo voltaic put in, it’s now virtually inconceivable to get an excellent return on a photo voltaic funding in Alabama.
Elevating the photo voltaic price not solely prevents the expansion of Alabama’s photo voltaic trade and reduces householders’ photo voltaic financial savings, it additionally units a precedent for different states to implement photo voltaic charges of their very own.
Alabama Energy not too long ago acquired permission to extend their Capability Reservation Cost, which decreases the financial profit of putting in photo voltaic. Picture supply: Power Engineering
What’s Alabama Energy’s photo voltaic tax?
Alabama Energy’s photo voltaic tax, which is formally known as the Capability Reservation Cost, is a month-to-month, per kW price that residential clients need to pay once they set up photo voltaic.
Alabama Energy justifies the price by stating that photo voltaic householders ought to need to pay for utilizing the grid as a ‘supplemental supply of energy’ when their photo voltaic panels don’t produce sufficient power. In any other case, the utility claims electrical energy charges must enhance for non-solar clients.
Beforehand, the cost was equal to $5.00 per kW of photo voltaic put in. This can be a hefty cost that has deterred many Alabama residents from making the change to photo voltaic. An environmental advocacy group, the Southern Environmental Legislation Heart (SELC), filed a criticism towards the $5.00 price, claiming it was unjust.
In response to the criticism, Alabama Energy submitted a request to lift their price for photo voltaic house owners who use the facility grid as backup energy by a whopping 8%. This request was finally authorised on September 1, 2020. Now, photo voltaic panel house owners need to pay $5.41 per kW.
How does Alabama Energy’s photo voltaic tax affect householders?
Beforehand, the Capability Reservation Cost was equal to $5.00 per kW of photo voltaic in your property. The cost for Alabama Energy clients who go photo voltaic will now be equal to $5.41 per kW. This doesn’t look like a lot, however when you think about the prices over the lifetime of the settlement, it’s a big monetary burden.
Let’s have a look at an instance. The average home in Alabama consumes about 1,236 kilowatt hours (kWh) per thirty days. In an effort to produce sufficient electrical energy to cowl this utilization, you would wish to put in a 9.2 kW photo voltaic array.
With a 9.2 kW rooftop photo voltaic system, you would need to pay $49.77 every month, on prime of your common electrical energy invoice. That’s virtually $600 additional a yr only for switching to photo voltaic!
Over the 25-year lifetime of the photo voltaic system, you’ll have paid $15,000 in Capability Reservation Costs. That’s sufficient to purchase a second photo voltaic panel system!
Alabama Energy’s cost hike isn’t any shock
Alabama has been notoriously sluggish for adopting solar energy, so this vote by the state’s Public Service Fee isn’t stunning. There isn’t a statewide web metering coverage in Alabama, no state or utility photo voltaic incentives, and Alabama Energy affords a less-than-ideal different to web metering.
The unanimous vote to up the photo voltaic tax may need to do with the Public Service Fee members having acquired giant contributions from the mining and utility industries.
Fee President Twinkle Andress Cavanaugh has acquired over $275,000 from mining teams and electrical utilities. Jeremey Odon, who has been on the Fee since 2012, has $174,200 in marketing campaign donations from the mining and utility industries. The third Fee member, Chip Beeker, isn’t any totally different. Beeker has $145,000 from mining and utilities beneath his belt.
That’s over half 1,000,000 {dollars} funneled into Alabama’s Public Service Fee from industries which might be straight threatened by the expansion of photo voltaic and different renewable power sources. So, it comes at no shock that the PSC would need to preserve their donors completely happy, even when it means killing the photo voltaic trade within the course of.
Alabama Energy isn’t the one utility attempting to kill photo voltaic
The case of Alabama Energy isn’t precisely an uncommon one. Utilities and officers are continuously attempting to derail the photo voltaic trade by altering power insurance policies like slashing web metering advantages, including additional expenses, and chopping again on incentives.
Earlier this yr, a darkish cash group tried to kill net metering across the country by filing a petition to the Federal Energy Regulatory Commission (FERC). Luckily, FERC rejected the filing. The Trump Administration has also continuously attempted to undermine the renewable energy industry by imposing tariffs on solar panels and refusing to renew the federal tax credit.
However, this war isn’t just being waged on the national level. States are seeing battles over solar constantly.
Within the last year, Louisiana slashed their net metering policy, Kentucky tried to dramatically decrease how much it compensates solar homeowners, and an Arizona utility attempted to raise their electricity prices for solar system owners, all within the title of stopping ‘value shifting’ to non-solar householders, the identical reasoning Alabama Energy used to extend their photo voltaic cost.
The issue with cost-shifting
Value shifting is an issue that may happen with photo voltaic installations. Mainly, cost-shifting refers to utilities having to lift their charges for non-solar clients to make up for the charges that photo voltaic clients aren’t paying beneath web metering.
Nonetheless, research have proven that vital cost-shifting doesn’t happen till about 10% of a state’s electrical energy comes from photo voltaic. Something beneath that 10% threshold can have little to no cost-shifting. And contemplating that solely 0.28% of Alabama’s power comes from solar, it’s extremely unlikely they’ll see cost-shifting impacts anytime quickly.
It appears extra probably that Alabama Energy’s anti-solar agenda has extra to do with their very own revenue margins and backside line than it does with looking for ratepayers. Particularly since they’re keen to extend their electrical charges for an almost $1.1 billion expansion of pure fuel energy crops.
What does the elevated photo voltaic tax imply for Alabama’s photo voltaic trade?
General, Alabama hasn’t created the best ambiance for photo voltaic to thrive prior to now. Permitting the state’s largest utility to grossly overcharge photo voltaic clients for selecting clear power will solely make it worse.
As Alabama resists adopting photo voltaic, they forestall job development, financial funding, and creating a greater future for the subsequent era of Alabamians.
Nonetheless, hope shouldn’t be misplaced. There have been precedents set in states like Kansas, the place it was dominated unlawful by the state’s Supreme Courtroom to cost photo voltaic clients greater than non-solar clients, and like Arizona, the place the US Division of Justice dominated expenses that discriminate towards photo voltaic householders is illegal.
These may assist environmental teams to battle the Alabama photo voltaic tax, and stop photo voltaic insurance policies like this from occurring elsewhere. If profitable, there’s large potential for there to be a thriving photo voltaic trade in Alabama.
Key takeaways
- The Alabama Public Service Fee authorised Alabama Energy’s request to extend their month-to-month price to photo voltaic clients from $5.00 per kilowatt to $5.42 per kilowatt.
- The cost, referred to as the ‘photo voltaic tax’ by its critics, will value photo voltaic panel house owners hundreds of {dollars} over the lifetime of their system.
- Alabama Energy’s photo voltaic tax displays a bigger, nationwide motion to attempt to sluggish the expansion of the photo voltaic trade.
- Related photo voltaic expenses have been dominated illegal in different states, which supplies hope for environmental advocacy teams as they attempt to battle the photo voltaic tax.
