RAPID CITY, S.D. (AP) — It was the 1973 oil crisis that sparked Steve Hammond’s obsession with solar power. Pump prices were skyrocketing and people across America were panicking. To a young Hammond, a Navy man who grew up in Pierre, the nation’s solution seemed obvious: Stop burning fossil fuels and generate energy from the sun.
But while it made sense in theory - what is more reliable than the sun? - at a cost of hundreds of thousands of dollars, a household solar system was impractical for Hammond and other solar dreamers in the 1970s.
Now, 40-plus years later, that’s no longer the case. Government tax credits and a rapid reduction in the cost of solar panels have led to a sun-fueled revolution. Between 2010 and 2013, the nation’s photovoltaic capacity increased threefold, the Rapid City Journal (https://bit.ly/1po3Zzz ) reported.
It was only last July, after decades of pining, that Hammond and his wife became the first people in Rapid City to erect their own residential solar system - four silver pedestals that gleam proudly in the backyard of their home on Skyline Drive.
“It was freedom,” Hammond said recently. “It was wonderful to know that I can produce electricity from the sun, and it doesn’t pollute anything. It just makes you feel so good about doing your part for cleaning up the planet.”
But there is a dark side, the Hammonds assert. Their power company, Black Hills Power, in April proposed a rate increase that the Hammonds say will make their already financially questionable investment even less attractive.
Black Hills Power representatives dispute the Hammonds’ assertions.
But even before Black Hills Power proposed the rate increase, the Hammonds were unhappy with their power company’s tactics.
___
Despite the rapid growth of residential solar generation across the country, the Hammonds are still outliers in South Dakota. Only 13 other customers with Black Hills Power, the largest power company in western South Dakota, generate their own solar or wind power.
The reason for that, the Hammonds say, is obvious: Thanks to years of consistent lobbying by utility companies that fear the growth of homegrown generation, the South Dakota Legislature has avoided creating the solar-power incentives other states have.
South Dakota is one of only seven states that don’t require “net metering,” a policy that renewable energy advocates consider crucial for encouraging household energy generation.
At present, the Hammonds and other solar users in Rapid City are connected to the Black Hills Power grid. During the night, they draw power from the company while their solar system isn’t generating electricity. During the day, the Hammonds power their home on solar power and sell any excess energy from their panels back to Black Hills Power, which can then sell it other customers.
The rate that Black Hills Power purchases excess energy from the Hammonds is largely determined by the company. If South Dakota had net metering, the company would have to buy that electricity at the same rate at which it sells it to customers, about 12 cents per kilowatt hour.
The Hammonds say the status quo is problematic for two reasons. First, Black Hills Power has the ability to set the rate it purchases electricity from them particularly low, at 3.3 cents per kilowatt hour for the Hammonds. Then the company sells that power back to customers at 12 cents per kilowatt hour.
“They are selling that for a profit of 250 percent,” Hammond said, “and they don’t have to do a thing.”
The second problem, the Hammonds say, is that without getting a fairer rate for their electricity, their solar system is a long-term financial loser. Excluding the federal tax credit they received, their solar setup cost $42,000. While they save about $100 each month on their power bill, without net metering, Hammond said, “It will never pay for itself in our lifetime.”
He said that economic disincentive is why the growth of household solar and wind production has remained so stunted in South Dakota. It’s a price that he and his wife, who are now retired investors, have been willing to bear for the environmental benefits. They stress they didn’t build a solar system to make money.
___
But Black Hills Power wants to make things even worse for them, the Hammonds said.
In April, Black Hills Power filed a request with the Public Utilities Commission - the agency that regulates the power-company monopolies - to increase its rates this year. Included in its paperwork, the company is also requesting to change its rate structure in a way that probably will increase costs for its small number of solar- and wind-generating customers.
The Hammonds calculate, thanks to an estimate provided by Black Hills Power, that their monthly bill will increase by $5 to $25 if their energy usage remains the same. The proposed rate change, the Hammonds say, is part of the company’s continuing desire to stunt its customers’ interest in solar and wind production.
“They are penalizing people for putting in solar and wind,” Hammond said. Other states, he said, are offering “not only net metering but incentives. In some states this would pay for itself in three or four years.”
Black Hills Power said it doesn’t oppose household power generation; rather, company executives say, the lack of net metering and the proposed rate change for individual solar- and wind-energy producers are about keeping rates fair for all 66,000 of its customers.
Mike Theis, Black Hills Power’s director of operations, said that the rate at which the company purchases excess energy from the Hammonds - about 3.3 cents per kilowatt hour - is based on the average wholesale rate at which it purchases electricity from power plants.
Theis disputed that the company is making a huge profit on the excess energy produced by the Hammonds and other power generators. He said, for instance, that the company may not need the energy when the Hammonds’ solar system is feeding it back to the grid. In other cases, the company may be selling the electricity at the wholesale rate to other utilities.
“So we’re not necessarily turning around and buying it at 3 cents and selling it for 12,” he said.
The purpose of the company’s proposed rate restructuring for household power generators, Theis said, is to ensure that those producers are paying for their fair share of the company’s electrical infrastructure. He argues that because those customers are using less of the company’s electricity, they are paying less for the grid - transmission lines, distribution lines, substations, etc. - than other customers.
“Essentially if they’re avoiding all those costs altogether at the times that they are using the system, then they’re not paying for that system,” Theis said.
Theis added that the company didn’t think of the proposal as adding a charge to those power-generating customers. He said the restructuring may actually save money for many of them if they’re willing to change their energy-usage habits.
“We’ve run some preliminary numbers on the customers, and we’ve got some that we believe are going to save money by going to this charge, (and) some may cost more,” he said.
___
But those arguments carry little water with Dakota Rural Action, a conservation and agriculture group opposing Black Hills Power’s application to raise its rates, including its changes for solar and wind customers.
Caitlin Collier, an attorney for Dakota Rural Action, said that if the proposed rate restructuring for household power generators was about helping them save money, it would make the change optional for customers rather than mandatory.
“It’s very clear,” Collier said. “It’s not some methodology for basically helping people out, it’s a charge that the corporation plans to use for people who are generating electricity that has to be purchased by the utility.”
Collier added that the company’s argument that customers like the Hammonds aren’t paying their fair share for the grid made even less sense. When the Hammonds purchase electricity from Black Hills Power, they pay the same retail rates and charges that all customers do. Those fees go toward both the cost for Black Hills Power to purchase electricity and the cost for it to maintain its grid.
Collier also found it difficult to believe that Black Hills Power wasn’t benefiting, most of the time, from being able to buy the Hammonds’ electricity and resell it.
While the company says it doesn’t always need the power produced by the Hammonds, its justification for applying for a rate increase through the Public Utilities Commission is so that it can expand its power generation capacity. If the company doesn’t need extra power to its grid, Collier questions why it seems to be signaling that it does need additional power to its grid.
“I’m afraid a lot of their argument just doesn’t stand up to close inspection,” she said.
Brad Klein, a senior attorney for the Environmental Law and Policy Center, a Chicago-based advocacy group, said that Black Hills Power’s proposal is similar to moves by other utility companies across the country.
“We are increasingly seeing utilities trying to take certain steps with their rate structures to kind of discourage solar generation,” Klein said.
The proliferation of household power generators could be a boon for power companies, Klein said, but most companies miss that point.
Klein pointed to a study by the Rocky Mountain Institute, a nonprofit that analyzed 15 studies about the costs and benefits of household power generation. Among the biggest benefits to the grid is that solar producers generate power during the day, when companies need it most, and that the power can be transferred immediately to customers rather than over lengthy transmission lines where power is lost.
“The utility in (the Black Hills Power) case hasn’t looked at any of those benefits,” he said. “And that’s really going to mean it’s going to be harder to have a more diverse and strengthened grid over the long-run.”
South Dakota’s Public Utilities Commission is expected to approve or reject Black Hills Power’s rate proposals by no later than early next year.
If the company’s extra charge on their household is approved, the Hammonds say the company will only be hurting itself in the long run.
While the Hammonds rely on the company’s grid at night and at times during the day when they need more power, that could change. Battery technology is becoming increasingly affordable, and over the next decade, the Hammonds said, they may be able to harvest and store enough electricity for all their electricity needs.
If that’s the case, they and other customers won’t need the company at all.
Hammond said, “To heck with them.”
___
Information from: Rapid City Journal, https://www.rapidcityjournal.com
Please read our comment policy before commenting.