Why is it cheaper for individuals to install some amount of cheap solar power for themselves than for the grid to install it and then deliver it to them, with economies of scale in the construction and maintenance? Transmission cost?
It’s not cheaper in reality. Net metering is effectively a major subsidy that goes away pretty much everywhere that solar generation starts to make up a significant fraction of the supply.
Electricity companies don’t want to pay all that capital expense, so it makes sense for them to shift it onto consumers up until home solar generation starts approaching daytime demand. After that point, they can discontinue the net metering and push for “smart meters” that track usage by time of day and charge or pay variable amounts applicable for that particular time, and/or have separate “feed in” credits that are radically smaller per kWh than consumption charges (in practice often up to 85% less).
With smart meters and cheaper home battery systems the incentives starts to shift toward wealthier solar enthusiasts buying batteries and selling excess power to the grid at peak times (or consuming it themselves), lowering peak demand at no additional capital or maintenance cost to the grid operators.
In principle the endgame could involve no wholesale generators at all, just grid operators charging fees to net consumers and paying some nominal amount to net suppliers, but I expect it to not converge to anything as simple as that. Economies of scale will still favour larger-scale operations and local geographic and economic conditions will maintain a mixture of types and scales of generation, storage, distribution, and consumption. Regulation, contracts, and other conditions will also continue to vary greatly from place to place.
If the cost of power generation were the main contributor to the overall cost of the system then I think you’d be right: economies of scale and the ability to generate in cheap places and sell in expensive places would do a lot to keep people on the grid. But looking at my bill (footnote [1]) the non-generation costs are high enough that if current trends continue that should flip; see my response to cata, above.
I’m not claiming here that it’s currently cheaper, but that it will soon be cheaper in a lot of places. Only 47% of my bill is the actual power generation, and the non-generation charges total $0.18/kWh. That’s still slightly more expensive than solar+batteries here, but with current cost trends that should flip in a year or two.
Looking at their breakdown (footnote [1]) it seems to be mostly the cost of getting the electricity to the consumer. Since they’re a monopoly, there’s not much getting them to be efficient here, operating a high-uptime anything is expensive, and MA is an expensive place to do anything.
I don’t know this area well, but my understanding is that the “generation” portion represents a market where different companies can compete to provide power, while the other portion is the specific company that has wires to my house operating as a regulated monopoly. So while I don’t trust the detailed breakdown of the different monopoly charges (I suspect the company has quite a bit of freedom in practice to move costs between buckets) the high-level generation-vs-the-rest breakdown seems trustworthy.
Yes, if we assume that there is a competitive market for generation, price of transmission may prevent grid solar generation from being built. But you asserted that you could learn the cost of transmission from the bill.
Maybe we’re meaning different things by “cost”? If a large monopoly spends $X to do Y then even if they’re pretty inefficient in how they do Y I’d still describe $X as the cost. We might discuss ways to get the cost down closer to what we think it should be possible to do Y for (changing regulations, subjecting the monopoly to market forces in other ways, etc) but “cost” still seems like a fine word for it?
Even in this last comment you keep making that very distinction. The regulator dictates the price but you assert that you know what the monopoly spends.
If you just want to assert that the current set of regulations are unsustainable, then I agree. But not a single one of the comments reflects a belief that this is the topic, not even any of your comments.
you assert that you know what the monopoly spends.
First, don’t we know that? It’s a public company and it has to report what it spends.
But more importantly, I do generally think getting a regulated monopoly like this to become more efficient is intractable, at least in the short to medium term.
Maybe you could learn something by looking at the public filings, but you didn’t look at them. By regulation, not by being public, it has to spend proportionate to its income, but whether it is spending on transmission or generation is a fiction dictated by the regulator. It may well be that its transmission operating costs are much lower than its price and that a change of prices would be viable without any improvement in efficiency. This is exactly what I would how I would expect the company to set prices if it controlled the regulator: to extract as much money as possible on transmission to minimize competition. I don’t know how corrupt the regulator is, but that ignorance is exactly my point.
whether it is spending on transmission or generation is a fiction dictated by the regulator
That’s the key place where we disagree: my understanding is that the “generation” charges are actual money leaving the utility for a competitive market, and this is a real division.
The transmission utility is not purely a transmission company. It spends money on both generation and transmission. Some generation charges leave to other companies. This is not a competitive market, but even if it were, it would only give you a bound on the cost of generation and tell you nothing about the cost of transmission.
Why is it cheaper for individuals to install some amount of cheap solar power for themselves than for the grid to install it and then deliver it to them, with economies of scale in the construction and maintenance? Transmission cost?
It’s not cheaper in reality. Net metering is effectively a major subsidy that goes away pretty much everywhere that solar generation starts to make up a significant fraction of the supply.
Electricity companies don’t want to pay all that capital expense, so it makes sense for them to shift it onto consumers up until home solar generation starts approaching daytime demand. After that point, they can discontinue the net metering and push for “smart meters” that track usage by time of day and charge or pay variable amounts applicable for that particular time, and/or have separate “feed in” credits that are radically smaller per kWh than consumption charges (in practice often up to 85% less).
With smart meters and cheaper home battery systems the incentives starts to shift toward wealthier solar enthusiasts buying batteries and selling excess power to the grid at peak times (or consuming it themselves), lowering peak demand at no additional capital or maintenance cost to the grid operators.
In principle the endgame could involve no wholesale generators at all, just grid operators charging fees to net consumers and paying some nominal amount to net suppliers, but I expect it to not converge to anything as simple as that. Economies of scale will still favour larger-scale operations and local geographic and economic conditions will maintain a mixture of types and scales of generation, storage, distribution, and consumption. Regulation, contracts, and other conditions will also continue to vary greatly from place to place.
If the cost of power generation were the main contributor to the overall cost of the system then I think you’d be right: economies of scale and the ability to generate in cheap places and sell in expensive places would do a lot to keep people on the grid. But looking at my bill (footnote [1]) the non-generation costs are high enough that if current trends continue that should flip; see my response to cata, above.
I’m not claiming here that it’s currently cheaper, but that it will soon be cheaper in a lot of places. Only 47% of my bill is the actual power generation, and the non-generation charges total $0.18/kWh. That’s still slightly more expensive than solar+batteries here, but with current cost trends that should flip in a year or two.
Looking at their breakdown (footnote [1]) it seems to be mostly the cost of getting the electricity to the consumer. Since they’re a monopoly, there’s not much getting them to be efficient here, operating a high-uptime anything is expensive, and MA is an expensive place to do anything.
That breakdown is fiction dictated by the regulator.
How so?
These numbers are dictated by the regulator. What mechanism is there to make them have any relation to the real world?
I don’t know this area well, but my understanding is that the “generation” portion represents a market where different companies can compete to provide power, while the other portion is the specific company that has wires to my house operating as a regulated monopoly. So while I don’t trust the detailed breakdown of the different monopoly charges (I suspect the company has quite a bit of freedom in practice to move costs between buckets) the high-level generation-vs-the-rest breakdown seems trustworthy.
Yes, if we assume that there is a competitive market for generation, price of transmission may prevent grid solar generation from being built. But you asserted that you could learn the cost of transmission from the bill.
Maybe we’re meaning different things by “cost”? If a large monopoly spends $X to do Y then even if they’re pretty inefficient in how they do Y I’d still describe $X as the cost. We might discuss ways to get the cost down closer to what we think it should be possible to do Y for (changing regulations, subjecting the monopoly to market forces in other ways, etc) but “cost” still seems like a fine word for it?
Even in this last comment you keep making that very distinction. The regulator dictates the price but you assert that you know what the monopoly spends.
If you just want to assert that the current set of regulations are unsustainable, then I agree. But not a single one of the comments reflects a belief that this is the topic, not even any of your comments.
First, don’t we know that? It’s a public company and it has to report what it spends.
But more importantly, I do generally think getting a regulated monopoly like this to become more efficient is intractable, at least in the short to medium term.
Maybe you could learn something by looking at the public filings, but you didn’t look at them. By regulation, not by being public, it has to spend proportionate to its income, but whether it is spending on transmission or generation is a fiction dictated by the regulator. It may well be that its transmission operating costs are much lower than its price and that a change of prices would be viable without any improvement in efficiency. This is exactly what I would how I would expect the company to set prices if it controlled the regulator: to extract as much money as possible on transmission to minimize competition. I don’t know how corrupt the regulator is, but that ignorance is exactly my point.
That’s the key place where we disagree: my understanding is that the “generation” charges are actual money leaving the utility for a competitive market, and this is a real division.
The transmission utility is not purely a transmission company. It spends money on both generation and transmission. Some generation charges leave to other companies. This is not a competitive market, but even if it were, it would only give you a bound on the cost of generation and tell you nothing about the cost of transmission.
To a first approximation, solar is legal for individual residences and illegal on a larger scale.
really, say more?