A Bigger Solar Bang for the Ratepayer Buck: Pricing Solar Power More Effectively

Guest Column:  Feedback Loops and Efficiency in Incentive Programs  

By David LaGrand

All too often, big business and government deserve the criticism they draw for being slow, unresponsive, and unimaginative.

It was not a surprise to me when I had a conversation with a Consumers Energy employee last week to hear that Consumers Solar Power buyback program in the works for this year is shaping up to be the same kind of slow, ponderous, unresponsive program that could have been rolled out in the 19th century.

In the program, the utility will be required to offer to buy back a certain amount of solar power from customers at a certain price. Pretty simple, and good for getting solar systems installed.
On the other hand, we could sure do better. Why not, for example use the eBay model and hold a reverse auction? Even local auction houses do online bidding these days. The technology is not daunting.

If the solar buyback program were set up as an auction, the program could be more effective. Right now, the program seems to be slated to set up contracts to buy back 1,000 kilowatts of solar generating capacity at a rate of about 25 cents per kilowatt-hour. If we call that a 15 cent per kilowatt-hour premium, the program should cost about $200,000 per year to run.

If, instead, generating capacity buybacks were auctioned off to qualified bidders, with a minimum bid of 25 cents per kilowatt, installers might well prove to be willing to take a smaller premium – say, 15 cents per watt – in order to get some premium on the power produced. If so, Consumers could use the same outlay – $200,000 – to produce a much bigger program. If bidders took 15 cents per kilowatt-hour, using my example (a 5-cent premium), the program size could be tripled.

Again, we won’t know how a bid system will work without trying, but there’s really no downside to allowing feedback loops to drive prices down, and it’s unfortunate to see government-supported programs languish in inefficiency due to simple failure to keep up with current business practices.

David LaGrand was born in Grand Rapids and graduated from Calvin College and the University of Chicago Law School. After working as an Assistant Kent County Prosecutor, LaGrand formed a private law practice. LaGrand has formed several small businesses including Four Friends Coffeeshop and the Wealthy Street Bakery. In 2007, LaGrand was elected to the Grand Rapids City Commission. David lives near downtown with his wife Melissa and their four children. He is a member of Eastern Avenue Christian Reformed Church.

Note:  In the interest of public dialogue WMEAC welcomes guest column submissions, but does not necessarily endorse the views expressed therein.

0 replies
  1. Robert Stegmier
    Robert Stegmier says:

    June 29,2011
    I have 2 KW capacity of PV solar panels mounted on my home roof in Rockford MI and in the past 12 months produced 35.3 percent of my electricity. I am in the 6th year of operation and in my first year in Consumers Energy’s EARP program. I have from the beginning online and feeding any excess to the grid. I find these comments very interesting but I also find them typical as so often it is stressing the fact that wind and solar are variable and storage is a problem. While these comments are very true we need to look at these from a positive view. My solar is much more predictable than most folks realize. Of course the most predictable fact is that my energy is produced during the day and mostly in the summer during peak energy demand but also very well during the spring and fall. It is this predictability we need to stress and work from. From the beginning of April through the end of September my monthly average production is 57 .45 percent of my electricity needs. March, October and November average 35.11 %. While as you can imagine average only December, January and February average 3.45%. These are predictable and very repeatable from year to year. I could install storage batteries and use all of my production but I choose to share my significantly predictable excess with my neighbors through Consumers Energy grid.
    I suspect that wind energy while not as predictable as solar is more predictable than imagined when the data is gathered and studied.
    The $0.6.5 I am paid for what I produce will return my investment in 11 year with a slight 5% per year for the investment. This a lot to pay but by the same token the $0.115 CE charges for their mostly coal generated electricity doesn’t cover any social costs which would add approximately 35%.
    • I suggest we must manufacture the PV systems at a much reduced cost and increased efficiency.
    • The 35% social costs need to be charged to the coal production.
    • We need to take advantage of wind and solar to the very maximum even here in Michigan.

    Robert Stegmier
    Rockford, MI

    Reply
  2. Alaa
    Alaa says:

    As it looks at the mneomt, China will be the leader in renewable energy. This is truly great opportunity that the United States may miss out on unless we too adopt an aggressive energy plan that looks at putting significant attention into developing our own domestic resources. Solar could very well be the competitive energy source next to fossil fuels given the amount the industry has improved.Want to learn more about balanced energy for America? Visit http://www.consumerenergyalliance.org to get involved, discover CEA’s mission and sign up for our informative newsletter.

    Reply

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