Cost benefits of solar power subject to market conditions
Alan Sander, of Brady Township, said he installed solar panels on his house early last year to help offset the rising cost of energy, but a change in Central Electric Cooperative’s net metering policy has hindered some of the benefit.
He explained the amount of energy generated by solar power is subject to weather conditions, but the amount of money electric companies reimburse their clients for energy generation is subject to market conditions.
“Now we’re paying for generation and distribution, and you’re only getting generation rate back,” Sander said. “Before, if I used 1,000 kilowatts, and I produced 1,000, it would cost me 16 cents and they would give me 16 cents (back) so it was even. They say it costs them to transport over wires, so they are only giving the generation fee, which is 7 cents. It's a 9-cent loss per kilowatt.”
Cooperatives are not regulated by the Pennsylvania Public Utility Commission, and they don’t have to provide incentives for alternative energy generation. But according to Matt Boshaw, CEO and general manager of Central Electric Cooperative, the company has offered net metering for energy generators for about 20 years. Net metering is how a utility measures how much electricity is used versus how much is generated by the consumer.
While the cooperative is not subject to PUC regulations, its electricity rates are subject to the costs set by power generators, which fluctuate every year. Boshaw also said the cooperative changed its net metering policy over the course of a year, because the 100-some members with energy generation capabilities had been transferring distribution costs onto other members.
“Because there are distribution costs whether you are using energy or not, the other members pay for that,” Boshaw said. “We’re not going to do it at the expense of all of our members.“
Central Electric Cooperative and West Penn Power, which each serve residents of Butler County, pay clients who generate their own energy through reimbursements on their monthly bills.
Nils Hagen-Frederiksen, press secretary for the Pennsylvania Public Utility Commission, said when a residential electric user hooks an alternative energy system up with their provider, electricity use and generation is typically monitored through two-way “net metering.”
According to Boshaw, Central Electric Cooperative reimburses members for power they use that doesn’t come from the cooperative’s power generation.
“Every month, they have a certain amount of kilowatt-hours they push onto our system. Based on the cost from our generator, we provide them that credit,” Boshaw said. “Whatever excess they generate that comes back through, we pay them for the power that they don’t use.”
Hagen-Frederiksen said the commission has to approve rates set by public power companies, like West Penn Power. This includes the buyback rate for electricity generated, he said.
“The price that they pay, either for the electricity they buy or sell, is their local utility's default service,” he said. “Those are adjusted periodically. If you are buying, it costs ‘X,’ when you are returning power back to the grid, it costs ‘X.’”
As power providers, West Penn Power and Central Electric Cooperative don’t generate power, but send electricity to customers from their selected provider. Electric company bills consist of a base charge and a usage charge, Hagen-Frederiksen said, and the reimbursement for electricity generated is applied to the usage section of the bill.
Todd Meyers, spokesman for West Penn Power, said customers with solar panels may generate more power in the summer months, which can build some credit on a customer’s monthly bill.
“You're at least offsetting part of your bill, but there are months where you are producing more than you use,” Meyers said. “So if you put more onto the system than you used, you'll get a bill credit.”
Even if a solar power system is hooked in with Central Electric Cooperative, the power cannot be stored, or sent back to the provider.
“We don't do anything but pass that power through our grid,” Boshaw said.
Meyers also said the electricity generated by customers goes onto the power grid, but that power can’t be stored. The base charge on a customer’s bill accounts for the use of West Penn Power’s equipment, which transports electricity from an electricity provider to a customer and from a solar system to the grid.
“There are some fees that are part of your bill because we maintain wires,” Meyers said. “They're still interconnected to our system.”
Sander’s nephew, Wade Sander, of Mars, said he put solar panels on his home to help offset his electric bill through West Penn Power. The system he had installed in April 2023 was designed with a generation capacity of 12,500 kilowatts, and Wade said he uses about 12,000 kilowatts a month.
Although he is paying for the system on a loan, the power it has generated so far has paid off.
“When I first moved in my utility bill was $70,” Wade Sander said. “So far all I get is an electric bill for $7.47. I don’t generate in the winter months so I had a bill for like $30.”
Meyers said although a business sets up solar panels on homes, West Penn Power still sends an inspector to check the system and hook it onto the company’s grid.
“We just make sure that it meets the safety standards, that the system you’re putting in meets all the applicable state laws,” Meyers said.
Wade Sander said he is also receiving a tax credit for installing the solar generation system, which he said has also been a benefit.
“The biggest thing to keep track of is the tax credit, but my accountant did that,” Wade Sander said. “It’s based on income, so if you have less income you would get more of a credit.”
Hagen-Frederiksen said more people generating energy for themselves could impact the energy marketplace in the long-term, but natural gas is still a major generator of electricity.
“The marketplace, the amount of solar and wind both continue to increase,” Hagen-Frederiksen said. “But for Pennsylvania and the region as a whole, natural gas prices and the cost of electric generation really remains the driving factor.”
Alan Sander said although the solar panel system has had an impact on his electric bill, the changes to electricity rates could lessen his credit with the power company in the future.
“I'm just trying to have a balanced system. Electric is not going to get cheaper,” Alan Sander said. “And that's what concerns me, is they can change the credit rate.”
