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Cost shifts: The inconvenient truth of rooftop solar

A commentary in the June 7 issue of the Arizona Capitol Times “Utility customers have option of installing rooftop solar systems,” by executives from the rooftop solar industry presents a distorted and self-serving view of Arizona’s solar industry.

Their claim that Arizona Public Service (APS) is attempting to kill off the solar industry in Arizona by seeking potential changes in the way owners of rooftop solar are compensated for excess power sent back to the grid masks the real issue at hand. The real issue is that the business model used by companies like SolarCity, SunRun and Sungevity to sell prospective customers on installing rooftop solar, is based on cost transfers and subsidies that are heaped on other customers who have not installed, or cannot afford to install rooftop solar facilities.

But rather than engaging in thoughtful discussion and debate about subsidies and the unrecovered fixed costs to provide backup power, power lines and distribution systems to support rooftop solar, the solar companies simply ignore these economic issues and turn to demonizing the local utility with hollow accusations and innuendo.

The inconvenient truth that the rooftop solar companies fail to acknowledge to the public or their homeowner customers is that each solar array they install on a homeowner’s house transfers an average of $1,000 in subsidies and unrecovered fixed costs annually onto other customers’ electric bills. With approximately 18,000 systems already installed in APS’s service territory, the total cost picked up by other customers represents real money and is growing exponentially.

Homeowners with rooftop solar should benefit from the power they produce — both through the savings on their electric bills and through the excess power they provide back to the grid. But they should also pay their fair share of the costs for using APS’ facilities for backup power they need and depend on when the sun isn’t shining and for access to the power grid. They should also be compensated for any excess power generated and sent back to the grid based upon its actual worth as wholesale power, not at fully loaded retail rates as currently reflected in the net metering mechanism in place today.

After all, if the utility, rather than the rooftop solar customer, provides the wires, distribution system and ancillary services to accept, transport and deliver the rooftop power to other customers, why should rooftop systems be compensated for these services (and related costs) they don’t provide and don’t fully pay for?

What the rooftop solar companies seem not to appreciate is that the current net metering system is unsustainable from economic and policy perspectives. Subsidies mask proper price signals and cause an uneconomic allocation of resources. And as more customers opt for rooftop solar, an increasing amount of unrecovered fixed costs are transferred onto a decreasing number of non-solar, grid-based customers. This increasing cost burden on non-solar customers makes for poor policy and must ultimately change.

The rooftop solar industry would have us believe the fight over net metering is about freedom of choice for customers — the choice of alternative energy generated by rooftop solar versus getting power from the traditional utility company. The real dispute is not about freedom of choice at all — it’s about economics and fairness. It is simply easier for them to paint APS as a villain than defend or change their own unsustainable business model, which is based on subsidies and cost transfers.

— Gary Yaquinto is president & CEO, Arizona Investment Council.


  1. Finally someone tells the truth about solar and it’s subsidies. It may produce power but it isn’t practical if it can’t pay for it’s self. Sounds like most government endeavors.

  2. “Arizona Investment Council”? Had to go to the web-site to find their history: Originally formed in 1994 to maximize the influence of utility investors on public policies and governmental actions that may have an impact the well-being of investors and their utility investments, the Arizona Utility Investors Association (AUIA) was renamed the Arizona Investment Council (AIC).

    AIC wants to maximize the profits of current utility investors, who don’t give a rip about AZ, our energy security or cutting the use of pollution generating power and transitioning to reneweable resources. That’s inconvenient truth for you.

    If APS doesn’t like the current system, have them stop providing incentives for these systems. It is the rate payers and tax-paying citizens who have paid for infrastructure for APS and all other power companies, as well as pay for the incentives now. If the oh-so benevolent power company wants to talk about fair, let’s talk about turning all utilities that are currently a monopoly into nationalized non-profit agencies with no share holders. People need power, and power companies show no qualms about raising rates as they have no competition. Only the few legal protections that voters have been able to get shady politicians to give them stop those companies from further rate increases and have required them to use renewable resources in the first place. Mr. Yaquinto should acquaint himself with truth before inconviently trying to substitute propaganda for it.

  3. “transfers an average of $1,000 in subsidies and unrecovered fixed costs annually onto other customers’ electric bills.”


    I have seen no justification that it is costing APS $1000 per year to support one house with a solar tie in, and frankly I can’t see how it would ever cost APS this much. Get the facts on the table otherwise stop whining a keep solar an option. Long term this still is more attracting than our other power options and nothing else scales with home growth.

  4. Solar is too expensive.

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