Jacksonville Electric: Gambling with Florida’s energy future

One month after Hurricane Irma flooded the streets of Jacksonville, the board of JEA, Jacksonville’s local electric utility and the largest municipal utility in Florida, voted to slash net metering and limit its customers’ control over their own energy future. Vote Solar’s analysis is that JEA’s new solar and storage rates amount to a bad deal for customers and a major step backward for a state that needs to be working towards more grid resilience.

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When Irma tore through Florida last month, millions of people were left without electricity for days and, in some places, over a week. But communities across the state were soon buzzing with stories about the smart neighbors who kept the lights on and schools that powered emergency shelters with rooftop solar and battery storage systems in their homes. The combo of these technologies proved to be life savers after the storm, enabling homeowners to maintain some control over their families’ livelihoods.

These stories demonstrate an urgent lesson from Irma – that Floridians need to think differently about how they get their energy, and the kind of electric grid they want to have when the next hurricane hits. With experts predicting a continued trend of more intense hurricanes like Irma, the Sunshine State has a choice to make. It can either move towards an energy system that is stronger, more resilient, and ensures customer access to energy choices, or it can continue to play hurricane roulette.

JEA decided to gamble. The board’s abrupt decision to slash net energy metering (NEM) for rooftop solar was a vote to undermine customers’ control of their own energy future. What’s worse, JEA’s decision lacked a meaningful stakeholder process and included no data to justify such a dramatic change in rates.

JEA’s full proposal that was approved by its board is available here.

Jacksonville customers take a hit

JEA’s net metering change will cut the value of solar by over 70% for Jacksonville customers.

Instead of crediting solar customers for the energy they export back to the grid at retail rate of around 10.8 cents per kWh, JEA is now compensating exported power at avoided cost, a rate far lower than its actual value. JEA is also measuring customers’ solar production on a 15-minute basis, instead of a monthly basis, which limits the amount of time the exported energy can be used to offset costumers’ bill. With this approach, as much as half of the electricity generated from an average 5 kW home solar system may be sent back to grid, but now it will only be worth 3.2 cents per kWh. The combined consequence of these changes is a very bad deal for solar customers.

An income tax on the sun

In a bizarre gesture toward the customers it is supposed to be serving, JEA plans to force all net metering customers to become contract employees, so JEA can direct the IRS to tax those customers for the energy they are producing. JEA says it will issue an IRS 1099 form to any customer generating $600 or more in credits for the clean energy they send to the grid. From what we can tell, JEA will be issuing 1099 forms based on the total credits from each month, even if those credits are used to offset a customer’s bill.

The result of this new tax liability is twofold. First, solar customers are now responsible for a miscellaneous taxable income simply for offsetting their own energy use. Second, taxing the credits that compensate for the clean, local energy sent to the grid further reduces the value of those credits. On average, this means an additional 24% reduction in the new 3.2 cent export value for solar energy. For customers with larger systems, including businesses, schools, hospitals, and other commercial customers, net metering rates are now effectively worth around 2.4 cents per kWh, versus the retail rate JEA was crediting before the change

A modest rebate to sweeten a sour deal

As a parting gift for eliminating net metering, JEA has decided to offer a one-time rebate for battery storage. Unfortunately, JEA’s rebate will do very little to promote storage or make it a long-term solution to improving grid resilience, since the rebate does nothing to make storage investments economically viable for customers.

To be clear, incentivizing storage is a good thing, especially in a state with regular grid disruptions from hurricanes and other natural disasters. More utilities in Florida should take steps towards advancing the adoption of storage – especially for critical infrastructure like hospitals, assisted living facilities, schools, and emergency operations centers. And if battery storage systems are bought in combination with solar systems, customers can take advantage of the 30 percent federal Investment Tax Credit in addition to the local utility rebate.

However, Vote Solar’s analysis shows that the JEA rebate is not a well designed incentive and will not result in more storage on the grid. By our calculations, the $2,000 taxable rebate will be far less effective for incentivizing storage adoption than simply maintaining retail net metering. Those storage incentives are even less effective for those who could use it most: critical infrastructure customers, who are typically on commercial rates, and for whom this rebate is almost negligible.

Even worse, from our reading of the JEA proposal, it appears the rebate is also taxable for customers receiving them, which can further reduce the incentive to an after-tax value of around $1,500. JEA will also put a cumulative program cap on its rebate offering, so only about 520 customers will receive the rebate before JEA denies the offer to additional customers.

To put the economic trade-off of net metering versus JEA’s $1,500 after-tax rebate in perspective, Vote Solar estimates that an average residential customer with solar and storage could realize upwards of $1,100 in annual savings from retail net metering credits in the first year alone, compared to an annual savings of less than $500 under the new JEA avoided cost rate. That loss in savings quickly eats up over half the value of JEA’s paltry storage rebate in the first year.

JEA presents the storage rebate as a fair substitution for the cut to net metering, and a nudge for solar customers to invest in their own storage, rather than “using the grid as a battery.” JEA even goes so far as to suggest that customers can reasonably expect to store all the excess energy their rooftop solar produces so that “little or no energy from the private solar installation would be expected to be sent to the grid.” But a look at how the numbers shake out suggests that JEA has done little analysis on the economics of solar and storage for its customers, and is hoping those customers and other interested stakeholders won’t either.

In theory, a solar customer could do as JEA suggests and invest $20,000 – $30,000 in a massive battery system to store all 20-25 kWh of unused energy produced by a 6kW solar system during Florida’s sunniest days. But the reality is that even with a system that large, it is unlikely that the residential customers could even consume enough of the stored energy before the next day to enable the system to store another day’s energy production.

JEA’s approach doesn’t take advantage of the true benefits of storage. Storage is an excellent resource to provide peak savings, grid services, and backup power during outages. Cycling a battery daily just to keep solar customers from exporting energy to the grid during peak hours, when solar energy provides the most savings to all customers, is inefficient and not a smart investment strategy for customers.

Building grid resilience with a healthy market for customer storage

If JEA really wanted to improve grid resiliency and promote storage adoption, it would fairly compensate the value of private investment in solar and storage. And that value – to both the grid and to customers – can’t be understated. Building a modern, resilient, and reliable system – and safeguarding against the next Irma – necessitates a distributed grid that gives Floridians control over their energy future and stability.

JEA should maintain net metering and study the best mechanisms for incentivizing the adoption of solar plus storage, the best use of storage on the grid, and the optimal rate design to allow for customers to take full advantage of their private investments. Utilities throughout the country are testing different rate structures, such as time-of-use rates, and different market-based approaches, such as compensating customers with battery storage for grid services or partnering to provide storage services to customers. These are a few of the numerous approaches that could develop a stronger market for solar plus storage, compared to a one-time rebate.

Florida doesn’t have time to drag its feet in adopting clean, distributed resources like solar and storage. State leaders need to work with utilities, clean energy companies, residents, and all stakeholders, to develop a market that values keeping the lights on during the next Irma.

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