5 Utilities Cutting Solar Credits Through Time-of-Use Rates
Residential solar owners in the United States face a growing hurdle that diminishes the financial returns of their installations: time-of-use (TOU) rate structures. Utilities apply these rates to vary electricity prices by time of day, aiming to offset revenue losses from reduced sales. Although utilities claim TOU pricing mirrors actual electricity costs, solar customers and installers contend it erodes investment returns for rooftop systems. State regulators and industry experts report that several prominent utilities have adopted TOU plans which sharply lower credits for power exported during peak solar production hours.
The utilities listed below have faced criticism from installers, advocates, and economists for TOU programs that disadvantage solar owners. These examples illustrate how rate designs affect distributed energy economics and solar market expansion.
1. Pacific Gas & Electric (California)
Pacific Gas & Electric (PG&E), based in San Francisco, operates one of the nation's most intricate TOU systems. Solar net metering customers must transition to TOU rates upon system interconnection. The core issue stems from PG&E's peak pricing window starting in the late afternoon, as solar generation wanes.
Rooftop arrays in Northern California generate peak output from mid-morning to early afternoon, yet PG&E assigns lower credits to exports then. Evening imports, however, incur much higher charges. A California Solar & Storage Association study indicates payback periods for some customers now stretch beyond ten years, up from seven.
Energy policy analyst Mark Johnson from the University of California Energy Institute notes the deliberate design. “PG&E’s TOU schedule aligns with wholesale market patterns, yet it caps the value residential solar provides. The utility safeguards its revenue stream,” he stated.
PG&E asserts TOU rates enhance grid reliability and prompt usage shifts from peak times. For solar owners, though, the disconnect between production peaks and pricing creates a net cost rather than an incentive.
2. Arizona Public Service (Arizona)
Arizona Public Service (APS), located in Phoenix, has sparked regulatory battles over solar paybacks. New solar customers encounter mandatory TOU rates featuring peak pricing alongside demand charges. Demand charges calculate from the month's maximum power usage spike, inflating bills when devices run concurrently.
APS sets its peak window from late afternoon through evening, overlapping with declining solar output but sustained air conditioning needs. Midday exports thus earn reduced credits, cutting net metering advantages by up to 40 percent versus flat-rate users.
Tom Bailey, CEO of Phoenix installer Desert Sun Renewables, reports a drop in residential projects. “Savings were straightforward before. Now batteries or advanced load controls are essential for viability,” he explained. His firm pivots to storage-integrated setups, though many clients find them unaffordable.
APS defends the TOU framework as a true reflection of delivery costs, aiding load balance in an AC-reliant grid. Advocates urge regulators to scrutinize the TOU-demand charge pairing, deeming it overly punitive for solar producers.
3. NV Energy (Nevada)
NV Energy, centered in Las Vegas, carries a contentious solar legacy following prior net metering cuts. Recent rules restore credits but tie them to TOU pricing, devaluing midday exports when panels perform best.
Peak demand hits early evening as households activate, doubling off-peak prices. Exported solar thus fetches about half the rate of peak-time imports.
Nevada Public Utilities Commission documents show NV Energy positions this as equitable, mirroring grid expenses. Installers challenge it. “The setup penalizes abundant generation and incentivizes strained-hour usage,” said Laura Kim, policy director at the Western Solar Trade Alliance. She highlights how it deters solar without batteries.
The Nevada Solar Energy Association calculates a 25 percent drop in solar systems' net present value under TOU versus prior flat rates. This decline has tempered adoption in a former solar frontrunner state.
4. Florida Power & Light (Florida)
Florida Power & Light (FPL), in Juno Beach, rolls out TOU options that detractors argue erode owner-generated solar value. Standard customers select fixed or TOU plans, but solar users often land on schedules with elevated evening rates. Peak-off-peak spreads surpass 50 percent, introducing bill unpredictability.
Florida's strong midday sun boosts production, yet FPL credits that output at low rates. Evening grid reliance then hits premium pricing. The Solar Energy Industries Association estimates exported solar value falls by one-third.
FPL promotes TOU for grid efficiency and policy alignment. Regional installers see it stifling net metering. “Payback math now exceeds initial forecasts,” said Daniel Ruiz, owner of Miami's SunStream Energy. “Solar shifts from reliable saver to schedule-dependent risk.”
Regulators field petitions to assess TOU fairness for solar customers. Supporters push for voluntary opt-ins, honoring pre-installation payback expectations.
5. Xcel Energy (Colorado and Minnesota)
Xcel Energy, Minneapolis-based, navigates varied state rules. In Colorado and Minnesota, expanding TOU pilots apply to all residential users, including solar ones. Rates show sharp on-peak to off-peak gaps, peaking late afternoon into evening.
Colorado's TOU triples overnight pricing at peak. Solar exports credit low during production highs, while evening use charges top dollar. Colorado Public Utilities Commission data reveals 18 to 25 percent lower bill savings for TOU solar users versus flat net metering.
Xcel spokesperson Karen Thomas justifies the change for stability and storage uptake. “TOU signals market needs, bolstering reliability and battery adoption,” she said. Opponents note batteries' inaccessibility, labeling it inequitable.
Analysts view Xcel's model as influential for revenue-grid balance. Still, they caution aggressive TOU erodes policy confidence. “Short-term revenue gains may occur, but long-term customer faith suffers,” said Peter Harlan of CleanTech Research Group.
Weighing TOU's Solar Impact
TOU structures now dominate for emerging solar markets. Technically, they capture demand-driven costs, easing resource pressure through variable pricing. Practically, peak timings clash with solar cycles, undermining system economics.
Utilities gain cost recovery, revenue protection amid self-generation rise, and storage promotion. Homeowners' results hinge on usage adjustments or battery additions. Absent storage, midday exports undervalue, delaying returns and curbing installs.
Strategies for Solar Owners Facing TOU Shifts
Assess your utility's TOU details via rate schedules to map production against peaks. Consider battery integration to store midday excess for evening use, preserving credits. Explore demand response programs or efficiency upgrades to minimize peak draws. Consult installers on hybrid options tailored to your region's pricing. Track regulatory updates, as advocacy may yield fairer structures. These steps help sustain solar value despite evolving rates.