California’s Time-of-Use Rates Will Make You Want Energy Storage

by Anna Gretz
August 10, 2017

San Diego Gas & Electric recently made a change to their proposed time-of-use rates, and people are NOT happy.

But let’s back up for a minute.

To review: time-of-use rates refer to a system of making utility customers pay more for electricity during the times during the day that people typically use the most power (this is called peak demand.) High demand for electricity puts stress on the grid, and utilities hope the hiked up prices will encourage some users to unplug, and use the extra revenue from the other consumers to repair or enhance the grid so that meeting demand is still possible. Utilities set their own “peak time-of-use” period, and charge more for electricity during those hours.

San Diego Gas & Electric is the first one of California’s big utility companies to take the leap to a full TOU system for all of its users, and they just made a change to their proposed peak demand period. It may not seem like much at first, but let us fill you in on why this change matters… a lot.

The California Public Utilities Commission (CPUC) is responsible for the change. Historically, San Diego’s peak rates were between 11 AM and 6 PM. The proposed peak demand period was already a huge deviation from these previous rates: 3 PM to 9 PM. The CPUC’s recent change to the proposal cut out and extra hour, with the final proposal marking off a peak demand period from 4 PM to 9 PM.

Why is this a big deal? Because this shift undercuts the value of rooftop solar. The value of solar is calculated by the retail value of electricity during the hours when rooftop panels are generating power. Because of this, the movement of higher rates to later in the day makes the retail value of electricity lower during the hours when the sun is highest in the sky, giving rooftop solar owners a lower valuation on their power. The initial movement to later TOU peaks made a lot of sense because it fit with the needs of California’s power grid. California has a lot of solar power fed into the grid during midday--more than any other state--so it makes sense that electricity during those hours would be relatively cheap amidst the overabundance. But when solar generation tapers off in the later afternoon, there’s a much higher demand for energy, especially residential energy, as people are returning home from work and powering up their household appliances and electronics. This drastic supply/demand shift has put California’s grid, and the utility companies, in a tough spot… and they’re hoping that TOU rate will help even things out.

The “peak demand” hours, then, are calculated by taking a look at which hours during the day are toughest on the state’s power generators and grid operators, trying to match the most expensive rates to the times when it’s most expensive to provide electricity. Solar advocates have pushed for a 2 PM to 7 PM peak period, so that the value of solar won’t be completely diminished. But it doesn’t look like the CPUC has paid much attention to this proposal. The further edits that shifted the beginning of the peak period from 3 to 4 PM added insult to injury, as far as solar advocates were concerned. It was yet another hour sun that was losing its value for rooftop solar owners. Solar customers are feeling, and rightly so, that the system is skewed toward electricity consumers who are not generating any power of their own.

We’ll have to wait to see whether or not the edited version of the TOU system is passed… but these events have made Californian rooftop solar owners look into home energy storage, and a pretty awesome thing called “Time-of-Use Arbitrage.”

Time-of-Use Arbitrage sounds fancy, but it’s actually really simple if you know how to do it. Here’s how it works: Home battery owners charge up their batteries with free power from their solar panels, and use that stored power in the evenings, instead of sucking power from the grid. When homeowners do this, they end up getting the lowest electricity rates available even when the power companies are charging the most for electricity. In fact, battery owners can even get software that will do this for them automatically, so they don’t even have to think about it.

The great part about this arrangement is, it’s actually good for everyone. Battery owners get to slash their electricity bills, which is of course, awesome, and utility companies get one less customer demanding electricity during peak hours. With home batteries, everyone’s winning.

Time-of-Use Arbitrage is just another bullet point on a long list of reasons why solar needs energy storage. (What else is on the list? Independence from an unreliable power grid, black-out protection, using free, clean energy anytime… to name a few.) Home battery owners get to tune out the battle over electricity rates, and spend their time and energy focusing on what they love… and powering it with free energy from the sun.