Introducing the universal solar tariff
During the current energy crisis due to the War in Ukraine, every business and household has to deal with a substantial increase in energy prices.
And when the governments step in to protect them from the skyrocketing prices of fossil fuels, they face extraordinary deficits. Going out of this crisis seems extremely difficult.
The incredible story of solar rooftops
The most protected households against energy price volatility are the ones with solar rooftops or Photovoltaic thermal collectors and a high level of electrification. Solar rooftops are a low-cost source of energy immune to inflation. Furthermore, the value of these solar rooftops increases over time as the price of kWh increases.
I feel lucky to own one of these solar rooftop systems. But I am not the only one!
Solar has been, for years, the cheapest way to produce electricity. But it has also other incredible advantages: available in unlimited quantity, has low carbon intensity, and can be produced everywhere on earth. This high-tech source of energy has resulted from exceptional technological developments in the last 45 years. In 1977, the global production capacity of solar modules was only 500KW; in 2022, we will reach a fantastic 500GW or 50 000 000KW. Its main limitation is obviously that it is available only when the sun shines.
Introducing an innovative concept to address inequality and ease decarbonization
It isn’t easy to benefit from the advantages of solar technology if you don’t have such a PV or PVT system. Indeed solar still has a low penetration in the utility sector, and its benefits are not accessible to all through utility contracts.
So people who don’t have access to a roof or can’t afford a solar installation may end up in a very unfavorable situation and face higher and higher energy bills. It is even more unfortunate that many families live in cities and, therefore, in apartments and rarely have the chance to own a solar system. Outside of cities, lower-income households often live in multi-dwelling units/apartments, so the purchasing power of these families is the most impacted by the electricity price increases.
According to the latest forecasts, only 13% of US homes will have a domestic solar PV system by 2030.
How can we make the benefits of solar technology available to everybody to reduce inequality?
Community solar can be a solution, as well as peer-to-peer solar. This article presents an ever more attractive solution that could have a much more significant impact: the “universal solar tariff.”
The idea of the “universal solar” tariff is to provide every business and household with the equivalent of a virtual solar rooftop. It means to make available to energy consumers a given amount of kWh at a lower tariff during the daytime produced by this virtual solar panel.
Another essential idea is to make this tariff available to every delivery point (roaming).
Using this tariff, you can charge your EV at your home, at your workplace’s parking, or in the street at the lowest cost possible while ensuring that you only use clean electricity and reduce your GHG emissions.
About the Universal solar tariff
What is the difference between the “universal solar tariff” and other tariffs?
Today most people face the following tariffs at home:
- Home electricity tariff: with Peak and non-peak hours or Flexible tariffs
- EV charger tariff: price depends on the speed of charging. The four typical levels are: Regular charge (up to 7KW), Fast charge (up to 22KW), Rapid (up to 50KW), or even Super Rapid (<150KW)
Typically Peak hours are during the days and non-peak hours are during the night. As solar is only available during the day, it is easy to understand that the low cost of solar energy is not accessible to customers with this tariff structure. A flexible tariff allows you to benefit partially from the lower price of solar as electricity ends to be cheaper during sun hours due to increased solar generation. Nevertheless, it is still not the most efficient due to how the market prices electricity (price of the most expensive generator at a given time). So you still pay more than a pure solar electricity tariff.
The universal solar tariff has a unique advantage; it gives you access to low-cost solar electricity based on:
- The time of the day (from sunrise to sunset),
- Your (delivery point) location,
- The size of your virtual solar rooftop.
A critical aspect of the “universal solar tariff,” at least in its infancy, is that it only gives you access to the energy you produce at a given time. It means there is a limit to the quantity of energy you receive based on the weather and the size of your virtual solar plant associated with your contract (subscription). But over time, you may have providers offering unlimited universal solar tariffs (in a similar way as your mobile subscription changed overtime).
If you look outside or check the weather, you get a natural feeling about the quantity of electricity available to you through this tariff. The more sun you have, the more electricity you access. As a solar rooftop owner, it is easy to feel how much clean electricity a system produces at a given time based on external conditions.
It also means that the solar tariff can not be your only source of electricity; it would be an addition to your current electricity contracts.
Now you may be wondering, how does it impact the charging of your EV? Today when you plug your EV, you will either have a regular tariff or a fast charge one. People drive less than 50 km daily, so their car consumes less than 10KWh daily. A vehicle often stands for many hours during the day, so a fast charge is rarely needed to replenish the battery. For example, if you park your car for 6 hours, even if it is a bad day (cloudy and short daytime), you will still get a full charge as long as the solar rooftop can provide you with 1,5KW per h.
People mainly interested in reducing the running costs and GHG emissions associated with their EVs will find that the universal solar tariff is a perfect solution. It is effortless, you plug your EV, select the optimized solar tariff, and the vehicle will receive the maximum available electricity from your virtual solar rooftop. If your schedule requires it, you can still opt for the regular charge to maximize the EV’s range.
At home and on the move, the universal solar tariff allows you to access cheap and clean electricity.
What a compelling value proposition! isn’t it?
Below is an overview of how this solar tariff would benchmark compared to other offers.
Why is the universal solar tariff an exciting concept for utilities?
The electricity grid needs continuous maintenance, modernization, and expansion to be able to move electrons between generators and loads. The system also needs additional auxiliary services to guarantee the quality of the electricity provided. All these are the fixed costs of the electricity grid, and every unit (kWh) of the system needs to pay part of this cost.
The utilities (distributors and retailers) are, in one way, “disrupted” by the solar rooftops because they are selling fewer units over time, reducing their revenues and increasing the remaining units’ fixed costs.
By providing a universal solar tariff and some “virtual solar rooftops,” the utilities protect themselves by selling more units. They can drive electrification further by proposing lower-cost electricity, and they reduce the fixed costs per unit sold.
The proposed ‘universal solar tariff’ is, in fact, both a defensive and offensive move for utilities. The low price and low carbon intensity of the kWh make it an attractive product for consumers. And the product is designed to limit network costs thanks to the solar optimization that caps the supply based on the actual solar generation (customers get just the number of solar units their virtual roof produced). It means there is no need for additional power generation to balance supply and demand on these contracts. The total electricity consumption is limited to the entire actual generation at a given time.
Does the universal solar tariff mean the end of residential solar rooftops?
To decarbonize our energy system in time, we need the maximum volume of low-carbon energy as soon as possible. Every time we are able to replace a unit generated by fossil fuel combustion with a clean energy one, we also mitigate the current energy crisis.
For this, behind-the-meter solar systems have unique advantages:
- They require fewer grid upgrades.
- We can deploy them quickly (no or minor permitting).
- They are an excellent way to collect private capital for low-carbon assets (as such, they may lower the cost of the overall system).
The energy required to power these universal solar tariffs can come from solar rooftops and utility-scale projects. The “Universal Solar Tariff” is a great way to mutualize the benefit of solar rooftops.
What would be the financial impacts of such a tariff on the utilities?
Financially it plays out well. Solar has one of the lowest Levelized Costs of electricity (LCOE), and the variable costs of solar units are meager compared to carbon-intensive ones. Utilities may have a higher margin rate on the units sold with a universal solar tariff.
In countries where solar systems have reached a high penetration level, utilities have created many different tools and incentives to deal with the “duck curve.” The duck curve is due to an oversupply of electricity to peak sun hours.
There are different strategies to deal with this event:
- a) Shift more loads to the time of solar electricity generation
- b) Store excess electricity for later use with batteries or green hydrogen
- c) Curtail production to maintain balance in the network
The universal solar tariff supports the first strategy by encouraging energy consumption at the time of clean electricity generation, thanks to a strong economic incentive.
Assuming EVs can provide Vehicle-2-Grid or Vehicle-2-Home services, this concept also supports the second mitigation strategy by storing energy during peak production hours that will be used when the low carbon energy supply reduces.
What is the difference between traditional green tariff and universal solar tariff?
The main difference is that there is a limit to the delivery of electricity as part of this contract when there is not enough sun. Your home or building may fall back on a more expensive tariff once this limit is reached. Another consequence could be that your vehicle may be plugged in but not charging.
What if I don’t consume all the electricity my virtual solar rooftop generates?
You will not benefit from these units, and other customers of the universal solar tariff may consume these units. You could imagine providers proposing a universal solar + storage tariff.
How do you limit the electricity consumption according to the virtual solar rooftop generation in real time?
Most electrical systems ensure real-time balancing between the demand and the supply, and utilities supply electricity according to real-time consumption. Utilities use, from time to time, demand-side management solutions to make marginal changes to the demand in case of emergency.
To limit the demand according to the generation, we need a new set of actuators that modify the load on the network. Energy management systems can also optimize an installation based on contract (limit peak power, reduce bill). They can help you orchestrate your heat pumps, electrical heaters, air conditioning, water boilers, battery storage, EV chargers, and other equipment according to your universal solar tariffs.
Limiting consumption at the load level is also possible if it is connected to a delivery point (a metering device used for billing). Some EVs charger with solar optimization already exists, and they adjust the charge speed based on the rooftop solar electricity generation. Alternatively, your next EV could come as a bundle (car + virtual solar rooftop).
For EV load management, the Zappi v2 and Charge HQ are two different examples of technical solutions that support solar optimization. The below graphs show the impact of such a feature on the load curve of a household.
What about Wind energy?
Wing energy is the other significant source of clean and low-cost electricity. As such, it is very suitable for such a tariff. Because wind energy has a less intuitive generation pattern, it can be more difficult for people to intuitively evaluate the amount of electricity generated with their contract at a given time. We can imagine the integration of wind electricity generation in such a tariff by leveraging artificial intelligence to provide a forecast of the energy to be delivered in the coming hours when the user plugs its EV. One advantage of wind is that it would provide an additional source of electricity available during the night.
What are the main concerns that people will have with the solar tariffs?
The main concern will be the cost of existing fossil fuel assets, long-term energy storage solutions, nuclear plants, battery storage, or green hydrogen power plants. Should the costs of these reserved capacities be factored in all units sold, including the ones as part of the universal solar tariff? By doing so, are we preventing optimization between the generation and consumption curve? Or should we factor these costs only to the units concerned to have a lower tariff that people can work with, encourage the shifting of loads to low-carbon time-of-generation, and replace the carbon-intensive assets with cheaper and cleaner ones?
More critical for utilities and our societies, this tariff encourages consumers to shift loads as EVs or heat pumps to higher margin units (solar-produced kWh) instead of carbon-intensive ones produced with fossil fuel. The global energy consumption may increase by 50% in 2050. We want this increase to be matched with only low carbon emission energy sources.
Does the universal solar tariff exist already? Can I sign up for it?
As I am aware, there is no such tariff proposed to consumer at this time. Electricity markets are pretty complex, and there are many regulations and limitations to what companies can do or not do. The system has been designed and operated with legacy technologies (coal, gas, hydro, sometimes nuclear) in mind for a long time. The universal solar tariff is one example of an innovative product for energy consumers and how a different optimization logic at the system level creates more value from renewable energies.
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