Kansas utility regulators approved a new demand fee for Westar Energy that only applies to solar customers.
Customers of Kansas’ largest electric utility will face a new monthly charge if they choose to install solar panels on their homes.
Kansas regulators approved the demand fee Thursday as part of a rate case settlement with Westar Energy, which serves around 690,000 customers in the eastern part of the state.
Solar installers said the charge is likely to erase much or all of the financial incentive for smaller projects and keep the industry slumping in the state.
“Kansas should be open for business to solar companies, not making it harder for local business owners to work in Kansas,” said Dorothy Barnett, executive director of the Climate + Energy Project, a clean energy advocacy group.
She predicts the solar industry will continue to focus on other states, including Missouri, where conditions are more favorable for development.
The solar charge is part of a wide-ranging rate case settlement approved Thursday by the Kansas Corporation Commission. The fee is $9 per kilowatt during the summer and $3 per kilowatt during the remainder of the year.
Kansas City Power & Light, which recently merged with Westar, filed a similar request and is likely to get an answer from the commission by the end of the year. Barnett expects the commission will have little choice but to also grant KCP&L’s demand fee request, and she suspects other, smaller utilities in the state will seek to do the same.
The demand fee will be an addition to Westar’s fixed fee and the energy fee that varies with the amount of energy used. The new fee applies to customers with solar systems that began operating after October 2015. Westar puts them at about 350. Another 470 customers with solar systems that began operating before that time are exempted from the new charge.
One solar installer said that he expects his residential solar business will continue in the slump it’s been in a year or so, but he foresees an upside: more work installing home batteries for people determined to purchase even less electricity from Westar.
Demand fees are routinely levied on commercial customers. Although still a rarity in the residential sector, they’ve gotten a little traction lately as utilities have sought ways to compensate for decreased sales to people with their own solar generation. Because spikes in demand often impose large costs on electricity providers, who must resort to costly “peaker” plants or high-priced purchases on the spot wholesale market, they look for ways to pass those on to customers with erratic usage patterns.
Westar will calculate the demand fee each month based on that month’s highest 15 minutes of use between 2 p.m. and 7 p.m. If a customer’s air-conditioner, clothes dryer and electric oven happen to suck power at the same moment, a spike in demand results. The duration doesn’t matter, just the height of the peak.
Debates over rates for customers with rooftop solar arrays often orbit around the question of the cost — or value — of solar to the grid. The Kansas proceeding was no different. Westar and its experts made the case that solar customers, because they purchase less energy from the utility, fail to pay for their share of grid services. Even if those customers require less energy, utilities often take the position that solar customers use the transmission and especially the distribution systems to move their excess solar power out onto the grid. And in times of excess production, they say, solar customers use the grid as a battery.
Solar proponents generally assert that, in fact, they provide valuable services to utilities and grids because they don’t require as much power from far-away sources, reducing power losses and the wear on wires and substations and transformers. Their excess power, they say, most likely goes to a customer down the block.
“The KCC’s ruling was made without justification from independent studies,” said Aron Cromwell, who owns a Lawrence solar company and is a member of Climate + Energy’s Clean Energy Business Council. The decision “impedes a free market system and restricts energy choice in Kansas.”
Getting beyond the conflicting claims would require a value-of-solar study. While those have been done in several locations across the country, there’s been none in Kansas or in most states nearby. And there probably aren’t enough solar customers in Kansas to yield a meaningful result.
The number of residential solar customers in Kansas is unlikely to reach the requisite threshold now that a demand fee is weighing down the economics of solar. Mark Horst, owner of King Solar in Hutchinson, Kansas, did the math a couple months ago and estimated that the demand fee would undermine savings for small installations in particular.
He analyzed the finances of one customer’s 2.32-kilowatt array, and determined that her average monthly savings of $35 would be more than negated by an average monthly demand charge of $45. She actually should remove her array, he said. Larger arrays, while financially disadvantaged by the demand fee, still can result in some savings, according to Horst.
In an email, Westar spokeswoman Gina Penzig said, “The new rates still allow for savings when installing solar.”
It will mean paying attention to when various electrical machines are running, and trying to space them out, said Andy Rondon, a solar consultant with Good Energy Solutions in Lawrence.
“That kind of stuff is going to help. This is the route we’re going to have to go, as an industry.”
Technology is available to manage home energy use, but it’s costly and hasn’t been widely adopted, Rondon said. The alternative, he said, is people paying attention and managing the switches.
Or investing in batteries. A battery that cost close to $40,000 early this year is now better-performing and can be had for no more than $20,000, according to Rondon.
“I think that regardless of what we do, we are going to see more people adding batteries to their homes,” he said, and likely buying even less electricity from the local power company.