Electricity Wars: California is pivoting to a service model!

Tip: Electricity is a Service!

After California’s regulator started adding a fixed tariff that should ideally cover integration costs and emergency fuel, the solar industry started hitting a bit of clay. Predictably the classical voices are saying that it is “unfair” and that the regulator is “killing the industry”.

But as I explained before, electricity is not a commodity, but rather a service. The old system of pricing in kwh hours will soon be gone and as is usual with a regulatory correction, it is going to be followed by a rather painful market correction.

That grim future is tied to the California Public Utilities Commission (CPUC) changing the state’s solar rules a year ago, slashing the value of rooftop generated electricity.

The legislatively mandated review led to changes that cut the value of electricity generated by residential solar panels by 75% in the CPUC ruling, making it harder for residents to recover the cost of installing new systems. Solar arrays can carry price tags in the tens of thousands of dollars.

Electricity should be priced in both amps and kwh, it will settle the debate surrounding the LCOE and dozen other metrics that are being thrown around by the salespeople.

Renewable advocates have always said that it’s cheaper to integrate them, well if true then they shouldn’t have to fear a fixed tariff that covers their integration costs.

California is simply following the example that was set by Spain, the Netherlands, Flanders and I argue, soon to be South Africa and Australia.

Let’s wait and see what happens when everybody pays, the full cost of electricity.

As the old saying goes, where California leads, America follows.