How utility company pricing models affect you
How utility company pricing models affect you
Aging grid infrastructure, the increased adoption of renewable energy sources and more freak weather events, has prompted utility companies to roll-out innovative new ways to bill customers for their energy, as they look to better balance supply and demand.
From time-of-use pricing to demand charges, residential energy plans are changing, prompting more and more consumers to turn to rooftop solar and battery storage systems to gain greater control over their energy.
Here's a closer look at how utilities price your power and where solar-plus-storage can help you to keep your bills down and lights on.
Flat billing is a common residential energy charge where homeowners pay one rate for all their energy consumption, regardless of the time of day or total amount used. For example, this might be $0.15 per kilowatt-hour. Sometimes, utilities do charge a different flat rate in the Summer or Winter than during the rest of the year.
If you're billed under a flat rate model, solar can help you lower your bills by providing you with a source of power to either 1) sell back to the grid — lowering your total cost based on the amount of solar power produced — or 2) store with a battery system and use in place of utility-provided power, lowering your bill similarly and providing you with a back-up in the case of an outage.
Under a tiered billing plan, you will be charged different rates for different usage amounts. For example, you might be charged one rate for the first several hundred kilowatt-hours of energy you use and then another rate for the next few hundred. For context, the average American household uses 893 kWh per month. Some utilities increase the rate they charge with increased usage, while others charge less. There may also be seasonal variations on top of these tiers.
With solar panels and battery storage, you can mitigate the increase in prices by switching to your stored power when prices rise and generally reducing the net power drawn from the utility company.
Time-of-Use (TOU) pricing charges you different rates for your energy depending on the time of day. It's quickly becoming a popular new billing mechanism across the US. While different utilities take different approaches, TOU plans adjust how much you pay based on customer demand and energy generation costs, which means prices can vary by season, day of the week, holidays and throughout the day.
An advantage of TOU rates is that it adds transparency to your energy bills, giving you greater control over how much you pay by enabling you to adjust your energy consumption when prices are at their highest. Solar-plus-storage really comes into its own under TOU plans, by enabling you to tap into stored solar power during peak hours. Panasonic's EverVolt storage system allows you to simply switch your battery on and off remotely via an app.
Panasonic EverVolt 2.0 home battery storage system. Photo courtesy of Panasonic Life Solutions.
Utilities typically charge homeowners based on the amount of energy they use every month. However, some utilities are starting to propose demand charges for residential customers, which bills homeowners based on their peak power usage during a single 15-minute or 1-hour long period in a month. This means that if you use a particularly high amount of energy in a short time period, your bill will be higher to reflect this.
For homeowners that only have a rooftop solar system without battery storage, demand charges can mean you don't end up saving much on your electricity bills since it can be tough to coordinate your household's peak energy usage with peak output from your solar panels. However, if you have a battery, you could instead draw from your stored power when your energy consumption is high, to avoid using too much energy from the grid.
If you have solar panels installed, net metering allows you to send some or all of your solar power back to the grid if you can't use it, ensuring that it doesn't go to waste. In return, your utility will give you credits on your energy bill which you can use to offset the costs of future bills. For example, in the darker, cloudier days of winter, when your solar panels might not produce as much energy in comparison to the season's high energy needs. Some utilities allow you to roll these credits over into future years.
In some areas, utilities only offer partial credits for every unit of energy you feed back into the grid, which means you won't be fully compensated for your surplus solar production. In these areas and in state's where net metering isn't offered, adding battery storage to your solar panels can be really beneficial, since it enables you to store and use any surplus power yourself, rather than exporting it to the grid for little or no credit.
It can be helpful to check your state's net metering policies as a part of your research into solar energy.
Flat Monthly Subscriptions
Three electric utilities in the US are experimenting with an innovative new approach to pricing — a flat monthly rate, much like paying a monthly subscription to Amazon or Netflix. Since March this year, Uplight has been piloting its 'Plus' product with three utilities including Duke Energy and AES Indiana, offering customers a subscription-based package for the same amount each month.
Some utilities may combine several different billing approaches which can make understanding your monthly energy bills really tough. But whatever energy plan you're on, solar and solar-plus-storage offers you greater independence from utilities, shielding you from volatile and rising energy prices and ensuring you can keep the lights on in a power outage.