Did We Get Zero Energy Wrong? Arizona Builder Designs for the Grid, not Net-Metering

Dave Everson, CEO Of Mandalay Homes, Says It Is Time To Revamp The Renewable Energy Model By Designing For The Grid — Not Net-Metering. This Means Redefining How We Talk About Zero Energy.

Dave Everson is recognized as a leader for homebuilding innovation — his company, Mandalay Homes, received the DOE Innovation Award ten times since 2013. An early adopter of the U.S. Department of Energy’s zero energy ready home program (ZERH), he says it is time to shift focus away from net-metering and zero energy, and design for the grid instead.

Zero energy

What is zero energy? The total amount of energy used by the home on an annual basis is equal to the amount of renewable energy created onsite. It should not be confused with energy efficiency or less environmental impact. Meaning, if one loads a rooftop full of solar panels, any house can achieve zero energy. And, when excessive solar panels are installed, more energy will be generated than required to operate it — sometimes resulting in grid overload and negative impact on the environment. Regardless of these drawbacks, this is exactly what resulted from past solar incentives, especially in Hawaii, California, Nevada, and Arizona.

For solar salespeople, ‘zero energy’ was a buzzword used to encourage homeowners to buy solar panels and capitalize on solar incentives. The theory behind the incentives, they cost the utility less than creating new energy sources.

Along with the zero energy sales pitch, homeowners were told if their solar panels produced excess energy, they could sell power back to the utility at retail rates.

The early days of incentivizing solar panel adoption overlooked the problems that are surfacing from net-metering today. Now, states are passing legislation to reverse incentives that were intended to boost solar panel adoption. Even though the original net-metering model is fading, some with an interest in solar panel sales continue to advocate it as an ‘opportunity’, proclaiming benefits (some false) as seen in the advertisement from Solar Power Rocks (Image 1).

Selling energy to the utility (net-metering)

Is net-metering good? Utilities view it as a subsidy because they essentially pay retail rates for power that could be purchased at wholesale rates elsewhere. Solar salespeople take an opposite view; proclaiming without net-metering, homeowners would have less incentive to install solar panels in the first place. As such, it has been a significant part of the solar panel sales narrative. But, problems with net metering have surfaced.

The four problems caused by net-metering

1. Cost-shift

A focal point to the net-metering debate, some say it forces utility companies to buy back energy from solar customers at artificially high rates; at the expense of low-income utility customers who cannot afford solar power. This is sometimes referred to as ‘regressive’ because the benefits fall disproportionately on the wealthy, with the less fortunate bearing the brunt of the cost; a so-called ‘reverse Robin Hood effect’.

On the other hand, there are those who debunk the cost shift narrative as myth, citing a valid counter-counterargument. Some say the cost shift argument is fueled by the utilities who aim to protect their own interests — saying it is one of the most widely propagated myths around PV.

Whereas the debate about net-metering and cost shift continues, the following issues have little argument.

2. The duck curve

States are scrambling to combat the problem of too much energy created at non-peak hours, also known as the duck curve. The duck curve means substantial solar production in the middle of the day causes dispatchable and base-load producers, such as coal and nuclear, to reduce their output. Neither of which are intended to rapidly fire on and off, based on the fluctuations caused by solar and the rise and fall of the sun.

Video: the duck curve explained. But, not exactly…https://www.facebook.com/gcomm360/videos/1359020284234134/

Just as the net-metering image (Image 1) fails to consider the problems attributed to net-metering, the Vox duck curve video (above) fails to mention real solutions to grid overload. Meaning, it describes curtailment as the only way of dealing with too much midday renewable energy production. In doing so, it fails to present real solutions to the duck curve, such as batteries, pumped hydro, or EV. Both advertisements are cases of private entities protecting their interests, whether selling solar panels or making a case for investment in traditional power supplies.

Meanwhile, net metering problems are surfacing around the world, from California to Australia.

“So what do we do with all this electricity we don’t need in the middle of the day? The amount of solar power being produced in the middle are starting to have an impact on grid stability, and governments who have been happy to support solar will start to say well, paying for electricity in the middle of the day is very inefficient, maybe we’ll stop doing that.” Tony Wood , Energy Program Director, Grattan Institute

3. Anti-green effect

Net metering does not encourage rooftop solar consumers owners to invest in energy storage technology, instead it allows them to use the grid as storage. Ashley Brown, Executive Director of the Harvard Electricity Policy Group (HEPG), argues an irony, an “anti-green result as the rewards for energy efficiency, energy conservation, and distributed generation itself become smaller and smaller as more and more costs are shifted to the one part of the bill that everybody has to pay without regard to the level of consumption.” It may also discourage investments in energy efficiency if it forces utilities to increase the portion of the volumetric rate that covers fixed costs.

4. Grid overload

For some states, the electricity grid was not designed to cope with the amount of energy being generated in the middle of the day when demand is low, resulting in ‘solar spill’. Networks operating the grid are facing real challenges with not being prepared for excess energy coming back in in the middle of the day — and, they are starting to respond:

California — California is having to throw surplus energy away and sometimes pay Arizona to take it, a phenomenon called negative pricing. So much solar is produced at peak periods that wholesale energy prices can drop to zero or into negative territory; it puts strain on the grid, and the California Independent System Operator (the organization that oversees the operation of about 80% of the state’s electric power system) often has to send the excess solar to neighboring states like Arizona or curtail it altogether.

*“The California scenario of negative pricing, is a leading indicator of trouble for the whole country.” James Bushnell, Energy Economist, University of California, Davis*

Arizona — solar customers will get lower credits for excess solar-energy production and pay slightly higher monthly meter fees.

Hawaii — net energy metering program is abruptly removed in 2017. Under the new grid-supply option, PV customers will be compensated at the wholesale rate for electricity exported to the grid; roughly 15 cents per kilowatt-hour to 28 cents per kilowatt-hour, which is about half of the state’s average retail electricity rates. To help cover fixed costs, residential PV customers connected to the grid will pay a minimum monthly bill of $25.

In summary, selling solar panels to customers on the premise of ‘zero energy‘ sometimes results in the adverse effect of net-metering, the anti-green effect, a cost shift, and grid overload. On the other hand, advocating ‘zero energy‘ to home builders can have positive results — inspiring them to build homes that are designed to be energy efficient first; with the goal of reducing energy demand — this results in homes that are far superior in quality compared to those built to code minimum. When combining a low energy demand home with solar panel affordability, it allows zero energy to make economic sense, and scaleable.

Zero Energy Vs. Zero Energy Ready?

We must distinguish between the two.

In 2013, the U.S. Department of Energy launched its zero energy ready home program (ZERH). The premise, design a home to reduce its energy demand as much as possible, making it ‘zero energy ready’. In turn, very little solar is necessary to achieve zero energy compared to homes built to code minimum. A recent report by the Rocky Mountain Institute makes the case for zero energy ready homes, citing it only increases costs by as little as 1%.

We see solar salespeople use the lingo of ‘zero-energy’ to capitalize on incentives and sell homeowners solar panels with the potential of ‘selling’ energy back to the utility. On the other hand, the DOE and its ZERH program uses the lingo of ‘zero energy‘ to advocate a better built home that uses less energy to operate, improved indoor air quality, less water use, and lower environmental impact.

Builders are embracing the ZERH program.

Since 2013, and for three consecutive years, ZERH certifications have doubled to nearly 3,000 homes. Moving forward, program commitments exceed 10,000 homes. Furthermore, builders who have built or plan to build a zero energy ready home in 2019, has doubled to 44% from 21% in 2015. (Dodge Data and Analytics in 2017).

During the past five years. the price of solar panels has dropped 70%. Not only are we able to ZERH certify every Mandalay home, we are also able to offer a near-zero electric bill as a standard feature. Anymore, ZERH makes shear economic sense. When we couple ZERH with solar and storage, it is better for the grid and better for the environment (TABLE 1). It is time for the homebuilding industry to redefine the goals of yesterday. The ‘too expensive to build green’ is no longer an argument. Dave Everson, CEO, Mandalay Homes

With the economic barriers removed from building zero energy ready homes, Everson says we must focus on designing against net-metering and against grid overload, and solve the duck curve and lighten the environmental impact. He says by incorporating storage, it will alleviate the need for coal and nuclear power supplies to fire on and off due to net-metering.

Everson is not alone in the conversation about combating system peaks and distributed energy with storage. In New Hampshire, Liberty Utilities is launching a pilot programthat will subsidize up to 500 battery storage units for for homeowners to be proactive in lowering their utility bill while responding to system peaks. The pilot program is intended to produce a pivotal test case for home energy devices and reducing overall grid costs.

Could less solar have greater benefit to the environment than using more? Everson says yes. And he has proof, as demonstrated by the Mandalay iON home. The Mandalay iON home is designed against net metering, against grid overload, against the on and off firing of base-load energy production, and against placing avoidable strain on the environment. How does Everson do it? First, Mandalay builds homes that feature very low energy demand, giving special attention to energy design — balancing solar and storage with energy management software and technology.

STORAGE

The solution to wild electrical fluctuations in the grid is storage. Will storage transform the future of low-carbon energy generation? Not alone. It’s one (perhaps the first among equals) of several important factors — distribution models and battery-based grid regulation among them. Energy storage has the potential to shape the global energy landscape as it allows for renewables in places where the grid was unable to accommodate them. Given the decreasing cost and technology advancements, storage is primed to counter the challenge of intermittent energy supply. It is hard to argue against storage when considering the following:

1. Storage costs — an affordable solution

Bloomberg New Energy Finance has forecast a veritable boom in energy storage installations in the coming years with investments hitting US$1.2 trillion by 2040. Falling battery costs will be the driver behind this boom, with BNEF projecting a 52 percent drop in utility-scale lithium-ion systems by 2030.

2. Less solar is better: for the budget and the environment

When using storage, fewer solar panels are necessary to achieve a near zero electric bill and avoid net-metering. Everson says it may sound counter-intuitive, but using fewer solar panels and targeting a higher HERS Index has a greater benefit to the environment than a zero HERS Index home with solar — and costs the homeowner less (TABLE 1). Everson is adopting this formula for all Mandalay new homes, including in the Arizona communities of Jasper, The Dells, and Mountain Gate.

3. Going dark during peak — less negative impact to the environment

More of an issue in sunny states, the duck curve strains the grid, as it forces ramping down conventional plants so far that the fast ramp-up to meet peak evening demand strains their operational capability and spikes fossil fuel resources and carbon emissions.

The management of such oversupply during the midday hours results in decreased frequency response capabilities, which are caused by fewer energy resources being available to automatically adjust energy generation to maintain grid reliability.

Since solar energy cannot ramp up or down on demand, grid operators have trouble balancing power generation if there’s too much solar. Solar energy causes periods of over-generation during the day, followed by steep ramping needs from conventional sources in the evening. Traditional power supplies of coal and nuclear, were not designed to fire on and off. Yet, this is exactly what happens with solar and the duck curve. To avoid this risk, the grid needs access to automated frequency response systems that can quickly and automatically ramp up or down in the event of sudden interruptions — such as storage and software.

Recent policy shifts by the Federal Energy Regulatory Commission (FERC) and some pioneering states, coupled with advancements in the energy storage market, are signaling a shift toward utilizing energy storage as a more environmentally friendly and cost-effective alternative to gas-fired peaker plants. If these trends continue, a combined solar and energy storage facility could help provide a clean, renewable energy solution to the problems created by the duck curve.

Solar’s Changing Market

Will storage spell the end to small companies selling solar panels? Not exactly. But, these companies will be forced to become more creative than chasing incentives. If they are going to survive, it will require adapting to a new market — obtaining detailed energy use data for clients, predicting energy flow on a second-by-second basis, and calculating financial payback. This will force installers to get more savvy with energy modeling and storage trends. And, they maybe forced to incorporate storage solutions into their product lists.

While this article focuses on rooftop solar, Scott Rackey, Head of PV + Storage Development at First Solar, says the best economic model for solar and storage and a subdivision, is small ground mount solar at the megawatt scale. This can be one quarter of the cost compared to installing solar and storage on individual houses and rooftops. But, this solution would eliminate many jobs.

Rackey says we must consider future market trends such as EVs and the continued solar and storage price drop. He says the business of both keeps growing, stating it is hard to argue the cheapest form of energy, especially when it has no risk of an oil spill or nuclear accident.

Storage transforms an interment energy asset into a firm capacity asset. Scott Rackey, First Solar

Market Disruption

As private entities posture to support their interests, the zero energy and net metering debate intensifies. Those protecting nuclear and coal interests argue against solar and storage. Utilities argue against net-metering citing a cost shift and curtailment — solar salespeople argue for it as arsenal for their sales pitch to homeowners. Private interest groups fuel the debate by citing research and reports that are backed by ‘experts’ as a means to support their schemes. One thing is clear, thanks to net-metering and storage, the zero energy of yesterday is undergoing a revamp.

Meanwhile, Everson is making a clear statement. While others debate, he has completed his first ten Mandalay iON homes; all are occupied with enthusiastic homeowners. He has also broken ground on a 650-home iON community that will be dark during peak and have the storage flexibility to provide electricity for an additional 2000 homes. Everson is proving the model without incentives and without special programs. He is proving the model (in Arizona and beyond) as financially sound (for builder and home buyer), scaleable, and as having less environmental impact and strain on the environment. In the process, and in order to maximize benefit for the environment and pocketbook, he discovered it is best to design against net-metering and against net zero — this is iON by Mandalay. Consumers want it, it is cost effective to build, its dark during peak, it features no additional costs to the homeowner, and its energy storage is expandable. How do you argue that?