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September 9, 2019

How Utilities Are Approaching the Cost of Power for Businesses—And What it Means for Evening Energy Use

Time of Use (ToU) pricing is a fancy name utilities use to adjust their electricity rates – based on customer demand:

  • When more people want electricity, the rate goes up
  • When demand decreases, electricity prices go down

To avoid peak demand charges, businesses throughout California have historically explored 2 options:

  • Adjust hours of operation to ensure power consumption coincides with off-peak pricing
  • Install solar panels to generate “free” electricity during the day when grid utility rates are at their peak 

However, neither of these strategies deliver the results that it once did. 

How California’s Changing Utility Landscape Makes It Harder to Save 

Installing solar photovoltaic (PV) panels isn’t an effective strategy for managing ToU pricing since peak demand is no longer during normal daytime hours. California utilities keep shifting it later and later, with many of the highest rates now falling between 4 PM and 9 PM.

This is when the sun is starting to set, and solar panels stop generating power.

For certain businesses, adjusting their hours of operation isn’t really an option either. Many theaters, night clubs, restaurants and other entertainment venues cater exclusively to the evening crowd – often with their opening hours coinciding with the most expensive utility rates of the day.

Even when those same venues install solar PV panels, they can’t use the clean electricity generated directly. Instead they feed this unused daytime solar power into the utility grid under California’s net energy metering (NEM) program. Although they are compensated for this electricity, these solar customers are granted a lesser value for the energy they have stored on the utility gird.

And when their panels stop working at night, these evening businesses must buy whatever electricity they need from the grid – usually at peak prices.

Worse still, many of these entertainment venues also rely heavily on low-skilled labor. While California deserves praise for leading the charge in minimum wage increases, this shift introduces another skyrocketing cost that theaters and restaurants must now manage. 

The state’s evolving energy landscape and labor laws are squeezing many businesses from both sides.

Fortunately, there is a way to harness solar energy – both day and night – so you can avoid paying exorbitant rates for grid electricity. And California is prepared to help you make the transition using generous self generation incentives.

Solar Batteries and California’s Self-Generation Incentive Program

Installing on-site solar batteries allows you to capture the clean electricity generated from your PV panels early in the day. This is especially useful if your business doesn’t use much power during morning hours (e.g. 7 AM to noon).

Your solar PV system can charge the batteries daily with free sunshine in a few hours. 

This stored power is then used in the evening to eliminate the highest electrical usage cost for your business.

So why doesn’t every business install solar batteries?

The primary reason is cost. The upfront investment is significant and many businesses have a hard time justifying the expense – despite the long-term benefits and savings available. The benefits for some extend into millions in operational savings.

Back in 2001, California introduced a state-level subsidy known as the Self-Generation Incentive Program (SGIP). This incentive covers up to 12% of commercial on-site batteries clean energy investment when paired with solar power.

A victim of its own success, the Self-Generation Incentive Program quickly started to run out of money. But in 2018, Governor Brown signed SB700 into law, which extended the Self-Generation Incentive Program through 2025. This added an extra $800 million in funding, bringing the total to $1.2 billion. 

Passage of SB700 essentially reset the clock. But because free money tends to attract a lot of interest, financing will likely run out well before 2025.

Act now and use the SGIP initiative to help reduce the cost of your own clean power investment. 

In addition, you can save even more money by combining the SGIP with other solar incentives, such as:

  • Net Energy Metering
  • The Investment Tax Credit
  • Section 179 and Bonus Depreciation
  • State-Level Depreciation

Read more about these incentives here: Using Solar Rebates and Incentives to Help Pay for Your Commercial PV Installation

Getting the Most Out Of Solar PV Panels and On-Site Storage

If you want to control rising electricity costs, combining solar panels with on-site storage is a great start. This combination won’t shield you from minimum wage increases, but it can free up resources to help make covering salary hikes more manageable.

Still, you may be at risk of leaving money on the table. In fact, you might even lose money if your solar PV system suffers from faulty parts, shoddy labor or simple degradation.

This is why we also install real-time solar monitoring so our customers can track their PV system’s performance. This monitoring allows you to quickly intervene the moment your solar installation’s output dips below normal thresholds.

In the absence of solar monitoring, undetected issues can fester. And depending on the size of your PV installation, you might rack up tens of thousands of dollars in direct losses as you unwittingly buy more of your electricity from the utility grid. Moreover, because much of that power is generated from fossil fuel, you’re also indirectly releasing more CO2 into the atmosphere.

This defeats the whole purpose of going solar in the first place.

But as the following case study highlights, it’s possible to dramatically reduce monthly energy spending and safeguard your solar savings for decades. 

A Case Study in Savings: PV Panels, Solar Batteries and Real-Time Monitoring

Mary Pickford Theater is an entertainment venue whose primary hours of operation are during the evening, when electricity rates are at their peak.

The Mary Pickford Theater with solar power and battery storage
The Mary Pickford Theater with solar power and battery storage

Under Southern California Edison’s older GS-3-B-CPP rate tariff rules, the theater was being charged:

  • $0.21 kW/h for standard electricity usage. During the theater’s busy summer season, this resulted in an average of $28,399.15 in charges a month
  • $13.61 in “on-peak” demand charges. With an average consumption rate of 485 kW, the theater paid roughly $6,600.85 a month (or 485 kW x $13.61)

Taken together, Mary Pickford Theater’s total monthly bill averaged $35,000 during the summer. But in March 2019, SCE updated its rate tariff schedule under its new GS-3-E guidelines:

  • The standard kW/h rate jumped up to $0.42777
  • The on-peak demand rate plummeted to $3.38

To adjust to this sudden change, Mary Pickford Theater explored a range of solutions to help save money and control rising costs. 

After a thorough energy audit, the theater decided to swap out incandescent bulbs with LED alternatives. It also replaced its previous air conditioning system with more energy efficient equipment. These commonsense improvements helped Mary Pickford Theater reduce its operational expenses substantially.

On-site Solar Battery Storage
On-site Solar Battery Storage

To further increase boost savings, however, the theater also installed:

  • A 620 kW rooftop PV system 
  • 1,000 kW/h of on-site storage
  • Real-time solar monitoring

Because Mary Pickford Theater uses minimal electricity during the day, it can fully top up its batteries using the free energy generated from its solar PV panels before noon. And as a result, it is able to avoid paying $0.42777 kW/h in standard usage charges.

When combined with the aforementioned energy efficiency improvements, this combination delivers utility bill savings of 90% for its standard electricity consumption.

In addition, Mary Pickford Theater uses its stored solar energy to power its evening operations. And this has reduced the previous 485 kW in demand usage to an average of 100 kW during the expensive 4 PM to 9 PM time range.

Deploying battery storage (under the new peak demand rate) means Mary Pickford Theater only pays $338 per month during the summer (or 100 x $3.38). This represents a savings of 95%, given that the theater was previously paying $6,600.85 per month. 

During the non-summer months when cooling requirements are lower, this solar and storage combination covers almost 100% of the theater’s energy needs around the clock.

In just the first year alone, Mary Pickford Theater saved more than $230,000 in utility bills. Over the next 21 years, it expects to save nearly $5 million.

And thanks to real-time solar monitoring, the theater can protect these savings by immediately intervening if and when there is a problem.

Ready to Add Solar Power, On-Site Batteries and Real-Time Monitoring?

Going solar is a huge investment. But with the ever-evolving utility landscape, it’s becoming harder for many nighttime businesses to justify the upfront cost. On its own, solar power is no longer a sufficient energy management solution in the quest to control rising grid electricity prices.

However, installing on-site batteries allows you to keep and use 100% of the clean electricity that your PV panels generate throughout the day. When executed correctly, this combination can cover nearly all of your energy requirements – as illustrated by Mary Pickford Theater.

Better still, making the transition is more affordable than ever thanks to initiatives like the Self-Generation Incentive Program. This subsidy reduces the upfront cost of your solar battery investment by 12%.  And with real-time monitoring under-girding your PV system, you’re able to protect your investment throughout the 25+ years of your solar panels’ warrantied lifetimes.

To learn how we can help your business keep the lights on, save money, and reduce its carbon footprint, request a commercial energy analysis.

Request Commercial Energy Analysis

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