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This whole article is weird to me as a New Zealander, since most of the problems comes from weirdly, not letting the market set the buy-back rate of electricity

This whole article is weird to me as a New Zealander, since most of the problems comes from weirdly, not letting the market set the buy-back rate of electricity. I worked for one of New Zealand's largest electricity generators and retailers, and we investigated a solar market. Here's how it works. Electricity is broken up into generation costs, distribution costs, retail costs, regulatory costs, and profit. Generation capacity goes up and down throughout the day, as does demand. In New Zealand an automated auction happens 30 minutes where generators bid in electricity at a price. The system operator then buys capacity required at any particular area at the cheapest price that is available. This sets the wholesale price of electricity. This then gets distributed by the system operator throughout the country to a local lines company. They maintain the power lines to your house, but also to that person in the middle of nowhere. The energy company figures out how much you've consumed, and bills you. Of course, when you have a problem, you call them, so there's a call centre always available as well. Finally, there are taxes and levies that the government applies. After all that, if there's anything left over between the retail price, and the sum of those costs, well, that's the profit. The weird bit is, where do you set the buyback rate for solar? The retail price? But there's so much expenses there, not all of which are the retailer's cost. The fair price of the market is the generating price, or wholesale price. But, there maybe political incentives to set a higher rate, as well as cap the number of people who can get that higher rate. But if you want it sustainable for everybody, then using the wholesale rate makes more sense.

skolos 11y ago
What you just said is that the buyback rate should be somewhere between wholesale rate and retail. There is no clear cut way to figure out what it should be so regulators and politicians get involved in setting the rate. "Sustainable for everybody" argument can be used on both sides - if rate is set too low, the solar panel owners subsidize the rest of the customers if it is set too high then other customers subsidize solar panel owners. So the argument is not as clear as you tried to make it sound.
- WaylonKenning 11y ago
  There is a clear cut way - the wholesale rate. In New Zealand, an auction happens every 30 minutes where demand is tallied by the system operator (Transpower) at a Grid Extraction Point, and generators bid in what they think it's worth. The system operator then purchases the cheapest electricity available (taking into account demand is different throughout the network, and the network can't transfer all electricity to all parts of the grid because of line constraints). This is the cost of the 'raw materials' of the retail electricity price. A solar panel on your house really isn't any different that a little power station. You still have to transport that electricity somewhere, maintain those lines, maintain the voltage, run a power station when it gets dark, bill you, etc. It's not a big conspiracy, it's just that the cost of energy makes up about half the costs of the electricity system. If you set at a rate higher than the wholesale rate, then there must be other reasons to do so rather than pure financials. A good example would be if an Energy Utility wanted to attract solar customers, sell them solar systems, and put it on the bill to make them more sticky customers.
  - andor436 11y ago
    That's not quite what the wholesale rate means in the US; we have what you describe but it's typically referred to as the spot market. The wholesale rate when used by politicians and the media here usually (as far as I know) refers to the monthly auction clearing rate, which is much more stable. There is also a day-ahead wholesale rate, but the net metering rollback bills I've read recently are all based on the monthly auction rate.

skolos 11y ago

What you just said is that the buyback rate should be somewhere between wholesale rate and retail. There is no clear cut way to figure out what it should be so regulators and politicians get involved in setting the rate. "Sustainable for everybody" argument can be used on both sides - if rate is set too low, the solar panel owners subsidize the rest of the customers if it is set too high then other customers subsidize solar panel owners. So the argument is not as clear as you tried to make it sound.

WaylonKenning 11y ago
There is a clear cut way - the wholesale rate. In New Zealand, an auction happens every 30 minutes where demand is tallied by the system operator (Transpower) at a Grid Extraction Point, and generators bid in what they think it's worth. The system operator then purchases the cheapest electricity available (taking into account demand is different throughout the network, and the network can't transfer all electricity to all parts of the grid because of line constraints). This is the cost of the 'raw materials' of the retail electricity price. A solar panel on your house really isn't any different that a little power station. You still have to transport that electricity somewhere, maintain those lines, maintain the voltage, run a power station when it gets dark, bill you, etc. It's not a big conspiracy, it's just that the cost of energy makes up about half the costs of the electricity system. If you set at a rate higher than the wholesale rate, then there must be other reasons to do so rather than pure financials. A good example would be if an Energy Utility wanted to attract solar customers, sell them solar systems, and put it on the bill to make them more sticky customers.
- andor436 11y ago
  That's not quite what the wholesale rate means in the US; we have what you describe but it's typically referred to as the spot market. The wholesale rate when used by politicians and the media here usually (as far as I know) refers to the monthly auction clearing rate, which is much more stable. There is also a day-ahead wholesale rate, but the net metering rollback bills I've read recently are all based on the monthly auction rate.