Session: 10-02: Alternative Energy Conversion Technology (including Wind, Geothermal, Hydro, and Ocean)

Paper Number: 142379

142379 - The Effect of Income Dependent Base Charge Energy Pricing on Photovoltaic Adoption. 

Abstract: 

Income dependent base charge is a residential electricity pricing scheme in which customers pay reduced utility tariffs but are charged a monthly fee based on household income. A household that uses enough electricity such that the amount saved due to the reduced utility tariff is greater than the monthly fee will save money. Alternately, consumers who use a small amount of electricity, such that the reduced tariff savings are smaller than the monthly fee, are paying more than they would otherwise. The motivating factor behind this type of energy pricing is to make the energy burden or percentage of income spent on energy more even across household income levels. As things are now, lower income households tend to spend a higher percentage of their annual income on energy, and income dependent base charge seeks to reduce that burden. 

One problem with income dependent base charge is that it does not incentivize energy saving behaviors, because energy bills are not purely based on energy used. One population that could be disproportionately affected by income dependent base charge are residential photovoltaic owners. For these customers, who are likely to use less electricity than non-residential photovoltaic owners, the base charges far outweigh the savings due to the reduced utility tariff. Based on the study by Jacksohn et al., the largest determining factor in residential photovoltaic adoption is return on investment. Under income dependent base charge the rate of return would be reduced for all customers and reduced by a higher margin for high income households who are the most likely to invest in solar. Because of these factors, Introducing income dependent base charge could lead to a large decrease in residential photovoltaic adoption. The goal of this work is to determine what the impact of income dependent base cost would be on the rate of return of photovoltaic owners across income levels and electricity consumption habits, and to make a prediction as to how large of an impact that change could have on photovoltaic adoption rates. 

In order to predict the effect of income dependent base charge on photovoltaic users, diverse house models will be generated using a stochastic model described in Covington et al. The electricity use of those households will be simulated using Energy Plus, a building simulation tool developed by the Department of Energy. The household models will also integrate an appropriate amount of photovoltaic cells to meet their electricity demand and simulated again. From the simulated energy usage data and energy pricing from California utility provider PG&E the cost of the solar arrays will be compared to the savings due to residential photovoltaics under existing pricing and income dependent base charge. Finally using data from Chan et al. and Heleno et al. regarding the relationship between return on investment and photovoltaic adoption the change in photovoltaic adoption due to income dependent base charge can be found. Using fairness metrics established in Covington et al., it can be demonstrated that Income Dependent Base Charge produces unfair conditions for a majority of photovoltaic owners.

The data collected shows that income dependent base charge will have a severely negative impact on the return on investment for photovoltaics, particularly for medium high and high income households. 35% of households with a combined income of $100,000 or more would require more than 15 years of savings due to photovoltaics before paying off their solar investment, and some households are never able to make back their investment when the discount rate is applied to the money invested. The households in the medium high and high income range account for 50% of residential solar installations, so income dependent base charge will have a substantial negative impact on photovoltaic investment. 

Presenting Author: Samuel Broyles Santa Clara University

Presenting Author Biography: Sam Broyles is a Mechanical Engineer working on a masters degree at Santa Clara University in mechanical engineering with a focus on mechatronic systems. He is currently working as a researcher for SCU, and has previously been a Manufacturing Engineer at Swagelok Northern California. He is interested in robotics, green energy, and music.

Authors:

Samuel Broyles Santa Clara University
Thomas Roth National Institute of Standards and Technology
Wenqi Guo National Insitute of Standards and Technology
Yuhong Liu Santa Clara University
Yi Fang Santa Clara University
Hohyun Lee Santa Clara University