There has been a flurry of activity around electricity rates in the last few months, and I think it is important to keep on top of this news for you. It’s also time for a quick update on the solar panels, or as I sometimes refer to them, “The Mathematician’s Folly.” (No, just kidding, my love.)
If you are new or want a refresher, you can go back to the beginning of our story or pick up with the previous update. Today, I’m going to refresh the financials, talk about our first big issue with the panels and then give an update opinion on how the panels have fit into our life.
DTE Rate Hikes
In November, the Michigan Public Service Commission approved a $30m rate increase for DTE. This increase translates to less then $1/mo for the average home. The approved increase is significantly less than the $388m increase requested. (And no, I didn’t accidentally add an extra digit in there.).
In the same swoop, the Commission rejected a proposal to reduce the payment to rooftop solar owners who sell electricity to DTE, a “demand charge” for solar owners and actually required DTE to increase the payment (by literally 0.2 cents – I can’t make this stuff up) to solar owners for their electricity.
For frame of reference, DTE currently pays solar owners about $.09 per kilowatt hour. DTE wanted to drop this to $.035 per kilwatt hour. (Yes, you are reading that correctly – three and a half cents). DTE sells this electricity to to other customers for their full retail rate of around $.18 per kilwatt hour. So they wanted to pay less than 20% of what they sell it for. (More on this hot button below!)
Undeterred, DTE filed for its next rate increase on February 10, 2023 and requested an almost 14% rate hike, the equivalent of $622m. If approved, the average household’s bill would increase by $12.46/month. I’ll have to keep you posted on this rate fight. After the devastating ice storm we had a few weeks ago, thousands were without power for multiple days. The Commission might not be in a very friendly state of mind when it comes to a double digit rate hike.
Time of Day Rates
In March, DTE will launch mandatory “time of day” rates for all customers. Customers will pay different rates for electricity based on the time of day and also the time of year. This change to the rate structure was actually required by the Commission, and was not at the behest of DTE. DTE had offered a time of day rate structure previously; it was just for optional enrollment and the structure was a little different.
Basically, between 3:00 pm and 7:00 pm Monday through Friday, electricity is going to be more expensive. In October – May, electricity will be just shy of 9% more than non-peak hours. In June – September, a kilowatt hour will be a whopping 35% more expensive than non-peak hours.
This model more accurately reflects the cost of the electricity being generated and used. In June-September, people get home from work and do what? Crank their air conditioning to try to cool down their house. When everyone behaves similarly, it strains the system. DTE may need to either generate power in advance or purchase energy from other sources. This setup makes the electricity more expensive during those time periods.
Now, the good news here is that electricity will actually be cheaper during the off-peak hours, and I do mean cheaper than than the current flat rate! This setup means you will want to shift your flexible energy usage away from peak hours. Dishwasher, laundry, charging electric vehicles – these are best completed at any time other than 3pm – 7pm on weekdays.
You can visit DTE’s website to learn more about these rate changes and to run simulations using your own energy usage data. The new rate structure will go into effect sometime this month, so you’ll want to watch for a notice from DTE on when exactly that change will occur. (As of right now, we have received nothing on this change . . . as of March 13.)
A Solar Cliff
Buckle up for this one, folks. DTE is required by federal law to allow residential solar owners to hook up to the grid. However, how much DTE pays for the electricity sent back to them is not covered under that law. Under the current distributed generation solar program, DTE has to hook customers up and pay them the rate I discussed above (roughly 9 cents per kilowatt hour right now).
Now, that nine cents per kWh is set up by Michigan law to only apply until the amount of solar energy sold back hits 1% of their annual average peak load. WTH does that mean? Okay, basically, there’s a tipping point where DTE doesn’t have to include new solar homes in the program to pay them the $.09 per kWh.
Soooo (you can see where this is going) we’re about to hit that cap. DTE told the Commission it expects to hit its cap by July 1 of THIS YEAR. Well, DTE did agree to hook up customers under the current arrangement through the end of 2023, but what will solar owners receive after year end?
I’ll tell you – only because I couldn’t find a GIF of the scene from Footloose where they play “chicken” with a pair of tractors.
THEY DON’T KNOW. (I’m not that surprised? Are you?) The Commission/the government/DTE have nothing lined up to replace the current program. Now, Consumers Energy hit their cap last year and voluntarily agreed to raise the limit. (Probably because they were – wisely – scared to push the state and end up with a program they hated even more. The devil you know and all that.)
A Tale of Two Arguments
The argument over how much residential solar panel owners should receive for the energy they sell back to electric providers is actually a fascinating social justice question.
Here’s my interpretation of the DTE side of the argument:
The cost of wholesale energy is 3-4 cents per kilowatt hour on the open market. When DTE is required to pay solar panel owners 9 cents per kWh, it’s paying more than it otherwise would for that electricity. Because DTE is a for-profit company, it needs to charge all customers more money per kWH to sustain its business make a profit for its shareholders than it would if it was paying the regular lower wholesale rate. For this reason, DTE always refers to the solar panel outflow credits to homeowners as “a subsidy.”
Here’s the homeowner’s version:
When a solar panel produces more electricity than a home uses, the electricity is fed back into the grid and redirected to the home’s closest neighbors. While the homeowner sunk thousands of dollars into the solar panel infrastructure to generate that “clean energy”, DTE is just shuttling it next door and charging double the amount for it. If DTE were to pay only 3.5 cents per kWh, owning the panels now becomes cost prohibitive and people are disincentivized to add a home solar panel array.
Dollars & Sense: An Update
So what’s the update on our solar panel return on investment? I know, inquiring minds want to know.
I’ll get into the detail below but the bottom line is that our lifetime savings since we installed the solar is 54.84%. In our home, that translates to $1,272 saved between July 2021 and February 2023.
If we look at the calendar year 2022, the savings on our annual electric bill was 66.74%, not too shabby! Our total electrical bill for 2022 was right around $356, as opposed to the $1,072 we would have paid without the solar.
Recap on the financials: Our net cost on the panels and battery system was $23,722. So far we have saved about 5% of the total investment. As we continue to see annual rate hikes, I expect the cost savings will start to accelerate.
Our First Hiccup
We did have our first hiccup with the battery, and I was not a happy camper. The last week of October 2022, I popped into my Enphase app to check on the solar production. I noticed that the battery was showing offline with an error. After researching the error, Enphase indicated that the error would most like reset itself overnight.
So . . . I promptly forgot about it. Well, a few days later, I popped back into the app and realized the error was still showing. Our battery was not functioning. After thirty minutes of troubleshooting on the phone with Enphase support (who was actually very helpful), we decided a tech would have to come out from our installer because a piece of hardware might be the issue.
It took another three days to get the installer onsite. He was able to get the battery back online. It seems Enphase had pushed out a software update and our system simply didn’t like it. After several reboots and a manual update push, the issue was fixed.
In the end our battery was offline about 8-9 days during a sunny time of the year. I was pretty upset that we missed out on the savings during that time.
Other than this hiccup, we barely notice our solar panels. They function quietly in the background, and we enjoy having the lower monthly electric cost.
We have not had an instance where we had to significantly rely on our battery during a power outage. I still have a lot of concerns around its ability to get us through a winter storm.
As always, thank you for joining me! I’m happy to help any home owner questions you have and as always, happy homeownering!
