Wednesday, June 20, 2012

Energy Sell-Back (or Buy-Back) Electricity Rate Plans

My fault, it's been a while... my goal when I created this blog was to have at least 1 "useful" post per month.  Although I have a lot of ideas, simply putting "pen to paper" has been much harder than I had expected.

Anyways, the topic of discussion this time is related to a previous post around my new solar panels.  As I described in that post, I was (and still am) really excited with the new system and the benefits that came with having had it installed.

I also alluded to the efforts to try and find the right electricity rate plan.  Initially, I struggled with how pick the right provider.  Prior to that, I touched on how to choose an electricity rate plan, but that was with the mindset where, like most homeowners, I would only be consuming electricity.

However, I needed to shop for a rate plan while also taking into consideration that I could generate excess electricity and put it back on to the grid.  This made comparing rate plans a bit more challenging.

On that note, a few things I needed to keep in mind while shopping for the right rate plan for a solar powered home:
1) Does the retailer offer a plan that actually purchases "net outflow"? (excess electricity generated that is placed back onto the grid)
2) What's the rate of "buy back"? ($ per kWh rate that the retailer will purchase net outflow)
3) How does this cost compare to non-buy back rate plans?

Example of retailer that doesn't buy back power.
About #1, the easiest way is to look at any of the retailer's rate plans and under the "Disclosure Chart" section (included with all Texas deregulated Energy Facts Labels).  There you will see a line item about whether or not they purchase excess renewable generation or net outflow.

Example of retailer that buys back power.
After determining whether or not a retailer purchases excess renewable generation, the search is then narrowed down to the specific rate plan(s) from the retailer that specifically allows for bill credits resulting from net outflows.

My search led me to just three in Texas that offer a buy-back rate plan:
- Reliant Energy
- TXU Energy
- Green Mountain Energy

With that, the next question, from #2 above, is about each retailer's policy on purchasing excess generation.

Not surprisingly, I discovered that this policy varies by retailer:
- Reliant's policy provides "a credit at the full retail energy charge for the first 500 kWh returned to the grid each month" and above that "5 cents per kWh credit for additional generation above 500 kWh that is returned to the grid"
- TXU's policy "will pay you 7.5¢ / kWh for surplus generation from solar units" (and from what I understood, there was not a kWh cap)
- Green Mountain's policy will pay for "the first 500 kWh per month of surplus power, the credit will be the same per kWh rate that Green Mountain charges for the Renewable Rewards electricity product" and above that "the buy-back rate will be reduced by 50 percent"

I threw those variables into a spreadsheet and, with some seasonal kWh assumptions, I determined that below 10 cents/kWh Reliant's plan was the best, with Green Mountain coming in second.  However, both retailer's rate plans have energy charges that are a bit higher than their own "run-of-the-mill" rate plans (at least 10 to 20% higher).

About TXU Energy, they offer buy-back on any rate plan, which is really nice, with the only requirement that you fill out a surplus generation agreement.  I would consider one of their plans if my net outflows were more than 500 kWh of electricity each month.

In a later post, I'll try to share some of the detailed analysis around the calculations leading to those conclusions.

Lastly, about question #3 above, I started my research with the assumption that buy-back rate plans could be compared with non-buy back plans.  However, after having had a new smart meter installed (required where I live in the Texas ERCOT market) with my solar panel system, I found that comparison is truly an apples-to-oranges scenario.

A little background before I get into "why":
  • The old electric meter was analog
    • Meaning it had a physical set of dials that showed how much electricity was flowing across the meter (for most people it flowed in one direction since electricity in the house was only being consumed)
    • The limitation to this technology was that it had to be physically visited by someone, typically once per month, for purposes like reading (billing) or disconnection
  • The new electric meter, or smart meter, is digital
    • Meaning it encompasses several technologies, such as wireless communication, that eliminate the need to be visited by someone for measurement or disconnection
    • Another advantage is the ability to read the flow of electricity more frequently, like every 15 minutes, which allows further insight into daily household energy use
So, why is the difference between old and new meters important?

If I had an analog meter with my solar panel system, those dials measuring my electricity flow would spin forward when I was using electricity and backward when I had excess generation going back onto the grid.  This would essentially credit me for all of my net outflow.  I actually was in this situation for a few weeks after my solar panels were installed while waiting for the smart meter to be put into place.

With the new smart meter (specifically the one designed for solar panel owners), it has two channels of measurement.  One for inflows (power taken from the grid and into my home) and the second for outflows (power placed onto the grid that I didn't consume).  So, essentially nothing "spins" backward.  The numbers measuring kWh only go forward.

This is important because retailers will see both numbers (inflow and outflow readings), but it's up to them whether or not they care about the outflow.  For most retailers, they would only bill on the inflow reading and never credit you (nor would they be obligated to) for the outflow reading.

Bottom-line, it really goes back to question #1 and focusing on retailers that offer a buy-back plan.  Comparing them with other retailers who only take into account electricity usage and exclude potential credit for excess generation doesn't make much sense, especially if I'm trying to maximize my investment in solar power.

Given that, I'll share with you a number from one of my recent monthly bills:  $16

Not bad, right??

(yeah yeah, "wait 'til summer" you say...)


  1. This should be replicated to the UK consumer market as it can bring down consumption of say for example, the daikin zone controller by heaps!

  2. TXU also offers "Free Nights" plans where you are not charged for energy consumption at night.

    The details are:
    - Free energy from 10PM-6AM
    - Daytime energy costs 19.7c/kwh
    - Buyback rate is still 7.5c/kwh

    So, as a thought exercise, how much solar capacity would you need to have a $0 bill in the middle of summer?

    Short answer is: A LOT! Since the outflow power is valued at 7.5c, and the inflow power costs 19.7c, for every KWH your house consumes during dawn/dusk you will have to produce almost 3 KWH in excess power to send back to the grid. Or you will need big battery packs to store and release that energy, which cost as much or more than the solar panels themselves.

    My house consumes an average of 3 kw during the day, and 2 kw at night. So my consumption between 8AM-8PM is about 36kwh, and my 8PM-8AM consumption is about 24kwh.

    My Free Energy plan takes out the nighttime usage, so it removes (6 hours) x (2kw)= 12kwh. That leaves me with 12kwh of power during the evening, and 36kwh during the day that I need to cover with my solar capacity.

    Furthermore, since the solar panels aren't providing anything after 8PM, or before 8AM, I have to pay for those kwh (at least 8kwh) completely out-of-pocket.

    So, bare minimum, my solar system will have to produce 36kwh + (8kwh x 3) = 60kwh per day to achieve zero energy charge.
    My solar radiation factor is about 6.0 during peak of summer. So my required capacity is, 60kwh / 6.0(hr) = 10kw.

    10kw would be a very big system for a residential site, costing $15,000-$20,000.
    Even if I had a fancy tracking array, and could achieve a solar radiation factor of 10.0 (unheard-of efficiency), I would still need 6kw, which is easily an investment of $10,000 or more.

    Even with tax credits, I would be out-of-pocket $8,000.
    If my power bill averages to $125 per month, it will take me 5.5 years to break even.

    All-in-all its about as good of a payoff scheme as any other renewable energy, but its still a huge investment and a long time period to see any kind of returns.

  3. . TXU Energy’s buy-back program is limited to DRG systems 12 kW and less.

  4. Jim what size system do you have?

  5. Glad that you ask, my system is about 6.5kW and you can see my lifetime usage stats here:
    My solar panel usage stats