Solar power is a hot topic in the energy industry these days. The technology is constantly evolving, and more states and cities are encouraging solar development through financial incentives and tax breaks, on both a business and household level. We are in the midst of a green energy revolution, and solar power is on the rise. But what is the true value of solar energy? Read on to find out more.
Calculating the Value of Solar Power
Recently, Minnesota broke ground by formalizing the study of solar energy value formula that is designed to change the sometimes tenuous relationship between producers and utilities. Compensation for the production of solar energy has depended largely on consumption rates, which can put producers at a disadvantage depending on their region, and the demand for alternative energy.
The formula in question sets an interesting precedent that was meant to set a transparent, market-based price for solar energy. That price was designed to be based entirely on the following objectives: avoiding the purchase of energy from other, more polluting energy sources; avoiding the need to build additional power plant capacity to meet growing consumer energy needs; providing energy at a fixed price now and in the future; and reducing wear and tear on the electric grid (including power lines, substations, and power plants).
Value of Solar vs. Net Metering
There are a number of key differences between Minnesota’s calculation and standard net metering practices. To start, in the case of net metering, the creation of solar power reduces your electricity bill similarly to how energy conservation (such as turning off a light) would lower your energy use. In the case of Minnesota’s Value of Solar formula, it is the value of the solar rate rather than the retail electricity rate that would influence the price. The price is locked in with a 25-year contract, and any net excess electricity generation is forfeited to the utility. In both cases, customers earn credit toward their energy bill for solar power generated, and production cannot exceed 120% of on-site annual consumption.
The Environmental Value
Interestingly enough, the precedent this formula sets is rather one that incentivizes utilities to use alternates to fossil fuel energy generation. Value of solar offers utilities the transparency of the market price and the potential for cost recovery on payments made to solar producers. For utility customers, the 25-year fixed-price contract helps make financing and budgeting simpler and more reliable, especially as the price of solar power generation continues to drop. Most of all, the reevaluation of solar power generation on both a personal and utility level shows promise that green energy is being taken seriously in the political realm. The environmental benefits of these energy alternatives are long lasting and far reaching. The alternative energy industry will undoubtedly continue to change as public and political opinion and technologies improve over time. This is one of many first steps.
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