Utilities traditionally have met renewable portfolio standards with power purchases from IPPs. But new approaches are allowing utilities to build their rate bases with investments in solar...
Combined efforts bring mutual benefit.
solar projects installed by independent solar companies. So far PG&E has invested $160 million in projects being installed by SolarCity and SunRun, companies operating in multiple states that offer solar lease and PPA options, largely in the residential market.
Even utilities that proactively want to engage in solar activity encounter challenges, since all utilities operate within bounds established by higher authorities, whether a public service commission, a city council, or a co-op board.
One challenge is how to assign stakeholder impacts: who benefits from utility solar activities, who pays for them, and how benefits and costs should be allocated among different stakeholders and utility customers. This challenge isn’t uncommon for utilities, of course, and certainly isn’t unique to solar programs. Many proposed programs have been declined by higher authorities as a result of these concerns, so addressing them in advance is an important key to success.
Utilities struggle with the issue of revenue erosion as well. Customer-owned solar capacity feeds into the problem. Why should a utility encourage customers to generate their own electricity without a clear value proposition? Though it’s been implemented in only a handful of states and remains controversial, decoupling—or separating profits from sales—might represent a partial solution. Perhaps the most productive path forward is for the solar and utility industries to identify win-win business models that create the necessary value proposition for utilities. They can also work together to help educate regulators about policy changes that create an incentive rather than a disincentive for utilities to implement solar programs.
As former Chrysler executive Thomas Stallkamp said, “The secret is to gang up on the problem, rather than each other.”
Two areas of opportunity exist where more collaboration would have a positive end result for everyone’s solar energy goals: smart grid and storage.
The term “smart grid” has an elusive definition. It’s complex, and if you ask 100 people, you’ll get 100 variations on the answer. But utilities are already collaborating quite effectively with various smart grid technology players, while solar companies are more frequently sitting on the sidelines.
During a recent SEPA trip to Japan with 18 utility representatives, individuals from utilities, government agencies, and solar companies all independently voiced a similar perspective. To paraphrase, they said, “In the United States, you talk about the smart grid as a way to improve reliability, to improve customer satisfaction and to reduce rates. In Japan, we talk about the need for a smart grid, too. But the only reason we talk about it is because it’s the enabler to reach our goal of creating a low-carbon society. A smart grid will allow us to integrate far more solar electricity.”
With some exceptions, in the United States smart grid conversations frequently downplay or even ignore the significant role it can play in helping meet clean energy goals. If the solar industry can work in close collaboration with the utility industry to define this value and draw clear parallels for regulators between the smart grid and the ability to meet renewable portfolio standards, utilities and the solar industry