[BETA] Fortnightly

In this month’s Vendor Neutral column (and shown to the right here on Fortnightly.com), you’ll find two aerial photos of solar projects—a 1.65-MW installation on the roof of a convention center, and a 12.5-MW array covering 100 acres. These two projects are similar in that they both were developed and are owned by non-utility generators, in states with strong incentives for solar energy. But despite the fact that the ground-based array has almost 10 times the capacity of the solar roof, the rooftop project represents something more important for the industry.

From the utility’s point of view, a growing wave of rooftop PV projects is starting to look ominous. And now, some utilities are taking action to shore up their defenses—advocating legislative and regulatory changes that pull back net metering policies and other solar incentives.

Concerns focus in part on operational challenges from integrating dispersed generation that’s variable, non-dispatchable, and sometimes beyond the utility’s ability to control. But the biggest worry seems to involve the prospect of a fixed-costs dilemma, which I addressed in this column last issue. (see “ Facing Facts ,” Fortnightly, June 2012.)  The shorthand is this: As PV gets cheaper, an increasing number of PV-owning customers will pay less than their fair share of utility system costs, leaving a shrinking number of non-solar customers to pick up the tab for keeping the lights on. Although PV’s market penetration is tiny today, it’s growing rapidly enough to raise real concerns for many utilities.

“Distributed generation is becoming one of the largest subsidies on our system,” said Ron Litzinger, president of Southern California Edison, during a panel discussion at this year’s Edison Electric Institute Annual Convention. “That subsidy tends to go from low-income to higher-income customers. We need to make sure all the costs of distributed generation are known before decisions are made.

“Left unchecked, we could see rates increase by 40 to 50 percent by 2020, which we know isn’t sustainable.”

Tectonic Shifts

It’s no surprise that California utilities are among the first to raise the alarm about rooftop PV, given the state’s aggressive renewable portfolio standards and rooftop solar goals. Pacific Gas & Electric, for example, reportedly is interconnecting about 1,000 solar roofs each month—a mind-boggling rate for a technology whose effects on the system aren’t yet fully understood.

But the problem isn’t limited to left-leaning states. In Georgia, for example, where net metering interconnections already are capped at 0.2 percent of peak demand, utilities—including Southern Company’s Georgia Power—are advocating legislation that would prevent third parties from owning retail customers’ PV panels. That would make it harder for customer load to leave the grid—and would allow time to plan for an orderly transition toward a solar-powered world. Perhaps a world that’s built by the utility.

Similarly, in South Carolina, net metering capacity also is capped at 0.2 percent, and some utilities already impose special fees and tariff conditions on net-metering customers. And yet, utilities