Faced with aging assets, rising operating costs, growing regulatory risks, and flat demand growth, utilities are challenged to remain competitive in an evolving energy market. The answer might be...
Making Friends with Solar DG
Better to compete from within than fight from afar.
Today’s electric infrastructure has barely changed at all since the late 19th century. It’s difficult to imagine any other consumer technology that has survived in essentially the same form over all those years, in seeming defiance of economic, demographic, social, and technological changes. Indeed, none come to mind. The electric industry can’t hope to remain immutable for much longer.
Yet building a new industry infrastructure takes time. The models proposed here offer just a sample of possible strategies, both for the mass adoption of DG solar and the continued sustainability of utilities.
The electric power industry of the future won’t be exclusive to a single type of generation model. Thanks to declining technology costs, DG solar penetration in the U.S. is growing at a rapid pace. Utilities now have a choice: to invest today to educate themselves about – and profit from – DG solar, or to dig in their heels and fight. A recent, widely circulated report from the Edison Electric Institute (EEI) compared the current situation with the changes in the telephone industry over the last four decades. Specifically, the report noted, “those telecom providers that have embraced new technologies and addressed the competitive threats they faced have managed to survive and to protect investors from a “Kodak moment.” 6
Moreover, contrary to what some heel-diggers contend, DG solar’s expansion won’t be slowed by technical limitations. According to an EPRI study, “EPRI Smart Grid Demonstration Initiative: 4 Year Update” from 2012, solar can actually reduce the strain on the grid. We need only look at Germany for proof that existing grids can support massive deployment of DG solar penetration: according to a 2012 New York Times article, more than a million Germans had installed solar panels on their homes – without changes or disruption to the grid. Advances in smart grid technologies will further streamline complimentary use of both centralized and distributed generation. The inexorable adoption of DG solar and the smart grid is going to put pressure on utilities to adapt their business models to maintain their service standards.
Utilities that invest in DG solar early could corner the expanding market: the knowledge they gain from being first movers will deliver significant advantages over later adopters. Increasing and inexorable penetration of DG assets requires utility-solar cooperation and innovation if utilities are to meet shareholder and customer demands. Utilities that regard solar as an existential threat are in for a very rough ride. DG solar is here to stay: with many possible avenues for engagement and profit, utilities should view solar as an opportunity, not a threat.
3. U.S. Census Bureau, American FactFinder website .
5. Virginia Corporation Commission News Release , Nov. 28, 2012: “The Virginia State Corporation Commission approved Dominion Virginia Power’s Solar Partnership Program (addressed by the SCC as the “Community Solar Power Program”) on Nov. 28, 2012, allowing