Regardless of what drives the action — state regulation, federal policy, economic reality — collaboration between utilities and the solar industry is now becoming prevalent. Expanding definitions...
What Solar Success Looks Like
Managing the transition to a solar-powered future.
The explosive growth of solar over the past few years caught many in the electric utility industry by surprise. The sheer amount of solar is impressive, though the 8 GW of solar installed in the U.S. today is still less than 1 percent of U.S. electricity production. What’s grabbing the attention of utilities is the potentially cascading impact of solar in decentralizing the generation of electric power delivered to the customer.
The single most significant development in this trend has been the proliferation of solar companies leasing customer rooftop power systems. Leveraging a combination of cheaper solar panels, tax credits, and local incentives, these companies have built a profitable business model while offering the utility customer a “no money down” means to reduce monthly utility bills. The leasing companies now compete directly with utilities for energy sales to retail customers, a relationship that the utility once owned completely.
The revenue erosion and possible negative impact on the utility industry is addressed in the report Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business released in January 2013 by the Edison Electric Institute. Some observers believe that the logical reaction of utilities to solar is to see it as a threat that will demand amassing their considerable power to stop.
We at the Solar Electric Power Association (SEPA) see the future playing out differently. There might be some utilities digging in their heels, but we see a growing number who recognize that accommodating more distributed, customer-based generation presents new business opportunities. Solar is the bellwether of a more customer-focused energy business in which electric utilities can be a significant and successful player.
20 Percent in 20 Years
There is little doubt that solar will grow into a significant resource. Two years ago, at a general session of Solar Power International, I led a discussion on the future of solar with the CEOs of six major U.S. utilities. Each CEO estimated that solar will comprise 15 to 20 percent of the generation portfolios of their companies in 20 years.
If solar success can be defined as a win-win-win scenario for utilities, solar companies, and consumers, what has to happen to achieve that success?
First, solar success will depend on resolving the question of how to equitably reward the customer who installs solar for the value of that resource, while allowing the utility to cover the costs of supplying the services necessary to the vitality of a grid that benefits all electricity consumers.
This is the most visible issue facing solar and utilities today, and one that SEPA is committed to playing a key role in resolving. In July we released Ratemaking, Solar Value and Solar Net Energy Metering – A Primer, a carefully constructed report that we offer as a critical reference for a process of developing solutions to support solar growth.
At the core of what has become a contentious debate is the future of net energy