Let the sunshine in: Utilities and solar energy

Let the sunshine in: Utilities and solar energy

I’m guessing many of you who work in the electric utility industry have been purchasing a lot of aspirin lately. Activist groups are working hard to reduce CO2 emissions by targeting the most visible offender: coal-fired power plants. They are vocal and love to make a dramatic scene somewhere near a utility’s headquarters.

The trouble is, we’re a long way away from being able to dismantle all coal-fired power plants. The utility industry doesn’t have a good alternative for reliable, low cost generation without CO2 side effects. Technological advancements in fuel cell generation and storage, created by firms like Redox Power and Bloom Energy, are exciting but don’t yet offer the solution. In fact, many of these fuel cells still require natural gas to operate.

But one solution has become much more viable over the last two years, and NGOs and the American public are wondering why utilities aren’t embracing it: solar.

Some background on solar

The Solar Energy Industries Association (SEIA) estimates the average price of a solar panel has dropped by 60% since 2011, making it more affordable to a growing number of residential and commercial customers. They also estimate that by the end of this year, there will be a solar project completed every four minutes. Not including utility scale projects, 68% of the distributed solar in the U.S. has been installed in the last two and a half years. The expectation is for it to double again in the next two and a half years.

Our own proprietary research confirms consumers interest in solar continues to increase. In our soon to be released Energy Pulse 2013 study, 22% of homeowners who have not installed solar panels think they need to, for either solar-heated water or to create electricity. A closer look shows that 8% of homeowners are either very likely or likely to add solar panels to their homes. While this may seem small, that represents millions of homes and supports a continuing residential solar growth trend.

Solar flares

Initially, utilities (particularly those in states with renewable energy standards) made great offers to encourage “innovators” who were willing to put solar on their homes and businesses. But many of those offers have dried up, and many utilities are actually re-working net metering policies in a way that makes solar much less attractive to their customers.

It is absolutely understood that utilities (along with their customers – though most don’t know it) have a valid concern that homes and businesses using solar panels might not be paying their “fair share” for use of the infrastructure, and that solar makes demand more difficult to predict and plan for. But solar tariffs and punitive net metering formulas are likely to cause a considerable firestorm of criticism, especially if the perception is that the industry is trying to slow the growth of solar.

To that point, both Xcel, in Colorado, and APS, in Arizona, have proposed changes to their net metering policies that reduce the value of solar, and therefore the incentive for homes and businesses pursuing it. In Arizona, the debate over solar has become especially contentious, complete with the formation of tax-exempt organizations and commercials that look like political attack ads. And Georgia Power has included a controversial $22/month (on average) solar tariff in their current rate case that the Sierra Club claims “will effectively kill residential solar” in the state.

Shedding some light into a complex issue

On the other hand, Austin Energy has developed a relatively even-handed net metering equation to deal with the issue. This algorithm is updated each year and incorporates the value of things like avoided fuel and transmission costs, line loss savings and even environmental benefits. While no one solution will make everyone happy, a more scientific approach, openly shared with the public, should help alleviate some of the concerns about fairness.

Regardless of the path chosen, electric utilities would be wise to communicate clearly and openly about the challenges associated with distributed solar generation and net metering. After all, isn’t that the premise behind sunshine laws?


Posted on

October 16, 2013

About the Author

Jim Lyza

Jim is a former contributor to Shelton Insights.

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