Solar and utilities: on the rise, here to stay

Advocates point to drivers: costs fall, innovations rise

Phil Carson | Jun 13, 2012

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Twenty years of education and research for utilities has put the Solar Electric Power Association or SEPA, as it's known, as close to the solar energy-utility nexus as possible. 

A few factoids: 

 

  • More than half SEPA's membership are electric utilities
  • More than 90 percent of the nation's solar capacity is grid-connected
  • About 20 percent or less of that capacity is owned by utilities
  • In 2011, solar power was the fastest growing utility power source. Less than 350 non-solar power plants were commissioned, versus more than 62,500 photovoltaic "power plants" (as defined by a metered customer), among utilities, residences and businesses. 
  • For the fourth straight year, while residences accounted for 89 percent of the installations, commercial rooftop installations accounted for more than 53 percent of capacity.

 

The upshot? The amount of solar power being produced in the United States is on a tear, whether that's utility-owned and run or private, according to SEPA. And that's mainstreaming the technology from the utility point of view, SEPA executives told us recently.

So, what's changed over the past 20 years to bring us to this point? 

"We're really in an era now where solar is on the radar," said Julia Hamm, SEPA's president and CEO. "Utilities are truly, on a regular basis, at the CEO level, at the board of directors' level, at the city council level, thinking solar.

"For me, that's one of the biggest changes of the past two to three years," Hamm continued. "It used to be a far more niche option. But now that prices have come down so drastically that utilities are realizing, whether it's their own choice or their commission's choice or their customers' choice, they need to figure out how to be ready to accept more solar onto their grid going into the future. That's changing the dynamics of the conversation within the utility."

Today, we're in an era of "mainstreaming," said Eran Mahrer, vice president for utility strategy at SEPA. What once were renewable energy divisions within utilities are now being integrated into the overall business and solar power is considered another generation source, along with traditional baseload. 

That certainly speaks to the mindset among utilities, according to solar power advocates at SEPA.

So, what's driving the trend? 

"In the past five or so years, one of the biggest drivers isn't policy so much as financing innovations," Hamm said. "The proliferation of rooftop leasing [has been a factor]. Solar service companies that will own, operate and maintain a system on a commercial or residential rooftop has really created a drastic increase in the number of customers going solar. That's creating an interesting dynamic for utilities. That model isn't necessarily available in every state, but it is available in a growing number of states, quite quickly. When that first happened, years ago in the commercial space, it began to take off. The solar industry had doubts it would `pencil out' for the residential market, but that model worked out for the residential market rather quickly. Now, the majority of solar systems being installed today actually aren't owned by the customer but by the solar services company. That's one piece of the puzzle.

"Net metering, from the customers' side of the equation, has resulted in more customer-side of the meter solar installations," Hamm continued. "And that creates another challenging dynamic for the utilities."

The speed of success may, indeed, prove to be its own challenge, given the pace of change in the utility industry, I interjected. 

"What we're observing is that the distributed energy model is producing significant challenges to the traditional utility business model," Mahrer said. "Most people take that to mean that the utility is challenged to evolve. The utilities are lumbering along, having trouble adopting this new solar technology. In fact, in my opinion, it's anything but that. As distributed energy grows, the regulatory structures and the relationships utilities have with customers will need to evolve. It's a multi-partner partnership." 

The conversation continued, but it's clear from the proffered stats that the premature cries that a single, national solar investment gone awry somehow spelled doom for an industry are just that. The trend is undeniable. The "mix" (my term) is alive and well and becoming more diverse. 

A raft of issues remain and are well-known. Anyone who whines excessively about challenges doesn't belong in the arena. Maintaining the status quo has its share of challenges. But that's not news. 

Phil Carson 
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com 
303-228-4757

 

 

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Comments

What about the money flow?

I guess I have a question about the proliferation of solar PV when it is clear the technology is not economical--the mere fact that it depends upon federal grants and net metering at full residential or commercial power rates makes that very plain.  The federal grant program pays out 30% of the cost of a solar PV system and there are state programs in many cases as well.  In the solar leasing program the company installing and owning the system gets the grant money and other tax breaks.  Who decides the true value of the installation?  What limits are there to determining what the costs should be that form the basis of the grant(s)?  Also, one has to consider that the system owner now becomes a generator in the wholesale power market, however, with net metering any power that the systems put into the grid allows the system owner to not only collect the energy costs but also the costs associated with line charges.  Therefore the generator is being paid both energy and line charges whereas other wholesale generators are paid for energy only.  If the PV system were to put out enough energy to effectively zero the location's electricity bill, others have to pay the costs for the site's line costs.

Challenges Indeed

Readers need to keep an eye on several activities in California to see how this is likely to play out.  First, the California PUC is likely to initiate a rulemaking at its regular meeting today that will address the rate impact on and of net metering.  Second, last week a report outlining how to accelerate development of rooftop solar was issues by the Berkeley Law project.  They are very much related and they go to the heart of the biggest challenges of all, which is the availability of consumer choice in the form of a cost-effective alternative to grid power from a local utility.  It's really going to shake things up in the utility world.

Jack Ellis, Tahoe City, CA