Who's Changing Who: Utilities or the Solar Industry?

Historically, utilities and solar power have had a tense, marginal relationship at best. The reasons are fairly obvious; most utilities today are deregulated, investor-owned companies looking for a profit. So how can interrupting their own revenue stream by facilitating the ownership of independent energy by their customers be considered a good business model? utilities vs solar powerYet regardless of that, utilities across the nation are getting more involved in the solar industry, and may even be guiding it. Not without some motivation, of course. The primary impetus for utility interest in solar power came from the government. Renewable portfolio standards (RPS) require utilities to obtain a certain percentage of their power from renewable energy within a certain time frame—say, 20 percent renewable by 2020. Now, 29 states have mandatory RPS in place (four more have voluntary versions), and utilities have been forced to seek out renewable energy projects and promote energy efficiency. Rebate programs, net metering and other incentives have popped up to help make that happen. The federal government and many state governments offer incentives for homes and businesses to adopt solar power which the utility can then buy through interconnection with that system. Before Congress extended the federal solar tax credits in 2008, utilities were not allowed to directly benefit from those credits. In other words, electricity providers had no incentive to purchase their own solar power generating systems. All the purchasing of such power was done through a power purchase agreement (PPA) with a developer or system owner. But now, utilities do qualify and can cost-effectively build, own and operate their own solar arrays, and that is having a major effect on the solar industry. Even more so as remote, utility-scale solar thermal projects mired in bureaucratic and environmental red tape give way to more centrally located distributed PV projects. Now the question arises as to who is controlling who between the solar industry and utilities, as that inherently tense relationship gets more and more intimate. California utilities, as per usual, are leading the way. Southern California Edison has announced a plan approved by the California Public Utilities Commission to install 500 megawatts of distributed, rooftop solar power in southern California. utilities solar powerThe utility will own and operate the systems, and will essentially lease rooftop space from customers, offering them a fixed long-term rate in return (very similar to SolarCity’s landmark solar leasing program). PG&E, northern California’s primary utility, has a similar plan currently awaiting approval. So now we may have utilities in control of solar projects. Both the SCE and PG&E programs have gained a lot of attention over the last year and are by far the biggest of their kind in the country. It would appear that the solar industry has changed utilities by getting them to embrace the idea that a growing number of their customers are and will become independent power producers. Yet now that utilities seem to be accepting distributed solar power as a way of life, they may in turn be changing the solar industry by turning communities into solar farms. It seems the solar industry and utilities are growing and changing together, and there is still a lot of room for tension. As solar’s share of a utility’s electricity generation increases, the more it will cut into utility revenue. That is probably why (in addition to meeting RPS mandates) utilities are looking to gain more control over installations. At the same time, utilities may be turning new home solar power systems into something akin to new cars—often leased rather than bought. Utilities have the capital to pay for a roof covered in solar panels, while many home and business owners do not. So, is the solar industry changing utilities or are utilities changing solar? It’s a tough question, and its true answer may not be revealed until these new additions to the game play themselves out. But in the meantime, you can listen to an informative podcast on the subject sponsored by Renewable Energy World. Photo Credit: Choctaw County Utilities & Cotton, Shires, & Associates

Posted on March 31 in Solar Politics by .

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