Residential solar installations are happening at an unprecedented rate here in the United States. Lowering installation and panels costs are accelerating PV installations, especially in places where electricity prices are exceptionally higher than the national average.
This is creating an environment, especially due to net metering, where new electricity generators (rooftop panel owners, be they homeowners, or third-party owners) are being paid the retail rate of electricity over the wholesale price that utilities are used to paying, which is undoubtedly eating away at utilities’ bottom lines.
Consequently, some utilities and energy holdings companies are taking a proactive role in investigating the potential business models incorporating rooftop solar, while others are taking a direct approach in deploying residential solar. And, contrarily, there are utilities that are taking an aggressive stance against solar deployment and are not incorporating rooftop solar into their portfolios.
Therefore, what is the correct business model for utilities regarding distributed solar electricity generation? Or, is utility involvement in rooftop solar not a forgone conclusion?
1. Invest directly into residential solar?
- Example: PSE&G will launch a residential and commercial solar loan program for customers to deploy rooftop systems. This program takes advantage of New Jersey’s net metering and Solar Renewable Energy Credits for those participating in the program to recoup their investment.
2. Invest in companies deploying distributed generation systems?
- Example: Duke Energy Corporation, the largest energy holdings company in the United States, made an equity investment in Clean Power Finance, which is an internet-based solar finance company that connects capital to those who’d like to deploy residential solar.
3. Provide Feed-In Tariffs to encourage rooftop deployment?
- Example: Long Island Power Authority has launched the Clean Solar Initiative that provides feed-in tariffs for residential installed solar with a 20 year PPA. (Which is based on a lottery system for the amount and price of solar-generated electricity you would like to provide.)
- Example: Hawaii Electric Company sets the feed-in tariff rates and allows customers to bid on rates for specific technologies and their respective sizes. These rates and sizes vary for individual islands and their energy needs.
4. Make it complicated and limited to receive rebates?
- Example: Anaheim Public Utilities deployed a limited-time rebate lottery program that allows applicants to apply for a limited amount of time. The next application window is January 16th – 30th, 2014.
Will any of the above strategies be the dominant business model? Is there another unforeseen strategy that mixes the competitive advantage utilities already possess with their customers with the ingenuity and novel finance mechanisms associated with newly launched rooftop solar?
Or, will they fight back against an energy movement that threatens the very essence of their business model like utilities in Australia? Or, will they limit connection citing grid stabilization issues, as in Hawaii?
Categories: Discussion - Distributed Energy
Stoking the fire:
See what Accenture and Greentech Media found regarding Utility heads’ opinion of the role of distributed solar as either a disruptive, competition-enhancing player in the electricity market, an integral addition to their generation portfolio, or a threat to their business model.