The exponential increase in solar installations across the country has disruptive potential for America’s energy landscape, forcing utilities to respond. Residential solar installations account for less than 1% of U.S. energy generation, but they are poised to double every year. Some utilities see this growth as a threat to their business model and are doing their best to stop it. Others recognize the opportunities that solar presents and are promoting the growth of the industry.
Solar is Changing the Landscape
Controversy is brewing mainly around the issue of net metering, the process by which solar installations producing extra power can sell that power back to the grid. Often at retail rates. Utilities argue that homeowners receiving this compensation aren’t paying their fair share of utility operating costs. Utilities pass these extra costs off to other energy customers.
This has led some utilities to advocate reductions in net metering rates and even a slew of political ads between utilities and pro-solar groups.
How Utilities are Helping
Other utilities are responding differently. Those who see distributed solar energy as a new opportunity include NRG Energy in New Jersey. NRG sells solar systems to businesses like NFL stadiums, universities and hotels nationwide. PSE&G, also in New Jersey, has begun making loans to solar customers, a financing model similar to groups like Sungevity or SolarCity. Duke energy and Edison International are actually investing in Clean Power Finance, a company that helps to finance solar projects.
Some utilities are beginning to partner with independent companies who install and lease residential solar panels. SolarCity, one of the largest residential solar lease companies in the country, just signed a deal with Direct Energy, a utility company serving 14 states. Direct Energy will advertise the installations to its customers while SolarCity will design and install the panels. Another utility, Edison International, recently bought SoCore Energy, which will give them their own foothold in rooftop solar leases.
Sacramento Municipal Utility District (SMUD), enables community members buy into community solar installations with an extra charge on their energy bill each month. SMUD also protects solar customers by providing a protection on leased installations against panels that achieve less than 80% of promised energy production. Long Island Power Authority (LIPA) sees distributed solar generation as a means to cheaply power far flung areas of their district. By installing 40 megawatts of solar in Long Island LIPA expects to save $84 million by 2020 by avoiding the cost of wires and transmission. They’ll also be powering 5,200 homes with clean energy.
How Distributed Solar Can Help Utilities
Supporters of solar argue that residential solar installations are actually a boon to utilities. Electricity demand typically peaks during the day, when people are awake and watching television, running their AC, etc. Utilities are forced to ramp up their electricity production to account for this peak, which is expensive. This is also when solar panels are sending energy back to the grid, meaning they can work to relieve utilities of some of the costly swings in energy use. It also reduces transmission and distribution costs. Since more houses are producing their own electricity, utilities don’t need to spend as much money sending that electricity to them.
In January, the Edison Electric Institute utility called distributed solar generation a “disruptive challenge.” While some utilities perceive solar installations as destructive to their business, others are embracing the inevitable growth of the industry and helping their customers go solar. So far most of the residential solar market has been developed by independent groups, but the future may see more utilities supporting the growth of solar energy.
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Jacob Sandry is an Energy Studies scholar at Yale University and a fellow at Mosaic. He has worked in Colorado to protect endangered waterways and in Bolivia to protect animals rescued from the black market. Jacob has been to 5 continents, but originally hails from Minnesota where he developed his appreciation for the environment by camping, hiking and running. Follow him on twitter @yaakovsandry.