GridWhy rooftop solar is disruptive to utilities – and the grid
Electric utilities have a unique role in society and the economy, one that is rooted in a set of arrangements with state regulators that goes back nearly a century. In exchange for being granted a geographic monopoly on the distribution of electric power, the utility is responsible for ensuring that its transmission and distribution systems operate reliably. In other words, it is the utility’s responsibility to ensure that blackouts occur infrequently and with short duration. Power-generating panels, called solar photovoltaics (PV), represent the fastest-growing source of electric power in the United States – but the proliferation of roof-top PVs poses a problem for the business model of electric utilities, a problem similar to that telephone companies have been facing: The rise of “cord cutters” — people with a cell phone but no land-line — places land-line phone companies in a quandary. They must continue to maintain their network infrastructure with fewer customers to pay for it. Roof-top solar technology will eventually force a conversation about the fundamental role of the electric utility and who should have ultimate responsibility for providing reliable electricity, if anyone. Going off the grid has a certain appeal to an increasing segment of the population, but it is far from clear that such a distributed system can deliver the same level of reliability at such a low cost.
A report earlier this month detailed how electric utilities were working through state regulators to stunt the spread of rooftop solar, the latest tactic in a campaign an industry group started three years ago.
What worries utilities so much? At one level, the problem is obvious: customers with rooftop solar panels buy less energy and pay less to utilities. But the issue is not limited to giant utility companies’ earnings potential. After all, we all use electricity and rely on utilities to maintain the power infrastructure.
Why is solar so threatening to utilities? And how is the rapid growth of solar changing how the grid works? The answers lie in the sometimes-arcane world of electric utilities and their business model. In all the change, though, there needs to be a discussion over how solar fits into the grid and how to ensure grid reliability.
Disruptive
Power-generating panels, called solar photovoltaics (PV), represent the fastest-growing source of electric power in the United States. In percentage terms, installed PV has grown four-fold over the past several years, and costs have fallen as rapidly as installations have risen.
The point of so-called “grid parity,” where the cost of generating electricity from solar PV falls to the point of being competitive with conventional power generation sources such as coal or natural gas, appears to be fast approaching. In some states, most notably Hawai’i, it has probably already arrived.
Large-scale solar power plants will continue to get built. But it is in the many millions of rooftops (and in the future, building facades) where the real potential for solar energy as a disruptive technology is taking shape. By installing solar panels, a consumer pays the utility less and, for the first time, becomes an energy producer rather than a consumer only.
Electric utilities in many states have responded in ways that, on the surface, conjure up stereotypical images of big companies trying to crush small competitors. Utilities have asked their state regulators to assess high fees on homeowners that install solar PV panels but maintain their connection to the electric grid. An Arizona utility, for instance, proposed levying a monthly US$50 grid interconnection fee for consumers with solar PV.
