Some utilities have belatedly decided to enter solar leasing business. Too little, too late? 

Some utilities have decided that fighting solar is futile. Instead, they will join their enemies, assisting more customers to install solar panels on the roof – if that is what they want – or make their homes and businesses more energy efficient – if that is what they want, or better manage their energy consumption and distributed generation through whatever range of services, gadgets, tariffs, or energy management devices that delivers improved energy services at low cost.

Sunshine + High retail tariffs = Solar PVs: Dark colors represent high retail tariffs where solar PVs would be attractive

 

Needless to say, solar PVs is what most consumers want, especially if they live in sunny parts of the country with high retail tariffs and supportive net energy metering (NEM) laws (see page 2 map). Customers in states such as Hawaii, California, New Mexico, and Texas are prime candidates since they enjoy ample sunshine while facing high retail tariffs (map on page 21). In the Northeast, tariffs are high while solar insolation may not be as good, still making it cost-effective to go solar. Only in states such as parts of Washington, Oregon or Wyoming, where retail tariffs are extremely low, will solar PVs not make much near-term economic sense. But even that can be debated.

In December 2014, several utilities in South Carolina, including Duke Energy, announced their intention to get into distributed solar business following a net metering agreement reached with the regulators and the solar lobby. Under this agreement, utilities in SC will be able to install solar panels as everyone else does and can charge and pay solar customers for energy at the same rate regardless of which way the electrons are flowing — currently about 10 cents/kWh.

Plenty of sunshine, and it is free

 

The compromise was reached among a consortium of utilities, environmental, consumer and the solar lobby to implement a law known as A Balanced Path for Distributed Energy in South Carolina, which was signed by Gov. Nikki Haley in June 2014. SC believes its model is a good one and can be copied by other states facing rapidly growing solar leasing business.

The law allows Duke Energy Carolinas and Duke Energy Progress in SC to add up to 3% of the utilities’ peak demand, or about 150 MW of rooftop solar installations. Customers can lease solar panels from the utilities or independent installers.

Duke, of course, is not alone. Utilities in other countries where solar PVs are popular, are contemplating similar moves, including Origin Energy and AGL in Australia, which are reportedly planning to get into solar leasing business.

Origin Energy’s chief executive of energy markets, Frank Calabria, has publicly stated that the company plans to copy the successful leasing model popularized in the US by the likes of SolarCity. The main attraction is that cash strapped customers need not put any money down while saving on their bills from day one. NRG, the biggest US independent power producer (IPP), has announced that it wishes to become No 2 behind SolarCity by the end of the year. The field is getting crowded.

Origin has already installed some 80,000 solar PV systems in Australia while serving roughly 400,000 customers with rooftop solar systems. The company is trying to minimize customer defections to other installers by keeping them as solar leasing customers.

Not everyone, of course, is following what Duke, NRG, Origin or AGL are trying to do by joining the solar bandwagon. Some companies are still trying to fight – and win – yesterday’s solar battles. It may be a losing battle, but who can fault them for trying.

Salt River Project, a non-profit utility, that started as a water rather than electric utility in Arizona, has decided that solar PV customers should be charged for the harm that they inflict on the network and their fellow non-solar customers – our words, not theirs. The company has proposed a $50 monthly fee on solar customers starting in April 2015. April 15, as everyone in the US knows, is the deadline for filing federal income taxes. As some critics see it, SRP’s solar customers will have to pay what they perceive as an annual $600 solar tax on top of their other taxes. Ouch.

Since SRP is not regulated by Arizona Corporation Commission (ACC), it can more or less do as it pleases and, generally, get away with it. By contrast, in 2013, Arizona Public Service (APS), an investor-owned utility or IOU, proposed more or less an identical $50 per month fixed fee on solar customers but was rebuffed by the ACC. After a lengthy, bitter and acrimonious public debate that pitted the nasty, big, monopoly utility against the little, nice, local solar installers and hordes of disgruntled customers, the ACC settled on a prorated fixed fee that varies by the size of the solar panels, averaging around $5 per month for typical solar customer – a tenth of what APS wanted.

It is called solar grid parity, and it is spreading like a virus

In its proposal, SRP repeats what many other utilities have already said, namely,

“The growing emphasis on energy efficiency and energy conservation and the increasing installations of distributed generation (primarily rooftop solar) reduces energy sales without a commensurate reduction in SRP’s fixed costs. It is important to understand that since SRP is a community-based, nonprofit utility and does not have stockholders, a disproportionate amount of these costs are currently being paid by other customers who do not have distributed generation.”

Fair enough. And perhaps SRP can get away with its proposal. Many utilities in other parts of the US and overseas, however, are caught in a no-man’s land, bound to abide by the prevailing net energy metering laws and unable, or in some cases forbidden to compete head-on with independent solar installers who are literally eating their lunch before their very eyes. The compromise reached in SC is notable in that it creates a level playing field for the incumbent utilities such as Duke to compete for a slice of the growing distributed generation pie.

 

One way to get around the problem is for IOUs to enter solar leasing business in someone else’s backyard, thus circumventing the local regulatory restrictions. A few US IOUs are already doing this by buying solar leasing companies in other states. This is among the reasons the current proceedings in NY and elsewhere is being followed with interest.

 

In many countries, the field is wide open in the sense that there are no prevailing net energy metering laws or feed-in-tariffs, and little or no regulations specifically prohibiting incumbent stakeholders to enter solar PV or energy service business. This offers an opportunity to establish a foothold before it is too late. There are lessons to be learned from US utilities who did not see the big solar PV game changer before the arrival of SolarCity and its lesser-known kin.

Published Originally in EEnergy Informer: The International Energy Newsletter February 2015 Issue.