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 If utilities embrace home solar, their deep pockets and access to
customers could transform what has been a fast-growing, but niche
industry. Solar powers only half a million U.S. homes and
businesses, according to solar market research firm GTM Research.
But utility-owned rooftop systems represent a change the solar
installation companies who dominate the market don't want, and
whether the two sides can compromise may determine if residential
solar truly goes mainstream.
In Arizona, the state's largest utility has proposed putting solar
panels on 3,000 customers' homes, promising a $30 monthly break on
their power bills. In New York, regulators are weighing allowing
utilities to get into the solar leasing business to meet the state's
aggressive plan to incorporate more decentralized, renewable power
onto the grid.
That's a change from the industry's recent skepticism of residential
solar. Last year, for example, the Edison Electric Institute, a
utility trade group, in a report described rooftop solar as a
"disruptive challenge" that could squeeze revenue and profits as
customers defected, leaving companies forced to maintain grids that
serve all.
Residential solar grew 45 percent in the second quarter from the
previous year and installations are expected to exceed 1 gigawatt
this year, or about enough for 165,000 homes, according to GTM
Research. That growth has been underpinned by government subsidies
and falling equipment costs that have allowed startups to underprice
utilities.
No-money-down solar leases also have made rooftop systems much more
financially accessible, boosting demand.
IF YOU CAN'T BEAT 'EM...
Some utilities, like Edison International and NRG, already have
entered the rooftop solar market through unregulated divisions, and
many utilities have bought huge solar arrays.
But a regulated utility rolling out large amounts of rooftop solar
is a new idea.
Pinnacle West Capital Corp unit Arizona Public Service (APS) in July
proposed to spend up to $70 million on systems for about 3,000
homes.
Also in Arizona, Fortis unit Tucson Electric Power proposed this
summer to give customers a fixed power rate in exchange for putting
panels on their rooftops.
The plans first must be approved by the utility regulator, and the
solar industry is fighting.
The issue, according to The Alliance for Solar Choice (TASC), a
coalition of solar leasing companies that includes SolarCity, SunRun
and Verengo Solar, is that regulators set rates that guarantee
profits for utilities, giving them a financial advantage, in
addition to their access to customers.
They say APS' record of trying to impose fees on solar customers is
a reason to question the utility's motives.
"Are they actually trying to deploy lots of rooftop solar or are
they just trying to kill off the only competition they've ever had?"
said Will Craven, a spokesman for TASC.
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To be sure, solar companies get their share of government support
through subsidies, and New York state recently agreed to invest $750
million in infrastructure and equipment purchases for a SolarCity
solar panel factory. SolarCity, backed by Tesla Motors CEO Elon
Musk, is the largest U.S. residential installer with about a third
of the market.
APS argues that its program isn't intended to supplant other means
of going solar and is good for rate payers. For instance, the
utility can place panels in locations that will most improve grid
stability.
"This isn't intended to be the one size fits all for solar," said
Marc Romito, manager of renewable energy at APS.
Arizona is currently ground zero in the debate over utility
ownership of rooftop solar, but the concept is being considered
elsewhere.
New York is weighing allowing utilities to own residential rooftop
systems, and regulated units of National Grid, Fortis, Iberdrola SA
and Consolidated Edison Inc support the idea. An early draft of the
plan issued last month said, however, that utilities must
demonstrate why their rooftop solar would be better than the
alternatives.
Other states have faced resistance to utilities getting into rooftop
solar as well. South Carolina earlier this year allowed utilities to
offer solar leases, although they cannot recover costs from
ratepayers and therefore will have to run such programs through an
unregulated division, a condition insisted on by solar installers.
And in Washington, a bill that would have given utilities control of
the leasing market failed this year. The bill's author,
Representative Jeff Morris, said he expects to introduce a
compromise between the solar and power sectors next year.
Utilities and installers could also join forces. Former U.S. Energy
Secretary Steven Chu said utilities should partner with installers,
offering financing while installers put on systems, though he
acknowledged risks.
"Safeguards against utilities squeezing out competition are
important," Chu said.
(Reporting By Nichola Groom, editing by Terry Wade and Peter
Henderson)
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