Clean Power

Published on April 20th, 2014 | by Zachary Shahan


Solar Industry’s Threat To Utilities Greatly Exaggerated, Says Solar CEO

April 20th, 2014 by  

distributed generation utilitiesOne of the world’s leading solar company CEOs, Arno Harris of Recurrent Energy (a US arm of Sharp), has backed up Warren Buffet and said that much of the hype over solar’s threat to utilities is an exaggeration.

“You can’t just take on the utilities and destroy them,” Harris, who is also the chairman of the Solar Energy Industries Association (SEIA), said in an interview at the Bloomberg New Energy Finance (BNEF) conference in New York. “To get to any significant solar penetration, we’ll need more and better utility services.”

Despite the fact that the trade association of investor-owned utilities, the Edison Electric Institute, released a report last year explaining how distributed (rooftop) solar could lead to a utility company death spiral, many utilities have since then come around and conceded that solar energy is a big part of the future of energy and they can help enable that future without killing themselves.

“Now they’re ready to have that conversation about how to integrate more solar,” said Harris. “It’s inevitable that solar will become a bigger part of the energy mix and we need the utilities to help manage the grid as it does.”

Food for thought.

For more on this topic, also see a recent survey of utility insiders, which found that “95% anticipate that their utility’s regulatory model will change over the next 10 years, and 57% believe it will change significantly.” Approximately 30–50% thought distributed solar generation was a great threat to the industry.

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is tryin' to help society help itself (and other species) with the power of the typed word. He spends most of his time here on CleanTechnica as its director and chief editor, but he's also the president of Important Media and the director/founder of EV Obsession, Solar Love, and Bikocity. Zach is recognized globally as a solar energy, electric car, and energy storage expert. Zach has long-term investments in TSLA, FSLR, SPWR, SEDG, & ABB — after years of covering solar and EVs, he simply has a lot of faith in these particular companies and feels like they are good cleantech companies to invest in.

  • spec9

    Solar literally cannot kill the utilities without killing itself too . . . if the grid collapsed then 99% of the solar PV installations would collapse as well because they are grid-tied system that don’t operate if the grid goes down. When the utilities start getting into trouble, the problems will be addressed. This is already taking place in Hawaii and Germany.

  • Mint

    Utilities will only be threatened if they lose control of pricing. Otherwise, they will just pass the costs of distributed solar onto customers without it.

    It’s really simple: Peak usage for most grids is in the evening, when total solar can be near zero, so utilities can’t shut down capacity, and solar saves only fuel cost, not grid construction/maintenance. Therefore solar reduces utility revenue (to the tune of 10-30c/kWh with “net metering”) far more than it reduces system cost (~4c/kWh or less). The only way to balance this mismatch is with higher prices.

    Net metering is by far the biggest incentive for solar, whether you call it a subsidy or not, and I suspect there will be a war against it soon. In areas with tiered pricing, it’ll only take 5-10% penetration to lop off 20% of revenues, and the masses are not going to be happy seeing a ~20% price hike to make up for that.

    If net metering goes, and grid costs become fixed charges per residence (like they are with companies), then distributed solar will be stopped dead in its tracks for a long time.

    • Otis11

      Good analysis – that’s why we’ll need to switch from net metering to some sort of value of solar payment system. I’m personally in favor of simply making all customers pay for what the use according to a time-of-day pricing model (high supply – low price, high demand – high price) where the generators get money based on the formula $ = (A – B*distance)*Kwh where A is the value of the power and B represents the cost of lost power/cost of maintenance per mile of lines used. Multiply this by the distance from the source where the energy is produced to the average distance necessary for the electricity to travel to be fully consumed.

      Use merit order pricing to figure A out and every generator gets the same A for that time period. Centralized generators lose a lot of electricity in line losses (both electric losses and cost) while distributed gets docked much less as it doesn’t travel as far. Now, the pay-back cost would probably come out to be 15% less than the cost to buy the electricity off the same grid, but that’s fair as the owner is using the grid. Keep in mind though, that the cost of power during the day can be twice that or more of the night cost – so the generator benefits too, and rightfully so. This also would encourage people to put their panels in the best orientation – as south facing panels explode. Prices drop, it becomes better to face your panels west. Once that drops, we start seeing more facing east.

      System may seem hard to calculate, but it can all be automated based on supply/demand numbers in real time.

  • spec9

    Well it is not a ‘death’ spiral so much as a ‘bail-out’ spiral. The Grid is too important to fail and they’ll just adjust the rules to make sure the utility continues operating. But they may have to shrink if they eventually generate less and less of the power.

  • Will E

    Solar is everywhere, Solar is cheap.
    money talks.
    Utilities cannot compete Solar.
    that is a fact today and in the future more so.

  • JamesWimberley

    A pity the survey presented “threat” and “opportunity” as alternatives for utlities. In reality, distributed solar is both.

    May be worth noting that utility solar can be disruptive too, like wind, as long as there is a true market for generated power. Both wind and solar jump straight to the top of the merit order and lower the capacity factor and earnings of old baseload coal and nuclear. For this stranding risk, it doesn’t matter where the solar is.

    The utility panic over rooftop solar, still much less in volume than utility solar, seems to be driven by two shocks: the radical change in the status of solar owners from passive consumers to partner consumer/generators; and the looming threat of their grid defection using cheap storage, which will empower them even more than today.

    • Mint

      Cheap personal storage is a long way from reality, because to truly disconnect from utilities, you need several days of storage. Even something like Tesla’s gigafactory will cut raw battery cost down to $120/kWh at best, so a few days of storage will add $10k cost to a solar installation.

      Merit order is not going to matter if baseload is bidding 1c/kWh and making up revenue when solar isn’t shining (or wind isn’t blowing). For this reason, solar will be limited to building only enough capacity to have minimal intrusion of nuclear/coal’s business, because on the margin they won’t make any money there. Loss of capacity factor is an important point you make, because when that happens, generators increase their prices.

      I think the biggest opportunity for utility solar displacing coal is with fresnel reflectors at coal plants, heating steam instead of coal when possible. But it’ll take real production commitment to get costs low enough.

    • spec9

      Like Mint, I also think that personal storage is unlikely to grow much since it is very expensive, increases maintenance, and never is as good as a grid connection (because you can’t handle long gaps, you can’t do high power things like fast-charging EVs, etc.)

      • Bob_Wallace

        If storage costs drop as much as some think and if utilities find a way to not pay much for end-user solar then people may find it attractive to add some storage to their system.

        It would not only save them money, it would give them some resistance to grid outages. A well-sized system might allow one to cut consumption back to a minimum and stay powered up throughout a long grid outage.

  • Hans

    Furthermore, it is my opinion that transmission and grid should be separated from power production.

    • No way

      You don’t have that?

      • Rick Kargaard

        We have that and the grid normally costs me more than my energy consumption.

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