Bridges To New Distributed Solar Business Models: New Report Released

Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!

doe_bridges_thumbOriginally published on Rocky Mountain Institute.

Distributed Solar’s Continued Growth Requires Aligning Interests of Utilities, Solar Companies

Every four minutes, another American home or business goes solar” is perhaps the most widely cited solar market statistic today. But while that number is impressive, it doesn’t give a sense for just how quickly distributed solar PV has scaled in the U.S. In 2006, one new PV project was installed every 80 minutes. Ten years later in 2016, industry analysts forecast this rate will approach a new installation every 80 seconds.

This market growth is driving a fundamental shift in distributed photovoltaic (DPV) economics and operations, with rippling effects across the electricity sector’s value chain more broadly, including high-profile conflicts between stakeholders whose alignment and cooperation will be necessary to support DPV’s continued growth into the future.

For example, solar policy frameworks to date have typically focused on customer-centric DPV value accruing primarily to the individual customer and/or third-party solar companies who install DPV systems. Meanwhile, under existing business models, utilities have negatively associated DPV with transaction costs, grid operation challenges, and revenue loss. To wit, heated policy debates in solar-resource-rich Arizona have become a focus of national attention, with nearly $5 million spent on communications efforts in 2013 alone, while similar debates are playing out in states as diverse as Massachusetts, Wisconsin, and California.

Creating a sustainable long-term DPV market will require aligning the interests of utilities, solar companies, technology providers, and customers. With support from the U.S. Department of Energy’s SunShot Initiative, a new Rocky Mountain Institute report—Bridges to New Solar Business Models: Opportunities to Increase and Capture the Value of Distributed Solar Photovoltaics—looks at enhancing legacy solar business models or building new ones by creating an expanded value pool, one that makes DPV affordable and accessible to far more customers, bridges beyond individual customer-centric DPV value to include value delivered to the grid and society, and allows the electricity grid’s myriad stakeholders to share in that value.

Barriers to Increasing and Capturing Value

To date, a series of misalignments and market failures—including pricing structures and lack of performance-based incentives—have prevented electricity system stakeholders from taking a holistic approach to the deployment of distributed PV. Solar companies and utilities have focused on low-cost deployment onto the grid without accounting for the operational benefits and costs of integration into the grid. As a result, significant value potential is being left on the table.

For example, solar companies have worked in isolation to reduce the pre-interconnection components of distributed PV cost, such as installation labor efficiency. Further cost reductions are possible, but the most significant of them will require involvement from both solar companies and utilities together to achieve, such as with streamlined site identification, PII, and customer acquisition. Similarly, post-interconnection monetization of currently untapped operational benefits can create additional value streams for customers, solar companies, and utilities that evolve from maximizing value for individual customers with distributed PV to optimizing value more broadly across such customers and the grid/society. However, defining, valuing, and capturing those value streams will require cooperation among stakeholders.

Aligning the interests of these stakeholders will involve two major threads:

  • Maximize the delivered value of DPV to customers and the electricity system by further decreasing costs and increasing benefits, and
  • Create new business models that enable and incent solar companies, utilities, and customers to optimize and capture that expanded pool of DPV value through win-win-win opportunities.

Promising Building Blocks for Bridge Business Model Strategies

While addressing some of these issues will require both pricing realignment and regulatory model reform, reform will take significant time and resources to unfold. The ill-fated electricity restructuring process in California, for instance, took roughly six years to go from concept to implementation. Meanwhile, utilities, solar companies, and regulators can design and implement components of solar business model strategies today that provide a bridge to the future. These complementary “bridge” business model strategies can start to create and capture value, while also providing best practices and lessons learned to inform broader reform efforts.

Building Block A: Increased Access to Distributed Solar

Objective: Make DPV accessible to a much broader customer base, including the large portion of customers for whom on-site solar is not an option by providing new options for procurement. These options include subscription models where the utility connects solar companies’ off-site DPV projects to customers, such as current community solar programs and utility tariff models for large commercial and industrial customers that provide renewable energy for new load.

Utility Role: The utility’s value proposition expands, better meeting its societal obligations by giving simple and convenient solar access to all its customers. The utility could become an important part of program marketing, leading customer acquisition efforts, and procuring DPV projects through competitive bidding. The costs and credits on participating customers’ bills would reflect the real benefits and costs that the DPV projects create.

Solar Company Role: Solar companies benefit by partnering with a utility to expand customer access to solar, increasing the potential market size. By leveraging the utility’s brand and existing customer relationships, the solar company can reduce customer acquisition costs, design and install projects, and perform ongoing operations and maintenance.

Building Block B: Distributed Solar as a Grid Resource

Objective: Optimize deployment to capture potential operational value that is currently being missed. DPV can support the grid and provide energy services to customers, but project design choices largely determine DPV’s potential to deliver such operational benefits to the customer and the larger system. Major opportunities to enhance project design include:

  • Optimizing for capacity value by designing DPV projects to better correlate production timing with load and targeting locations where the system is constrained (e.g., shifting the orientation of panels to better align with peak load or locating projects on substations with high forecasted demand).
  • Integrating complementary technologies to strengthen capabilities or provide additional grid services while balancing added costs (e.g., incorporating advanced inverters or storage to ensure that the project can reliably provide grid services when most needed).

Utility Role: The utility takes a more proactive role in DPV deployment, using DPV as a resource to reduce cost to serve and improve service for all customers. The utility identifies optimal system locations for DPV integration and facilitates DPV deployment by engaging solar industry partners.

Solar Company Role: Solar companies coordinate site selection with utilities and design and install projects on the distribution system where they can provide high net value. The solar companies would work in a competitive market for projects, either responding to utilities’ RFPs or installing projects based on utility pricing mechanisms.

Building Block C: Distributed Solar PV in Technology Bundles

Objective: Leverage DPV adoption to increase uptake of other distributed energy resource (DER) technologies, creating greater net value that can be tapped only by leveraging complementary technologies. Technology packages could take different forms, such as a “resilience” package, which bundles solar with storage and advanced controls, keeping the customer’s lights on during a power outage.

Utility Role: The utility enables customers to access energy services through DPV—bundled with additional technologies that increase the net value of the project—and helps customers select the best services for their needs. By advising the customer in this process, the utility can speed adoption by making myriad DER choices more consumer friendly. Utilities would evaluate how the technology packages provide value to the grid as well as the economic implications for customers.

Solar Company Role: Solar companies sell broader energy services to customers via technology packages the utility has screened and approved. Revenues could come from the company’s ability to package DPV with complementary technologies, increasing revenue per customer and expanding the potential market to include customers who see less risk if the technology package has utility approval.

Moving forward, to refine and implement innovative solar business model solutions across the U.S. will require direct engagement from regulators, utilities, and solar companies. This will include assessing current abilities to identify value and customer needs and developing multi-stakeholder processes for assessing value. To develop new approaches, policymakers may provide the driving force behind development of solutions and regulators can proactively clarify existing business and regulatory rules, as the New York Department of Public Service is doing with its Reforming the Energy Vision initiative. In other cases where that top-down push for change does not exist, solar companies, utilities, and other stakeholders should explore opportunities to collaboratively develop solutions, like the e21 Initiative has done in Minnesota.

While broader reform may ultimately be necessary, these bridge business models will be essential to ensure a robust and sustainable market for distributed PV over the next decade. By creating win-win-win outcomes, these models will not only benefit utilities, solar companies, and customers, but society as well—providing communities with economic development opportunities, cleaner air, and enhanced resiliency.

Download the report

Reprinted with permission.

Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.

CleanTechnica Holiday Wish Book

Holiday Wish Book Cover

Click to download.

Our Latest EVObsession Video

I don't like paywalls. You don't like paywalls. Who likes paywalls? Here at CleanTechnica, we implemented a limited paywall for a while, but it always felt wrong — and it was always tough to decide what we should put behind there. In theory, your most exclusive and best content goes behind a paywall. But then fewer people read it!! So, we've decided to completely nix paywalls here at CleanTechnica. But...
Like other media companies, we need reader support! If you support us, please chip in a bit monthly to help our team write, edit, and publish 15 cleantech stories a day!
Thank you!

CleanTechnica uses affiliate links. See our policy here.


Since 1982, RMI (previously Rocky Mountain Institute) has advanced market-based solutions that transform global energy use to create a clean, prosperous and secure future. An independent, nonprofit think-and-do tank, RMI engages with businesses, communities and institutions to accelerate and scale replicable solutions that drive the cost-effective shift from fossil fuels to efficiency and renewables. Please visit for more information.

RMI has 419 posts and counting. See all posts by RMI

10 thoughts on “Bridges To New Distributed Solar Business Models: New Report Released

  • This article is very convoluted and lousy at best. It does not clearly address the issue that Solar PV installed by customers will eat into the lunch money of electric utilities. How does the electric utilities earn money from this? Through uncashable credits and benefits? The article resorted to obfuscation of credits and benefits and the discussion did not spell out how it affects the bottom line of the utilities when they will be losing significant revenue stream as more solar PV are installed.

    • All appearances to the contrary, the electric cos. aren’t stupid.

      I don’t know it’s anyone’s responsibility but their own to tell utilities how to make money. They could become installers, repair centers, lease space on rooftops for their own installations, plan and coordinate microgrids. There will be a need for centralized power distribution for a long while. Those who can’t figure out how to make money – which they have been doing in great quantities for over 100 years – will go bankrupt in the creative destruction of capitalism – leaving the intelligently managed cos. to pick up the pieces and adapt. The legislators they bought and paid for may pass insane laws to delay progress but ultimately they will lose. “One resists the invasion of armies; one does not resist the invasion of ideas.” (Victor Hugo)

      Evolve or die.

      • I had the same question posted here, why can’t the utilities spearhead and install solar themselves? And there was a good video posted as an answer in a separate CleanTechnica article. The author speaker said that the IRR of 15% for a solar PV is not enough for utilities. They want something much much more easy money to be considered in their business. So our conclusion is thatthe utilities would rather lose the business than earn only 15% IRR.

        But of all their hypocrisy, the utilities complain left and right that the businesses who install solar PV are having a payback of IRR averaging 15%.

        • I know that you don’t realize this, but your own complaint about obfuscation and double speak actually answers your own question, in that there is no single answer, and many people, companies, and utilities are coming to realize this.
          For all your complaints about your own local utility (PG&E), the problems you have with them, and the ways you have of resolving them, do not apply when dealing with other utilities. The utilities here in East Tennessee, Western NC, and Northern Georgia under the TVA energy provider are actually giving a 1500$ cash rebate and guaranteeing a 10% premium on net metered power for twenty years just to get homes and businesses to install solar systems. I would bet that this is an opportunity that you wished was available to you.
          It does go to demonstrate the wide variety of situations that exist in the current electricity supply and usage scenarios across the US. This report, the linked conference from the E21 group, and what NY is trying to do just show various examples of what may happen in different places.
          One of the solutions when the utilities won’t address the addition of solar on their own is for Solar City to step in and become the energy provider. I know that you don’t like their leasing model, but they do at least offer fixed rates under certain plans, or a known increase under others, something that no utility is yet willing to guarantee.
          As more of these providers come into the market with PPA’s and other agreements thanks to the lack of fuel costs from solar more utilities will either adapt and do the same thing or fail.

          • I understand you perfectly, but the article cannot be translated into fine examples as you did.

          • I am glad that my examples demonstrated for you what the article was saying because actually they are the exact same thing.
            Let’s just put it down to my having to many years of having to survive in that world of corporate double speak and doing so because it was necessary to make the same translations for my coworkers.

  • The article seems to assume (I can’t be sure because of the cutting-edge management bafflegab) that utilities are monolithic integrated monopolies. That fits many US states, but not California and even more Texas, which have reasonably competitive markets. The drama plays out differently where, as in the UK and Texas, the grid operator is a neutral agency separate from the generators. Neither have experienced great difficulty in integrating rapidly growing volumes of renewables. The hit to the fossil generators is not their problem.

    • there is no place for coal diesel gas nuke utilities in the new order.
      they are only to obstruct delay and and spread fear and rob the costumers with high prices;
      will go bust for energy price slide.
      since two year I pay no more energy bill.
      cannot believe how easy cheap and fast Solar installation and gas out, air to water heatpump in. all electric.
      done, no problems, no more bills. saving this money for Tesla 3 all electric. question, how many Solar do you have?

    • To me it seemed more that this report and the references cited actually recognized the wide variety within the US utility business. Everything from monolithic monopolies, to deliverers, and individual fossil fuel suppliers, all need to recognize the change coming from distributed solar generation.
      Each and every one is going to have to recognize and adapt to the changes coming or fail.
      This can happen on a large scale like the Buffet investment group buying up quantities of renewable generation, or small like some utilities cooperating with cooperative farms.
      Or they can fight it, with the obvious example of those trying to cut net metering already.
      But the change has already happened, and the continuing reductions in the cost of solar should make it quite obvious to all that it will continue.
      It will just take some time to figure out those that are willing to change and adapt, or those that will end up failing. And yes due to politics it isn’t exactly a ‘free’ market situation, but in the end none of them will be able to fight less expensive solutions.

    • Check out the authors’ report. It explains a lot of this in a whole lot more detail.

Comments are closed.