As the number of rooftop solar installations continues to grow, especially in the residential solar market, it appears to cause friction between solar customers and utilities. There’s no arguing the fact that solar panels are here to stay. While solar’s growth is good for the environment, utility companies aren’t always jumping for joy.
Is it possible for lawmakers to work out a deal that benefits utility companies and their solar customers?
THE CURRENT RELATIONSHIP
Right now, many private utility companies are engaged in a bitter battle with rooftop solar. They’ve tried to introduce bills that would raise prices for solar customers. Fortunately, the legislation failed.
However, utility companies’ latest attempts to appeal to the public utility commissions have been successful. In late February, Salt River Project, a public utility in Arizona, voted to tack on a $50 monthly fee to solar customers’ bills.
A similar situation unfolded in Wisconsin last year. New Mexico is also considering raising fees for solar customers.
Why is the relationship between utilities and their solar customers souring?
Part of the problem lies in solar customers’ reliance on the grid. The other part lies in the fact that the utility companies’ business model is becoming outdated and impractical.
SOLAR CUSTOMERS AREN’T OFF THE GRID
Even though solar customers usually see a decrease in their electric bill, they still rely on the grid. Homeowners need it to absorb the excess power that the solar panels generate during the day. They also need the grid to give their houses power at night.
This is problematic for utility companies. Their costs remain the same despite collecting less revenue from solar customers. The companies still have to maintain power plants, transmission lines, and crews.
Some utility companies claim that charging solar customers monthly fees helps offset their costs. They also state that non-solar customers may face higher energy rates to compensate for solar customers’ savings.
A CENTURY-OLD BUSINESS MODEL
The business model that utility companies follow hasn’t changed in over a century. The companies depend on a steady growth in electricity demand to offset the huge investments needed to build power plants and the electric grid.
Rooftop solar slows the demand of electricity, and if enough of it is added, the demand growth could stop altogether. This means that utility companies wouldn’t be able to build new power plants. Is there a way for utility companies to survive the growth of rooftop solar?
New York thinks so. It’s including utility companies in its plan to increase the amount of rooftop solar in the state.
A new order from New York’s Public Service Commission stated that utility companies can’t own distributed power systems. This means that legally they can only own and operate power plants – not rooftop solar or small wind turbines.
By keeping other sources of electricity out of utility companies’ hands, New York hopes to create a more competitive market.
Another change that’s coming in New York is the way utility companies’ revenue is handled. In the past, companies’ revenue was based on how much power they sold. The state’s new plan is to base a company’s revenue on how efficiently and effectively it distributes power.
THE FUTURE OF ELECTRICITY
Utility companies are necessary for power distribution, but their role is changing. During the last century, utility companies generated power at large plants and brought it into customers’ homes.
The energy model is shifting away from that. In the future, it’s likely that utilities will simply facilitate the flow of power between dozens of independent systems and the grid. Instead of being the creator and generator of electricity, they will become kind of a middleman for it.
It is possible for utilities and solar customers to coexist, but it will take time and understanding from both parties to make the idea a reality.