Net metering wars: An environmentalist's view (better news than you might think)
By: SGN Staff
John Finnigan represents the Environmental Defense Fund before state public utility commissions. He recently blogged about the net metering situation and its implications for utilities.
I wanted you to see it because he makes the point that "as a guiding principle, utilities must have an opportunity to earn a fair return in exchange for keeping the lights on." Far too often, environmentalists and utilities have been adversaries. That is often still true when it comes to topics such as nuclear and coal. But it is refreshing to know that enlightened environmentalists understand and value the essential role of utilities. - Jesse Berst
By John Finnigan
Big-box retailers turn to solar, how can electric utilities adapt?
The electric utility industry faces the risk of declining revenues as more customers install solar panels on their homes and businesses. Solar power currently supplies 2% of the country’s electricity needs, and is projected to grow to 16% by 2020. In 2013, solar panel prices for commercial installations fell 15.6%, from $4.64/watt to $3.92/watt. To protect their revenues, some utilities are raising electricity costs for solar panel owners - but with mixed results. Credit ratings agencies are also expressing concern. Is there real cause for alarm or are these companies crying wolf? Judging by one customer segment - big-box retailers - the threat is real.
Top-ranked solar installations
The Solar Energy Industries Association (SEIA) ranks U.S. companies based on their solar energy capacity, and the top five companies on the list are big-box retailers:
Walmart tops SEIA’s list with 65,000 kW of solar power, which is enough to supply the annual energy needs of over 10,000 homes. They recently installed ten new solar rooftop systems in Maryland, totaling more than 13,000 panels. Walmart is the largest retailer in the U.S. and in the world by revenue, with 4,423 U.S. stores and over 10,000 stores worldwide. Walmart and EDF have been working together since 2004 to reduce the Walmart’s environmental footprint. With more than 200 solar installations across the country, Walmart plans to have 1,000 solar installations by 2020. Walmart’s goal is to eventually supply 100% of its energy needs with renewable energy.
Other commercial companies are turning to solar too
As a whole, the top 20 big-box retailers have over 18,000 U.S. stores, representing enormous potential for solar power growth. These retailers are only part of a larger group of commercial customers, which in total make up about one- third of U.S. electric utility sales. But other commercial customers are turning to solar too. The National Renewable Energy Laboratory reports that 40% of the nation’s 86,000 supermarkets are located in areas with grid parity (the cost of power from solar panels is equal to the cost of buying power from the utility). Commercial customers are also making impressive strides in reducing their energy usage through energy efficiency.
Changes ahead for electric utilities
What does this mean for electric utilities? We can expect to see the following changes to the electric utility business model going forward:
Â· Utilities will need to address the operational challenges of higher levels of solar power on their electric grids;
Â· Utilities will seek to limit the number of customers eligible for net metering plans, where the customer is paid for the excess energy supplied by their solar panels;
Â· Utilities will seek to reduce payments received for solar energy produced by net metering customers, who currently receive the full retail rate for their excess energy in many states;
Â· Utilities will seek to implement new, fixed charges for customers who install solar panels on their property;
Â· Utilities will start new businesses providing solar installation services for customers;
Â· Utilities will seek approval to own solar power installations located on their customer properties; and
Â· Regulators and utilities will consider adopting performance-based electricity rate plans. These plans would charge for electricity on the basis of service and performance, rather than the volume of energy sold to customers.
These changes present a host of legal and regulatory challenges. As a guiding principle, utilities must have an opportunity to earn a fair return in exchange for keeping the lights on. Similarly, electricity rates for solar panel owners should fairly reflect the full costs of serving these customers, as well as the full benefits that solar power provides to the electric utility. These changes will be disruptive for electric utilities, but will allow customers to choose affordable clean energy and new technologies. We’ll all benefit from cleaner energy and a reliable electric grid.
John Finnigan is the senior regulatory attorney for EDF’s US Climate and Energy Program, representing EDF before state public utility commissions on smart grid deployments and energy efficiency matters.