Wake-up call: big utilities finally pursuing rooftop solar
By: SGN Staff
Quick Take: Utilities in America's sunny southwest have been testing this idea for years. But finally several of the country's "traditional" utilities -- AEP, Dominion Resources and Southern Company among them -- are exploring the rooftop solar business. As the Wall Street Journal explains, distributed solar is a threat to the old-school utility business model. But it is also an opportunity to get into a new line of business, one that might make up for slowing demand growth and aging coal plants.
I think this is great news. AEP and Southern are fine utilities, but they rarely push the edge. The fact that these cautious companies are looking into rooftop solar will make it "safe" for other conservative utilities to do the same. I don't know if every utility should be in the solar business. But I do think every utility should run the numbers and think about it seriously.
- Jesse Berst
Here's the rock: Demand for electricity is flat or barely growing in many parts of North America. Here's the hard place: upstart companies such as Solar City are offering customers a way to minimize the power they need from their local utility. They provide the financing to install rooftop solar, then sell back the resulting power at a low guaranteed rate.
Although the numbers aren't big enough yet to impact utility profits, that could soon change. For instance, Solar City just got another half billion dollars in venture financing to allow it to fund even more projects. But utilities don't have to cede this new business to the startups. They could choose to finance installation in return for a long-term deal to sell the power back to the building owner (or buy it at a low rate). Or they could rent the rooftop and take the power.
In survey after survey, utilities still rank number one when respondents are asked who they trust with energy issues. Most customers would feel great confidence in a solar power deal that came from their local utility.
AEP CEO Nick Akins told the Journal that his firm is evaluating "at what point in time does it make sense" to enter the business of owning rooftop solar. "On its face you would look at it and say distributed generation is a threat. But on the other hand we see it as an opportunity because our business is changing. If it's truly a disruptive technology, you better have a part in it. Otherwise, you're on the bad side."
Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.
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