When the conversation about proliferating distributed solar photovoltaics (DPV) turns to the growing concerns of the utilities, it’s not uncommon to hear solar industry folks uttering dismissive things like “ah, they’ll figure it out” or “they should have seen this coming.” In fairness to the utilities, the growth of DPV has been unprecedented in recent years and the development necessary to accommodate this expansion is a massive, often perplexing undertaking. Early-market policies and regulations that once supported DPV’s development now do as much to inhibit its growth.
A new report from the Rocky Mountain Institute (RMI) titled Bridges to New Solar Business Models: Opportunities to Increase and Capture the Value of Distributed Solar Photovoltaics introduces interim strategies that DPV stakeholders — namely the solar industry and the utilities — can consider in the near-term while long-term changes to DPV infrastructure, technology, and regulation play out. The Bridges report presents immediate opportunities through which stakeholder collaboration would yield what RMI describes as “win-win-win” outcome: where solar, the utilities, and the customers are all delivered greater value.
Crude analogy alert: The perceived relationship between the solar industry and utilities today could be compared to a game of Harlem Globetrotters basketball: on the solar side are slam-dunk adoption rates and (mostly) winning headlines from the darling of renewable energy. On the utilities side, an uncoordinated squad of underdogs playing any card they can to keep up. (If one wanted to extend the analogy, the ineffectual referees might represent policy and regulation that isn’t keeping pace with the evolving market). The scenario RMI envisions would play out more like an NBA All-Star Game, where each optimally functioning team performs together to showcase one another’s strengths (… and the crowd goes wild).
Is the solar industry playing fair with the utilities? Are the utilities being as innovative as the market requires? “There are blanket generalizations, but there are good efforts and bad efforts happening throughout,” explained RMI’s Mathias Bell, who was a lead author on the Bridges report for 20 of the 36 months it was being created. “Not all solar companies are created equal and not all utilities are, either.”
How utilities perceive solar (and vice versa), comes down to business models and incentives, Bell says. The bridge business models that RMI introduces in its report address a concern shared by many. “The concern,” Bell explains, “[is] that rising tension and conflict will end up hindering the market rather than supporting the growth we see as necessary to meet long-term climate and energy goals.”
To understand how to maximize the value creation, optimization, and capture along the DPV value chain, RMI’s report first defines and then analyzes the three primary chain links — manufacturing, project development, and operations.
Collaborative opportunities, (which neither the solar industry nor utilities are thought to be able to manage alone) include:
- Continuing to down costs
- Targeting untapped operational benefits
- Optimizing for capacity value
- Providing additional grid services and
- Integrating complementary technologies and programs
Next, recommendations in RMI’s Bridges report are organized into three core “building blocks” that could together lead to the optimal win-win-win scenario between the solar industry, utilities, and customers:
- Make DPV accessible to broader customer base. Building on the popular trend of shared renewables, solar farms, community solar gardens, etc… increased accessibility would also includes new methods of financing and a proposed RFP process that could reduce costs by introducing multi-year contracts for DPV projects.
- Optimize deployment to capture potential operational benefits. How will utilities begin to view DPV as a beneficial resource instead of a burden? RMI suggests it will require a more proactive approach to recognizing where/when DPV generation is most valuable — a determination that would be sooner realized through partnerships between solar companies and utilities. For solar’s part, RMI suggests steps towards a more thoughtful deployment to the grid.
- Leverage solar adoption to increase uptake of other DER technologies. The last of three building blocks explores how technology shared between solar stakeholders and the utilities can provide services opportunities for both parties. Examples in the wild include a pilot program from Sacramento Municipal Utility District that offers customers a solar-plus-storage bundle from Sunverge Energy. Solar industry and utility industry players are keen to understand how SMUD’s technological approach can address demand response and peak load shifting.
Since a win-win-win outcome is not likely without the foundation of strong regulations (even in the near term) the recommendations of Bridges to New Solar Business Models seek to involve regulators who can be helpful — especially on the local and state level — in forging paths to data transparency, standardization in operations, and new methodologies for valuing DPV (benefits/costs).
Where the solar industry and utilities are encouraged to take risks to pave the road forward, regulators should also be willing to bend and explore changes that would benefit stakeholders and customers.
Time will tell if the U.S. solar industry and utilities will play nicely or divisively in the absence of solid regulation in the coming years. One unfortunate likelihood: high-profile clashes and regressions between the two will continue to draw more attention than bold and often costly pilot programs that are demonstrating positive change in states like New York, North Carolina, Hawaii, and Arizona. RMI’sBridges report outlines some reasonable paths forward, but maybe more importantly demonstrates that cooperative change is possible… and in many places already afoot.
In early 2015, RMI will be featuring the findings of its Bridges to New Solar Business Models report in a blog series. Keep an eye on RMI Outlet to follow along.
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