The dramatic reduction in the price of solar panels has made solar PV competitive with the central power grid in some parts of the country. For the first time in 100 years companies like SolarCity are providing consumers with a competitive alternative to the local power company. Alternatively consumers are installing their own solar panels. In some jurisdictions this is being encouraged by net metering programs that allow consumers to sell power to the utility at retail rates. Some utilities participate in feed-in-tariff programs that pay elevated rates for consumer generated power. All of these are disruptive for the traditional utility business model, because typically distributed generation results in reduced demand for power from the grid and reduced revenue to the utility.
Regulators are very concerned about this trend. The National Association of Regulatory Utility Commissioners (NARUC) and Federal Energy Regulatory Commission (FERC) periodically meet for what they call a Sunday Morning Collaborative to discuss common burning issues. The current burning issue currently being discussed at these meetings is new utility business models.
I recently blogged about decoupling as one strategy for addressing this challenge.
Another approach is to increase rates for consumers who install solar PV panels. Historically, Arizona has had one of the most successful solar incentive programs in the United States (according to APS more solar per capita and more energy from large solar plants than any other state), but the Arizona Corporation Commission (ACC) has just instituted a charge of $0.70 per kilowatt effective on Jan. 1, 2014 on future customers who install rooftop solar panels. It is estimated that this will collect $4.90 per month from a typical (future) rooftop solar customer. The ACC said that the current net metering program creates a cost shift, causing non-solar utility customers to pay higher rates to cover the costs of maintaining the electrical grid that all customers use.
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