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.
Jon Wellinghof, outgoing chairman of FERC, thinks that the writing is on the wall and it is being driven by customers wanting more control of their energy. He said
"Advances in technology and the desire we are seeing at the consumer level to have control and the ability to know that they can ensure the reliability of their system within their home, business, microgrid or their community. People are going to continue to drive towards having these kinds of technologies available to them. And once that happens through the technologies and the entrepreneurial spirit we are seeing with these companies coming in, I just don't see how we can continue with the same model we have had for the last 100 or 150 years."
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.I blogged about an Arizona utility's attempt to address the issue of lost revenue when their customers install solar panels. Ultimately the regulator allowed a fixed annual fee to be charged to solar customers.
Now in Colorado, the local utility is also attempting to maintain its revenue stream.
Xcel's Colorado operating company PSCO filed its 2014 Renewable Energy Standard (RES) Plan with the Colorado Public Utilities Commission (CPUC) on July 24, 2013. The plan offers a proposed roadmap and strategy for continuing to provide customers with clean energy choices while meeting the state’s Renewable Energy Standard goals. Currently PSCO is ahead of schedule and on track to meet the state’s RES goal of 30 percent renewable energy by 2020.
Xcel states that the important next step in the evolution of their solar programs is to create greater transparency around electric system use and costs associated with rooftop solar. Their RES plan does not propose any changes to established program features of incentives to be paid to solar customers in 2014. But it does propose identifying and labelling all the incentives solar customers receive. The interesting part is in the details of how these are calculated.
Xcel's RES plan states that customers with solar installations receive an incentive proportional to the energy they generate. Xcel is proposing the the incentive/subsidy should be calculated as the total number of kWh that a customer's rooftop panels generate (including both electricity that is exported to the grid and the power used by the consumer for their own needs) times a rate that Xcel has determined based on an internal study.
Under current solar policies, residential consumers are paid the full retail rate by Xcel for any excess electricity they supply to the utility system. That is called net metering. But Xcel says that customers with solar installations avoid paying for the utility system that they rely on to take this excess power and to supply their backup power. Xcel's 2014 RES plan proposes a way to track and quantify solar customers’ net costs — the benefits they receive less the costs Xcel avoids as a result of residential solar systems. Xcel says that currently these costs are absorbed by non-solar customers. In Arizona the utility also made the case that non-solar customers are paying for the grid that both solar and non-solar customers use.
Xcel wants to be able to recover the money they lose when their customers reduce their energy bills when they install solar panels. This would come from a fund specifically designed to encourage Xcel to invest in renewable energy to meet the state’s renewable energy standard (RES). The fund is called the the Renewable Energy Standard Adjustment (RESA) fund and is collected as a percentage of sales (up to 2 %) within the Xcel Energy and Black Hills customer base ( it is tacked on customer's power bills ) and may be used to pay for the incremental costs of renewable energy over traditional energy resources.
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