Should utilities be allowed to enter the solar biz?

Should utilities be allowed to enter the solar biz?

If utility companies start installing rooftop solar panels, does it make them clever or greedy?

The answer is probably a bit of both. If they would have had any vision or foresight, utility companies would have started their own distributed generation and rooftop solar enterprises years ago when their emerging competition did. Maybe 2010 or 2011 would have been good years to jump on the bandwagon.

But just as Blockbuster (remember the brick and mortar video rental stores?) waited until Netflix stomped on its market share to start its own mail-in rental service, utility companies are showing up a bit late to the party.

In theory, it’s a great idea for utilities to offer rooftop solar to their customers. Their deep pockets and customer access could lead to tremendous gains for solar adoption.

But, since utilities waited until now, there’s opposition from the thousands of solar companies that have been growing and contributing to local economies, rewarding entrepreneurs and employing people. It’s a bit like changing the rules mid-season to allow Division I college sports teams to play in Division III. It doesn’t seem fair. And it seems a bit sneaky and greedy.

"Are they actually trying to deploy lots of rooftop solar or are they just trying to kill off the only competition they've ever had?" said Will Craven, a spokesman for The Alliance for Solar Choice, a solar advocacy group backed by companies like Sunrun and SolarCity.

At first, utilities didn’t seem to think much of solar at all. It was expensive and posed so little threat that utility companies were happy to offer rebates to customers who installed it in an effort to move closer to meeting state renewable energy portfolio standards.

But then some creative business people found a way to make solar affordable to the masses – leasing panels with little or no upfront money and a promise of long-term utility bill savings while doing right by the environment. With an offer like that, it was no wonder the solar industry exploded.

Utilities started to worry. The Edison Electric Institute, a trade group for major utility companies, published a report in 2012 officially calling distributed solar a “threat” to the traditional utility business model.

As an illustration of that threat, Hawaii utility companies have started to see real grid defection. When they capped out their interconnection ratios and quit allowing new solar panel owners to connect their systems to the grid, Hawaiians started going off the grid.

The state regulators there denied the primary utility company’s operations plan, requiring it to find a way to support more distributed solar generation.

In reaction to the threat, utility companies, such as Arizona Public Service and several others in states from Colorado to Ohio, started to fight solar. They spent the last two years working to impose fees on solar customers or to raise taxes – anything to make the new technology less appealing to customers and less threatening to utilities.

All of those efforts to date have fallen short of achieving the seemingly apparent goals.

So, what are utility companies to do?

They can start installing their own distributed generation. Again, it’s a great idea that would do wonders for the environment. But solar isn’t just about the environment anymore. It’s about economics now, too. And that makes it infinitely more complicated.

Distributed generation has created a glimmer of choice where there wasn’t one before.

The reason utility companies are worried is that they can see a clear picture now of a future with viable energy storage options and affordable rooftop solar panels. That means they will have competition and customers will have choices about where they get their power for the first time ever.

Utility companies are regulated monopolies that are guaranteed certain profit margins in most states. Allowing a monopoly with guaranteed profits to compete in the same arena with free market start-ups doesn’t sit well with many.

Utilities in several states are working to add rooftop solar to their portfolios, but resistance has been strong. South Carolina recently allowed utilities to lease rooftop solar arrays to customers, but won’t allow the company to recoup costs from other rate payers, requiring the utility to run the solar leasing program as a separate enterprise.

That solution could work in other states as well. Utilities still get the advantage of customer access, but without the guaranteed profits, which could still allow independent providers to compete.