In the last decade or so, many utilities have demonstrated a “fight vs. flight” response toward solar energy and distributed generation. Some utilities have lobbied against solar and created regulatory roadblocks, while a greater majority of utilities ignored the solar industry – because it was relatively small and insignificant. But as the solar industry has matured and increased in size, and climate change has become a more pertinent issue, the U.S. electricity landscape is facing the precipice of a major evolution. Many utilities are demonstrating an evolutionary response and adapting to the changing energy landscape. As described in an excellent report by Bloomberg New Energy Finance’s “Fight, flight or adapt: How are US utilities coping with distributed PV,” there are a variety of business models that utilities are employing. These include:
a. Utilities who build and own distributed PV within their own service territories through regulated arms
b. Utilities who build and own distributed PV outside their service territories through unregulated arms
c. Utilities who invest tax equity, or an equity stake in PV portfolios
d. Utilities who purchase PV projects/portfolios that are developed by others
e. Utilities who invest in DG related technologies, such as grid enhancements and storage, and
At Sol Systems, we interact most frequently with utilities and divisions of utilities who are pursuing the “b”, “c”, and “d” strategies listed above, and we find that many clients are showing impressive and strategic leadership as they skillfully acquire profitable solar assets. We are both equipped and motivated to help our utility clients pursue these strategies because it advances our mission of bringing financing solutions to the solar industry.
In the meantime, we are intrigued by prospects of more massive evolutionary changes that will fundamentally transform the U.S. electricity landscape – like the reform commencing in New York to rethink the way electric utilities do business. In April, the New York Public Service Commission (NY PSC) kicked off a major proceeding which they named “Reforming the Energy Vision” (REV), and they are progressively plugging away at a schedule of reviews and status reports that extend over the course of the next year.
This “vision” begins with a 91-page report that explores how distributed grid architecture can be implemented on a wide scale. The REV aims to benefit commercial and retail consumers with lower costs, greater reliability and reduced emissions. New York’s Department of Public Service sees distribution utilities as playing the role of Distributed System Platform Providers (DSPPs) which would mediate between the customer and the bulk power system, and coordinate customer activities to improve efficiency and reduce the need for infrastructure investments. The DSPPs would also coordinate Distributed Energy Resources (DER) markets.
Needless to say, efforts like these are more realistic in deregulated markets, like those on the East Coast. However, there are more signs that the landscape could change quickly enough that utilities will be forced to evolve – or risk extinction.
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