Two recent headlines caught our attention recently, both heralding a boom in the number of solar installations expected in the U.S. over the next several years. First, SolarCity announces $500 million from Goldman Sachs to provide support their residential solar lease products READ MORE
The Grist.org opinion piece describing how the adoption of solar energy is posing a growing threat to the traditional large-scale utility business model covers a lot of complicated information on a topic filled with nuances and exceptions. However, it’s an interesting read and hits upon one of the key issues being debated regarding the future of solar energy in the U.S. READ MORE
Energy Informatics set to participate in SURGE Day, May 22nd
New Money and New Markets for Solar Energy
Two recent headlines caught our attention recently, both heralding a boom in the number of solar installations expected in the U.S. over the next several years. First, SolarCity announces $500 million from Goldman Sachs to provide support their residential solar lease products, an amount that will drive approximately 110MW in new solar capacity. Second, the Governor of Minnesota is set to sign legislation that will require large investor-owned utilities in that state to source at least 1.5 percent of their total electric retail sales from solar by year-end 2020. That translates to about 450MW. These two headlines alone foretell of approximately 100,000 new solar installations coming on-line and generating power for 25-30 years. All told, Greentech Media data suggests there will be close to 1 Million solar systems in place in the U.S. by 2016.
And just as the industry is trumpeting explosive growth in the number of new solar installations, we here at Energy Informatics can’t help but recognize an explosive growth in the new management challenges these announcements portend. After all, each new system becomes an energy- and revenue-producing asset the moment it’s installed. Third-Party Ownership (TPO) vendors, funding institutions (e.g. banks, utilities, private groups, etc.), and operations & maintenance service providers are now owning or managing hundreds, even thousands of these assets. Energy Informatics is working with these customers to confront the inherent challenges in managing large amounts of data, automating diagnosis and response, and providing stream-lined information and workflow to both upstream and downstream stakeholders.
Revenue per site - or per inverter- is relatively small, so automation and efficiency are key to avoiding costly operations that can quickly erode the ROI of the system or portfolio. And of course, good software tools are a logical and necessary ingredient. That’s where Energy Informatics and our team of experienced developers come into play.
Solar: The Less Than 1% Threat to Utilities
The Grist.org opinion piece describing how the adoption of solar energy is posing a growing threat to the traditional large-scale utility business model covers a lot of complicated information on a topic filled with nuances and exceptions. However, it’s an interesting read and hits upon one of the key issues being debated regarding the future of solar energy in the U.S.: utility rate-design and the future of net-metering.
Without trying to paraphrase the entire article (I suggest you read it), the author correctly asserts that solar adopters (those that connect solar to their homes or businesses) effectively decrease demand for the product the utilities are selling: conventional power. In turn, utilities must raise rates on their other customers in order to provide their investors a guaranteed rate of return. Higher rates - in turn - incents other customers to make the switch to solar, thereby creating a self-reinforcing loop: virtuous for the solar industry (it would seem); vicious for the utilities.
However, basic economic theory suggests that when demand for your product subsides, you need to lower your prices, not raise them. So utilities won’t simply and reactively do that, knowing the implications. Furthermore, PUCs and consumer protection advocate groups won’t sit idly by watching rates climb 20% or more for non-solar subscribers. And without question, utilities won’t sit idly by watching their business model collapse.
The concern among solar industry experts is that utilities will drive demand for solar lower by increasing the barriers to switching: higher minimum connection fees, “exit” fees, or abandoning net-metering rules that allow solar PV owners to offset the electricity they produce at prevailing retail rates, not wholesale rates. Just as solar is becoming much more affordable and accepted – due largely to plummeting material prices and greater availability of financing tools – utility rules and rate-structures may undermine the industry’s continued success. Of course, the solar industry has some muscle now too, and it’s fighting to ensure that doesn’t happen.