California Utility Commissioner: Utilities Would “Strangle Solar” if They Could January 20, 2014

In 2013, the Edison Electric Institute issued a paper warning that electric utilities face “disruptive challenges”, including the rise of distributed energy resources, like rooftop solar. In recent months, we have seen a building move by utilities to place roadblocks in the way of solar energy deployment, making it more difficult and expensive for businesses and homeowners to self generate electricity.

Now more confirmation. This will be a fight.

San Diego Union Tribune:

After resigning for health reasons, a member of the California Public Utilities Commission has warned of intense pressure by utilities to protect against the incursion of rooftop solar energy. Commissioner Mark Ferron announced Wednesday that he could no longer perform his duties as commissioner after two years of treatment for prostate cancer. In a jocular parting report, he praised California for its leading role on energy and climate policy, while warning that its utilities “would still dearly like to strangle rooftop solar if they could.” By order of the state legislature (Assembly Bill 327), the commission is poised to overhaul how much customers can be rewarded for generating their own solar electricity. Ferron, a former executive at Deutsche Bank and Salomon Brothers, warned that zealous legislators with little experience in energy matters have handed the commission “a poisoned chalice.” “The Commission will come under intense pressure to use this authority to protect the interests of the utilities over those of consumers and potential self-generators” of solar electricity, he wrote, “all in the name of addressing exaggerated concerns about grid stability, cost and fairness.” “You — my fellow Commissioners — all must be bold and forthright in defending and strengthening our state’s commitment to clean and distributed energy,” he stated. Industry analysts and advisers, including the investor-owned utilities association Edison Electric Institute, have issued public warnings of a disruptive threat to existing utility business models by the accelerating adoption of rooftop solar, and other “distributed generation” of electricity by customers.

Edison Electric Institute:

The timing of such transformative changes is unclear, but with the potential for technological innovation (e.g., solar photovoltaic or PV) becoming economically viable due to this confluence of forces, the industry and its stakeholders must proactively assess the impacts and alternatives available to address disruptive challenges in a timely manner.

–

While tariff restructuring can be used to mitigate lost revenues, the longer-term threat of fully exiting from the grid (or customers solely using the electric grid for backup purposes) raises the potential for irreparable damages to revenues and growth prospects. This suggests that an old-line industry with 30-year cost recovery of investment is vulnerable to cost-recovery threats from disruptive forces.

–

Due to the variable nature of renewable DER, there is a perception that customers will always need to remain on the grid. While we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically “cut the cord?”



Forbes:

To the list of industries at risk of complete obsolescence – which at the moment includes daily newspapers, government postal services, and men-only barbershops, among others – you can add U.S. power utilities. The creeping sense of impending peril that has enveloped the power sector was made explicit earlier this year in a widely distributed, and remarkably candid, report from the Edison Electric Institute entitled “Disruptive Challenges.” Warning of “irreparable damages to revenues and growth prospects” of utilities due to the spread of distributed power generation from renewable energy sources, the report foresees “a day when battery storage technology or micro turbines could allow customers to be electric grid independent.” The result: a “cycle of decline [that] has been previously witnessed in technology-disrupted sectors (such as telecommunications) and other deregulated industries (airlines).” A Bloomberg BusinessWeek story last week put an even finer point on it: “In about the time it has taken cell phones to supplant land lines in most U.S. homes, the grid will become increasingly irrelevant as customers move toward decentralized homegrown green energy.” NRG Energy NRG -0.04% CEO David Crane told the magazine that microgrids, small wind and solar, and net metering constitute “a mortal threat to the existing utility system.”