This morning while driving into work, I heard a great interview with former United States Secretary of Energy Stephen Chu on utility business models. While the gist of what he said wasn’t new to me, the clean and elegant way he laid out what he sees as the future of utilities and solar power is worth sharing.

Similar to how in the past telephone companies – he specifically named AT&T – used to own the entire telephone system from the overhead telephone lines up to and including the phone in your house, Chu feels that utilities ought to own solar panels and energy storage systems that they put on their customers’ roofs and in their garages. He said if utilities could outfit homeowners with solar panels and a 5-kW battery system, they could continue selling that customer power just as they do now. The utility would own the system, maintain the system and the customer would have no out-of-pocket expenses for it other than continuing to buy power at the same rate or at perhaps an even lower rate.

When a blackout occurred that homeowner could use the energy stored in the battery to keep a refrigerator running and maybe keep an LED light bulb on at night. In an outage situation, “that [little bit of power] goes a long way,” he said.

He explained the benefit of this approach for utilities would be many. They would gain a dry, secure “benign” environment to house the energy storage system, presumably a garage, barn or basement. They could then use that stored energy to balance the load on the grid, just as they do today by overloading the line slightly and letting then energy “dribble out,” he explained.

In the three-minute interview, Chu didn’t explain another huge reason that utilities should consider this option: distributed generation used in this way counteracts the need to build additional generation as the load capacity needs increase. And lastly and most important, the utility gets to keep its customer.

I remember way back in 2008 at a tradeshow when a reporter asked a utility this very question during a news conference: “Do you think utilities will ever own solar assets themselves?” The answer given then was strikingly similar to what Chu said utilities are saying now: “Maybe.”

Utilities should probably get clear on their approach soon. When it’s just a quarter or a half of one percent of a utility’s customers that have their own PV and are selling their solar power to the grid at the retail rate, the utility doesn’t care. But energy storage and PV panel costs are dropping, and once that percentage of utility customers’ that are zeroing out their bill goes to 5, 10 or 15 percent then “it’s a big deal” said Chu.

Chu said he told utilities that PV and energy storage is going to come and they should “form a new business model” NOW so that what today is a potential revenue loss, could become an area of growth for them in the future. Plus, he said this model would eventually lead to a more stable grid for us all.

I wonder if we’ll ever hear about one of the many solar leasing companies out there now getting acquired by a utility? That’s a matchup that I would really like to see.

I’ll be heading to Intersolar North America next week to check in with solar companies, energy storage companies, smart inverter manufacturers and more. Let me know in the comments below if there is a question you would like me to ask these experts.

Lead image: Solar Panels on Houses via Shutterstock