by Mark Sokolove, Executive Vice President of Tigercomm
As you may have seen, GTM Research has been doing superb work covering the intersection of growing distributed, residential solar on the one hand, and the evolving utility business model on the other (what it calls the “Grid Edge”). Their work is extremely valuable, as this is a critical, rapidly changing and complex space. Which is why we always look forward to webinars like the one presented by GTM Research Senior Vice President Shayle Kann on September 25, covering “The Complex, Evolving Solar-Utility Nexus.” The entire webinar is well worth listening to, but for now, here are a few key points to highlight.
THE LAY OF THE LAND
- It makes little sense to “silo” coverage of distributed solar PV on the one hand, and the future of the utility business model (including the smart grid, demand response, energy storage, etc.) on the other, as these two areas increasingly are increasingly converging.
- The U.S. solar market is growing, but not uniformly across the country or in terms of the specific sub-segment (residential, non-residential, utility) of that market.
- Growth was down a bit in the first two quarters of 2014 compared to the final quarter of 2013, but Shayle Kann advises that we not draw too much from that, as the U.S. solar market – particularly utility – is “lumpy.” If you take out the variability of the utility projects, trend lines for distributed solar are steadily increasing, with around 6.5 GW expected to be installed in the US in 2014, up about 35% from 2013, and about 17 times what it was 5 years ago.
- Why are utilities so worried about solar now, even though solar generally doesn’t comprises a huge portion of their energy mix as of now? In short, it has to do with the impact of distributed solar installations on utility demand growth. With US electric demand growth having slowed sharply, from about 10% per year back in the 1950s to just 1% per year now, large proportions of increased load growth could easily be taken up by distributed, solar PV (GTM estimates 50% or more of load growth could get eaten up by solar installations in the top 5 states).
POLICY BATTLES: THE SOLAR INDUSTRY SHOULDN’T LET DOWN ITS GUARD
- The result has been net energy metering (NEM) battles — some legislative, some regulatory, some both — in more than 20 states. What’s fascinating, and also encouraging, is that so far at least, the solar industry has been faring impressively well in these battles, especially for being a relatively small industry going up powerful, incumbent industry. Part of the reason for this success has been that rooftop solar has strong public appeal. Of course, this could change, as solar penetration increases and has more meaningful ratepayer impacts, so the solar industry should certainly not let its guard down.
- A likely outcome to utilities’ concerns about the economics of increased distributed solar penetration could very well include imposing a minimum monthly bill on consumers for use of the grid. The impact of this could be substantially less than imposing a fixed charge, which the solar industry has been fighting against, and could be part of a NEM compromise in numerous states.
- One option for utilities might be to “steer into the skid,” so to speak, by getting into the distributed solar game themselves. The question is whether regulated utilities will ultimately play a significant role in the distributed solar market, or remain outside it as grid operators?
DISTRIBUTED ENERGY MANAGEMENT SYSTEMS (DERMS) ARE A MAJOR GROWTH AREA
- There are also questions about utility interaction with distributed PV from a technical perspective, which is why every utility will need some version of capabilities that Distributed Energy Management Resource Systems (DERMS) provides. That includes reconfiguration of grid equipment, consumer-sited solutions such as smart inverters), network management such as market-based demand response, etc. This will undoubtedly be a major growth area in coming years, and something we all will be paying a great deal of attention to.
All in all, it’s a fascinating, dynamic time to be a participant in the evolving U.S. solar-utility nexus. With the help of analysts like the ones at GTM (and also smart grid experts like Paul De Martini, who I interviewed last spring), we look forward to continuing to track it, and also to help our clients navigate their way through it effectively, in years to come.