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Whither Utilities?

Paul Kando

In their effort to slow the growth of rooftop solar, electric companies and their trade association, the Edison Electric Institute (EEI), have based their campaign on the premise that rooftop solar customers cause a cost-shift to non-rooftop-solar customers. But it is natural gas prices and utility infrastructure spending that have a high impact on power bills, not rooftop solar.

High voltage wires riding off into the sunset
photo credit: Electricity Magazine

A number of studies have concluded that solar customers do not have a negative impact on non-solar customers, rebutting the cost-shift talking point. A recent report from the Lawrence Berkeley National Laboratory (LBNL) offers further indication that the cost shift argument is a self-serving myth: the effects of distributed solar on retail electricity prices will likely remain negligible for the foreseeable future. Furthermore, when distributed solar reaches 10% of electricity sales, its impact will be either a cost or a benefit of around $0.005/kWh.

If utility companies and regulators did want to address price impacts on their customers, they would do better to limit their use of natural gas for power generation, and to limit the capital expenditures they routinely propose in rate cases. By 2030, for each dollar per Million BTU increase in the natural gas price, retail electricity prices will increase by 1¢/kWh or more. Natural gas prices are volatile: confidence levels for 2030 range from increases of $2.2 to $5.4 per Million BTU. Yet there is more than 31 Gigawatt (GW) of gas capacity under construction, plus 111 GW proposed — more than 200 new natural gas power plants across the USA.

But it is capital expenditures by electric utilities that have the largest impact on electric bills. According to LBNL the cost to consumers of utility capital expenditures ranges between 1.6 – 3.6¢/kWh. Unlike solar, these expenditures never reduce the net cost of retail electricity.

Solar power provides a substantial public benefit because it reduces electricity prices by displacing more expensive power sources, reduces air and climate pollution, reduces electric grid system costs, reduces the need to build more power plants to meet peak demand, stabilizes prices, and enhances energy security. These avoided costs benefit non-solar ratepayers.

That utilities don’t want to talk about the price impacts of building more infrastructure is understandable: that’s how they make a profit. Inventing a solar cost shift is better PR than admitting that rooftop solar threatens the classical monopoly utility business model. However, the use of falsehoods and political dirty tricks — using front groups to influence legislators, hiring politicians’ children as lobbyists, for instance. — only underscores the outdated business model’s vulnerability to solar energy’s competitive advantages.

Utilities will not be saved by eliminating net metering or by attempts to raise the electric bills of rooftop solar generators. The cost of solar is dropping; so is the cost of energy storage. Unlike fossil fuels, solar is a distributed resource, ill-suited to a centralized business model. The utilities will either adapt, incorporating distributed power generation and two-way power flow into their operations, or they will be bypassed by innovation. Technologies abound (microgrids, storage, etc.) to aid in this transition for the benefit of everyone.