Solar energy threatening the future of US electricity industry?

July 27, 2013 by  
Filed under Green Energy News

For years, power companies have watched warily as solar panels have sprouted across the nation’s rooftops. Now, in almost panicked tones, they are fighting hard to slow the spread.

Alarmed by what they say has become an existential threat to their business, utility companies are moving to roll back government incentives aimed at promoting solar energy and other renewable sources of power. At stake, the companies say, is nothing less than the future of the U.S. electricity industry.

According to the Energy Information Administration, rooftop solar electricity – the economics of which often depend on government incentives and mandates – accounts for less than a quarter of 1 percent of the nation’s power generation. And yet, to hear executives tell it, such power sources could ultimately threaten traditional utilities’ ability to maintain the nation’s grid.

“We did not get in front of this disruption,” Clark Gellings, a fellow at the Electric Power Research Institute, a nonprofit arm of the industry, said during a panel discussion at the annual utility convention last month. “It may be too late.”

Advocates of renewable energy – not least solar industry executives who stand to get rich from the transformation – say such statements are wildly overblown. For now, they say, the government needs to help make the economics of renewable power work for ordinary Americans. Without incentives, the young industry might wither – and with it, their own potential profits.

The battle is playing out among energy executives, lawmakers and regulators across the country.

In Arizona, for example, the country’s second-largest solar market, the state’s largest utility is pressuring the Arizona Corporation Commission, which sets utility rates, to reconsider a generous residential credit and impose new fees on customers, months after the agency eliminated a commercial solar incentive. In North Carolina, Duke Energy is pushing to institute a new set of charges for solar customers as well.

Nowhere, though, is the battle more heated than in California, home to the nation’s largest solar market and some of the most aggressive subsidies. The outcome has the potential to set the course for solar and other renewable energies for decades to come.

At the heart of the fight is a credit system called net metering, which pays residential and commercial customers for excess renewable energy they sell back to utilities. Currently, 43 states, the District of Columbia and four territories offer a form of the incentive, according to the Energy Department.

Some keep the credit in line with the wholesale prices that utilities pay large power producers, which can be a few cents a kilowatt-hour. But in California, those payments are among the most generous because they are tied to the daytime retail rates customers pay for electricity, which include utility costs for maintaining the grid.

California’s three major utilities estimate that by the time the subsidy program fills up under its current limits, they could have to make up almost $1.4 billion a year in revenue lost to solar customers, and shift that burden to nonsolar customers. Some studies cited by solar advocates have shown, though, that the credit system can result in a net savings for the utilities.

Utilities in California have appealed to lawmakers and regulators to reduce the credits and limit the number of people who can participate. It has been an uphill fight.

About a year ago, the utilities pushed regulators to keep the amount of rooftop solar that would qualify for the net metering program at a low level; instead, regulators effectively raised it. Still, the utilities won a concession from the Legislature, which ordered the California Public Utilities Commission to conduct a study to determine the costs and benefits of rooftop solar to both customers and the power grid with an eye toward retooling the policy.

Edward Randolph, director of the commission’s energy division, said that the study, due in the fall, was a step toward figuring out how to make the economics work for customers who want to install solar systems as well as for the nonsolar customers and the utilities. The commission wants to ensure, he said, that, “we aren’t creating a system that 15 years from now has the utility going, ‘We don’t have customers anymore but we still have an obligation to provide a distribution system – how do we do that?’”

The struggle over the California incentives is only the most recent and visible dust-up as many utilities cling to their established business, and its centralized distribution of energy, until they can figure out a new way to make money. It is a question the Obama administration is grappling with as well as it promotes the integration of more renewable energy into the grid.

Utility executives have watched disruptive technologies cause businesses in other industries to founder – just as cellphones upended the traditional land-based telephone business, producing many a management shake-up – and they want to stay ahead of a fundamental shift in the way electricity is bought, sold and delivered.

“I see an opportunity for us to recreate ourselves, just like the telecommunications industry did,” Michael W. Yackira, chief executive of NV Energy, a Nevada utility, and chairman of the industry group the Edison Electric Institute, said at the group’s convention.

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