Distributed solar and the threat to utilities

David Roberts over at Grist takes a look at the arguments that utilities will increasingly make over the coming years regarding distributed solar. The major argument boils down to the fact that those with rooftop solar, who are generating most of their own electricity, are not rate paying customer and thus not contributing to transmission and distribution costs as well as other maintenance and fixed costs of operating a reliable electrical grid. The argument is then spun to argue that poorer folks, who can’t afford solar power, wind up being disproportionately burdened by the cost of maintaining the grid. This second argument doesn’t really make sense. The reality is closer to the fact that at the margins utilities will generate less revenue and profits as some customers move to generating their own power.

Distributed solar is such a small part of power generation right now that I’m not really convinced this is a real issue at present. Also utility scale solar development is far outpacing distributed solar in terms of growth. But if panel prices and more importantly, installation costs, dramatically declined over the next few years we could have a real problem. A 4 kilowatt systems runs about $20,000 but what happens if that becomes $10,000, about what that system costs in Germany?

Roberts doesn’t have an answer, but points out that there are actual benefits to utilities of distributed solar like having to build out less capacity and reduced investments in transmission and distribution (T&D). It’s a complicated issue because what’s actually needed is an incentive system that makes utilities supportive of distributed solar. Utilities want solar users to pay fees for “off-peak service, back-up interruptible service, and the pathway to sell [distributed energy resources] to the utility or other energy supply providers.” This will slow solar adoption and what happens if the dreaded solar/battery combo ever materializes where some customers could opt to never connect to the grid.

Like Roberts I don’t have an easy solution, but utilities would have to rethink their role. One option that springs to mind is that they embrace their role as a distributor of energy so that they could produce things like advanced software systems for networking the grid and tapping rooftop solar customers to stabilize the grid. Will this likely ever happen? No. But some degree of disruption is inevitable and just placing tolls on the grid seems only liken to worsen customer relationships and increase the chance that a minority of innovators will find ways to do without the grid.