World War Fee: Utilities Holding Action on the Solar Revolution

September 30, 2014

Big piece from Reuters this week on the global utility panic as solar photovoltaic generation promises to eat away at their 100+ year old business model. Recent historical experience with technological revolutions like the internet and cell phones come to mind, suggest that those that fight, and refuse to adapt,  will inevitably be absorbed.


A year after Spain, the sunniest country in Europe, issued notice of a law forcing solar energy-equipped homes and offices to pay a punitive tax, architect Inaki Alonso re-installed a 250 watt solar panel on a beam over his Madrid roof terrace.

“The government wanted people to be afraid to generate their own energy, but they haven’t dared to actually pass the law,” Alonso said as he tightened screws on the panel on a sunny summer day this month. He had removed solar panels from the roof last year.

“We’re tired of being afraid,” he said.

Halfway across the globe, in the “sunshine state” of Queensland,Australia, electrical engineer David Smyth says the war waged by some governments and utilities against distributed energy, the term used for power generated by solar panels, is already lost.

“The utilities are in a death spiral,” he told Reuters by telephone while driving between a pub where he helped set up 120 solar panels to cut its A$60,000 ($53,000) annual power bill and a galvanizing plant which was also adding solar panels to reduce costs.

In Australia, he said, solar panels have shifted from being a heavily subsidized indulgence for environmentally-conscious households to a pragmatic option for businesses wanting certainty about what their running costs will be next year.

“Not many people are doing it because of emissions or the environment,” Smyth said. “It’s about the cost.”

Solar photovoltaic (PV) panels constitute the fastest growing renewable energy technology in the world since 2000. Global capacity has exploded from 1.5 gigawatts at the turn of the century to 136 gigawatts currently, according to the Paris-based International Energy Agency. Meanwhile, the price of solar panels has plummeted 80 percent since 2008 thanks to generous state subsidies aimed at promoting clean energy.

It’s still less than one percent of energy capacity worldwide, but the surge in installations of rooftop solar panels is beginning to hit utilities and their business model of charging customers on the basis of consumption.

IEEE Spectrum:

Although solar energy is still a midget among U.S. energy sources, its rapid growth from a small base is beginning to make some of the big players nervous. Regulated utilities in a number of states—Arizona, California, Colorado, Idaho and Louisiana—have started to complain about the various benefits for photovoltaics (PV), says Mac Gunther, in a article appearing on Yale’s environment360 website. Gunther, a contributing editor at Fortune, describes the position of PV in the U.S. energy mix as “puny” or “a mere blip,” inasmuch as it accounted for barely one-tenth of 1 percent of U.S. electricity last year. (Coal delivered 37 percent and natural gas 30 percent.) Yet rooftop PV installations jumped nearly 50 percent last year, enough to make some incumbents seriously nervous.

Critics of solar incentives object to the whole panoply of state and Federal subsidies favoring PV, but they particularly object to aspects of “net metering,” the requirement that utilities allow distributed generators like owners of rootfop arrays to sell electricity back into the grid. The subject of net metering is a complicated one. In the United Kingdom, which to a great extent inspired the injection of free-market principles into electric power systems, net metering is not generally allowed or encouraged. There, the industry has persuaded regulators that with net metering, distributed generators become, in effect, free riders—they benefit from selling into the grid without bearing their fair share of paying for its maintenance. In the extreme case, a household that always produced excess energy and never bought power from the local utility might pay nothing to support the grid.



A South Dakota-based utility has decided to withdraw a proposed rate change that likely would have adversely impacted customers generating their own alternative energy. Black Hills Power, a subsidiary of Black Hills Corporation, serves nearly 70,000 customers throughout western South Dakota, northern Wyoming and southeastern Montana. After facing backlash to the proposed changes, the company withdrew the rate plan to allow for more time to discuss it with customers.

“We understand that it’s complicated,” Vance Crocker, Black Hills Power’s vice president of operations, told the Rapid City Journal. “We want to educate our customers about it and have a dialogue with our customers.”

Crocker did not rule out proposing the rate change again in the future, saying the company still thinks it’s fair. Part of a broader debate taking place at the local level throughout the country, Black Hills Power is one of many utilities seemingly stifling the proliferation of distributed solar power due to concerns over business-model disruption and long-term revenue impacts.

According to the Rapid City Journal, Black Hills Power argued that the proposal was necessary because company executives think independent power producers are not paying for their added use of the electrical grid.

Earlier this month Black Hills Power’s Jim Keck said the company is also concerned about covering their costs. “We don’t want to penalize our entire residential customer base to help pay for the fixed costs of these renewable systems,” he said.

Yale Environment 360:

No wonder the utilities are nervous. Just as personal computers threatened the manufacturers of industrial-sized mainframes, and the rapid adoption of cell phones shook up once-formidable landline operators, distributed solar could disrupt the de facto monopoly long held by regulated utilities.

Several utilities, including Arizona Public Service and Denver-based Xcel Energy, have asked their state regulators to reduce incentives or impose charges on customers who install rooftop solar; so far, at least, they aren’t making much headway. A bill in the California legislature, backed by the utility interests would add $120 a year in fees to rooftop solar customers.

But other utility companies are adopting a different strategy – they are joining forces with solar interests. NRG Energy, based in Princeton, N.J., has created a rooftop solar unit to sell systems to businesses and, eventually, homeowners. New Jersey’s PSE&G is making loans to solar customers, and Duke Energy and Edison International have invested in Clean Power Finance, a San Francisco-based firm that has raised half a billion dollars to finance solar projects.

From the utility’s perspective, it’s a mortal threat,” says NRG Energy’s chief executive, David Crane. As an independent power producer, NRG competes with regulated utilities; it has been selling rooftop solar directly to commercial customers, including hotels, Arizona State University, an NFL stadiums in Washington, New Jersey, and Philadelphia. “Big corporations are realizing that they can openly display their commitment to sustainability with solar panels without having to pay any more for electricity,” Crane says.

But other conservatives, including a group funded by the billionaire Koch brothers, are loudly opposing government support for solar. A Virginia-based advocacy group for senior citizens called the 60 Plus Association has built an Arizona website, and an accompanying web video attack on solar subsidies. The video seeks to link California-based rooftop firms SunRun and Solar City, which are operating in Arizona, to bankrupt manufacturer Solyndra, calling them “connected companies getting corporate welfare.” An APS spokesman told Yale Environment 360 that it was not responsible for the video or any campaign against rooftop solar. But APS has confirmed that its parent company, Pinnacle West Capital Corp., hired Sean Noble, an Arizona political consultant who also has worked for the 60 Plus Association. 60 Plus has received funding from Charles and David Koch, whose conglomerate, Koch Industries, includes fossil fuel holdings.

The fact that organizations funded by the Koch brothers are going after solar subsidies may be the best evidence of all that the industry’s future is bright.


19 Responses to “World War Fee: Utilities Holding Action on the Solar Revolution”

  1. Gingerbaker Says:

    Almost everyone, it seems, is standing around, looking down and self-consciously pushing the toes of their shoes around in the dust, while humming some nonsense song. Just waiting around, hoping that when they look up, the dust will have cleared and they will find that someone has done something, and they can then continue shuffling along, looking down at the ground. Never looking straight ahead at the problem.

    We are standing around watching as the electricity utility industry, the only segment of the business sector which can be said to be substantially non profit, is slowly being converted into a perpetual profit project of rapacious capitalists.

    We are avoiding having a really important conversation, a conversation which if we keep avoiding it, will mean all of us will be paying many trillions of dollars every month – out of our own pockets – instead of not paying a dime.

    That conversation is about why utilities need to stay public, so that the necessities of survival are owned equally by all, and not subject to profit mongering. Municipal water supplies, for example, are owned by the public and operated as non profits because no one wants to be held hostage for their water by Nestle’s. Privatizing local fire departments leads to homes burning down as the fire department looks on because the homeowner was late with a monthly payment.

    Another thing. For the past two decades, those of us who have been concerned about AGW – most of the people on the planet – have been shaking our heads and wondering why nothing much has been accomplished. Well, I can tell you why nothing much has been done – government is not doing its job, that’s why. Some initiatives are properly met only by the public sector, and nowhere is this more true than for renewable energy.

    What we have been doing is the almost exact equivalent of building the Interstate highway system by hoping that local driveway pavers will each build a quarter mile section of road and recoup their investment by charging tolls forever.

    This article demonstrates yet another example of how the business model of utilities – a business model based on constant revenue from customers to purchase fossil fuels or build infrastructure – just ain’t cutting it when it comes to renewables.

    If we want to build an actual renewable energy system that is intelligently designed and built on time to do any good, we need a national initiative, just like building the interstate system, or rural electrification, or water purification, or the FDIC. Instead, we have utilities fighting solar, homeowners paying out of their own pockets for their own system or worse – leasing panels from Elon Musk forever and feeling patriotic about it, because, didn’t you know? – decentralized power is just so cool and so green.

    We have an opportunity with renewable energy to own our system as a nation. And that means after we have payed off the cost of the build, we can all be enjoying free electricity. Or, we can stand around rubbing our shoes in the dust and wait for the vultures to move in and then we will be paying through the nose for our electricity forever, even though sun, wind, and tide are absolutely free.

    • Why utilities are private profit, public loss? Because decades ago, Insull formulated them that way and we live in a capitalistic society. it’s the worst of all evils, a so called regulated monopoly. Would it surprise you to know that these kinds of companies were more than happy to convert to a guaranteed rate of return on interest for all their activities regardless? What business wouldn’t want that? But you say that would limit them. Not really. This is how they get around that. They are guaranteed a rate of return on all capital investments. Utilities want demand growth to justify more capital equipment and that nets them more profits than a constant return would. When demand drops, they are in trouble because they have to go to the PUC and beg for rate increases. More often than not, they get them, but it is more lucrative and easier to convince the PUC to increase rates for more generation. The only chance consumers have is competition from generators. As you say, the transmission grid should be public, like highways, not private. Under private direction, it has become neglected in favor of profits. Generation sources can compete.

      • Gingerbaker Says:

        “But you say that would limit them. ”

        I did?

        I’m saying we should have a new Federal Utility, that builds all the infrastructure we need, and gives away the electricity for nothing or next to nothing. It should all be funded with tax dollars, like a National Health Care system.

        It should not be dependent on revenue from customers – this is the problem the above article illustrates – that utility is doing everything it can to stymie renewable energy. That is, to say the least, terrible policy, and one could easily go further. One might even call it anti-American, because our future as a nation depends on our ability to replace fossil fuels with non carbon sources. It is a national security issue – the greatest we have ever faced.

        Eighty years from now, when our seaports are flooded, our economy is on life support, and famine is a problem in America, people are going to wonder why we just did not build what we needed as a nation. Just like we did in the past – with national-scale Federal projects.

        Compared to the cost of adaptation, the bill for new infrastructure is tiny. Tiny!

        It is going to be interesting to see, as the fellow said in a video a few posts ago, how loudly American businesses start to scream bloody murder when China starts deploying massive amounts of solar and wind, thereby lowering the cost of energy for their exports.. We will be hearing how “unfair” their competitive advantage will be in the marketplace. The Koch brothers will frothing at the mouth for tariffs against Chinese products – wait and see.

        • Sorry about the confusion in the use of the word “you”. Not meant you personally. It total agreement with your comments. Public grid. Its about time. Decades after public highways. It was a national imperative to build a public road system during the cold war, for defense purposes, and it had unintended positive consequences. So, too, DARPA and the internet. It would be nice if the same thing happened for power.

          • bosbolini Says:

            “It was a national imperative to build a public road system during the cold war, for defense purposes, and it had unintended positive consequences.”

            In my view, it actually had unintended negative consequences that we must now attempt to undo if we can.

          • greenman3610 Says:

            I view the highways system as a massive subsidy to auto, oil and gas industries.

          • dumboldguy Says:

            “I view the highways system as a massive subsidy to auto, oil and gas industries”. Don’t forget the real estate investors and developers, home builders, timber and cement industries, and all the others that benefited from suburbanization and the consumer life style. There probably wouldn’t be a Scotts if it weren’t for all those lawns.

    • Want to see how poorly the grid is integrated? Read this:

      Most of the United States’ electricity grid is fairly well ordered — but parts of it remain a frontier when it comes to managing the interstate energy demands of the system as a whole.

      Take the stretch of the United States from California’s Sierra Nevada to the Rocky Mountains. Unlike the rest of the country, this region lacks any federal agency like the Bonneville Power Administration or TVA, or any entity like PJM, ISO New England, NYISO and California’s Independent System Operator (CAISO), to bring regulatory oversight and market structures to the business of generating, transmitting and distributing energy in the area.

      Instead, 38 electricity balancing authorities in the region all talk to one another to match supply with demand. In the days of reliable, centralized fossil fueled power, that was simpler — but it’s a problem when intermittent wind and solar power come into the picture.

      • dumboldguy Says:

        And wasn’t that lack the reason Enron and the other predators were able to manipulate electricity prices in CA and rip off $20+ billion?

  2. […] Big piece from Reuters this week on the global utility panic as solar photovoltaic generation promises to eat away at their 100+ year old business model. Recent historical experience with technolog…  […]

  3. Add to the solar PV boom, we will soon have battery storage systems:

    These will be both disruptive and helpful, I think.

  4. redskylite Says:

    The analogy with Computer mainframes being replaced with PC’s ) is good. I see more and more development with battery storage systems and small communities can now enjoy power without even being connected to the grid (especially in less fortunate and rural communities).

    Serious PCs were introduced in the early 1980’s, many companies migrated away from mainframes to distributed client/servers 15 years or so later during the mid 90s to end of the 20th century.

    However large banks (and other financial institutions) and airlines still use mainframes today and indeed keep their legacy systems going.

    There is room for both Nuclear and renewable (solar, wind, geothermal, hydro and marine/tidal).

    Peter is keeping the latest developments in our minds, I hate to see bloggers just favouring one replacement to fossil fuel power stations and rubbishing/belittling the rest, it sounds just as bigoted as many mainframe oriented folks sounded back in the 80s, when dissing the humble PC, and demeans the blog he puts so much effort and time into.

    Example of upcoming storage solutions
    Solar Energy Storage System For Homes and Businesses Unveiled.

  5. […] edge technology is not going to take over the major portion of power generation immediately. As I’ve noted this week, Big Energy has woken up to the existential threat posed by distributed, renewable energy – […]

  6. Mike Roddy Says:

    The notion that solar rooftop power can replace fossil fuel utility plants is a pipe dream. Only 8% of electricity in California is delivered to homes, and we would be lucky to install solar on half of them.

    This is all a distraction from utilities’ real fear, which is large solar and wind farms. They’d rather buy power from old coal and natural gas plants, which is cheap, since nobody pays for the GHG’s and pollution.

    There was a time when utilities were actually public. That ended with the current business model, which features low risk investments for the wealthy and various pension funds. Money trumps all, until we wake up one day and learn that it’s useless if the price is destroying the planet’s life support systems.

  7. Good rule of thumb is to generally support things the Koch brothers oppose. In other words, choose your enemies wisely.

  8. Here is a perfect example of utilities in a futile effort to hold back the tide.
    People need to get on the bandwagon and support folks who want energy choices and do not want their energy dictated by a monopoly.

    • Gingerbaker Says:

      There is absolutely nothing wrong with a monopoly – if it is regulated and funded properly. What is the alternative to a monopoly? For-profit corporations – which is the last thing we want as far as a commodity like electric power.

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