The spread of solar panels across the nation’s rooftops has been called a risk to the finances of old-line electric companies, but some utilities are now saying that if you can’t beat ’em, join ’em.
Around the country, utilities and the solar industry are floating new ways to install and pay for solar energy.
Arizona’s largest power provider plans to become a solar-panel vendor, and the municipal utility in San Antonio will try to purchase rooftop solar in bulk — the same way it buys power from a wind farm.
In Colorado, a proposal by Xcel Energy to create a program in which customers could pay a little more to support solar projects was rejected by state regulators in December.
The Colorado Public Utilities Commission is reviewing the role and financing of rooftop solar in the state.
There’s disagreement over how utilities should pay for solar power from rooftops.
The traditional approach, called net metering, credits solar kilowatt-hours at the same rate residential customers are charged for electricity. Utilities say that approach is too generous. But leasing companies that benefit from net metering accuse power companies of undermining solar energy’s spread.
Still, it is clear some utilities are moving into the business.
“Utilities are seeing this growing market and trying to figure a way to get a part of it,” said Nicole Litvak, an analyst with Boston-based GTM Research.
In 2014, residential was the fastest-growing solar market, increasing 55 percent over 2013, according to the Solar Energy Industries Association. Since 2010, the amount of residential solar in the country has grown fivefold to 3.5 gigawatts.
Rooftop solar — which can turn a homeowner from an electricity buyer to a seller — was labeled “a threat” to profits by the Edison Electric Institute, an industry trade group.
“It is certainly shaking things up,” said Danielle Murray, manager for solar services at Austin Energy, a municipally owned utility in Austin, Texas.
“Utilities are trying to figure out what it means to their business,” Murray said. “But to be clear, they are trying to skew things to keep business.”
Arizona Public Service is moving ahead with a $28.5 million plan to lease rooftops on which the utility will place 10 megawatts of solar installations. The residential customers won’t get the power — it will go directly onto the grid.
“This way all customers benefit from solar,” said APS spokeswoman Jenna Shaver.
“It also means that low-income families that couldn’t afford a system or even a lease can participate,” Shaver said.
Participants in the pilot program — about 1,500 homes — would get their usual utility bills and a $30 monthly credit for leasing their roofs.
APS initially proposed a 20-megawatt program, but regulators criticized the plan as too expensive. The staff also raised questions of whether APS would have a competitive advantage over other solar venders.
“A utility does start with a unique customer relationship,” said GTM’s Litvak.
National solar leasing companies, such as SunRun and SolarCity, have created a lobbying and advocacy group, The Alliance for Solar Choice, or TASC, to challenge utility companies.
“The utilities want guaranteed profits,” said Bryan Miller, vice president for San Francisco-based SunRun and the alliance’s co-chairman. “They want to rig the system.”
In San Antonio, CPS Energy is launching a pilot under which solar installers would gather enough rooftops to make a bid to sell power to the utility.
Contracts would be awarded to the low bidders at 1 megawatt to 5 megawatts.
“We are trying to create a program that promotes solar, but has no upfront cost to the city or customers,” said CPS spokeswoman Tracy Hamilton.
“San Antonio is a poor city, and there aren’t a lot of people who can buy installations that cost thousands of dollars,” Hamilton said.
The burden falls to the solar installer to aggregate the roofs and negotiate the credits customers would get and the bid prices at which it will sell the solar energy to CPS.
“We are waiting to see if this will work,” said Lanny Sinkin, director of Solar San Antonio, a nonprofit promoting solar energy. “Some installers are not happy.”
In North Carolina, Duke Energy had a $41 million program that installed 10 megawatts of solar panels on homes, businesses and schools and ground installations.
“It was our first foray into distributed solar,” said Randy Wheeless, a Duke spokesman. “I don’t think we will repeat it. We think large-scale solar projects are more cost-effective.”
Utilities in 28 states have raised questions about the use of net metering to financially credit rooftop solar, said Litvak, the industry analyst.
Xcel Energy uses net metering. It pays Colorado rooftop solar customers 11.5 cents for each kilowatt-hour — the same amount it charges a residential customer for electricity.
An Xcel study, however, calculated that the true value to the system is about 4.6 cents — with all the utility’s non-solar customers picking up the difference.
Solar advocates counter that Xcel underestimates the value of rooftop solar.
The Colorado Public Utilities Commission is evaluating the future of rooftop solar in the state and the fate of net metering.
In a few states, there have been efforts to find an alternative to net metering.
Austin Energy was the first utility in the country to create an alternative value-of-solar tariff in 2012.
Under the program, t
he utility pays for the kilowatt hours residents’ solar panels generate and credits it to their bills. Homeowners do not directly use the energy from their roofs.
In place of net metering, a value for solar kilowatt-hours is calculated based on items such as avoided fuel costs, avoided costs for new power plants and transmission lines, savings on power losses on lines and environmental benefits.
TASC has questioned Austin’s calculation and whether the credits homeowners receive should be counted as income. The federal Internal Revenue Service is reviewing that.
In March 2014, Minnesota became the first state to adopt a value-of-solar tariff, which utilities can use on a voluntary basis.
The tariff includes an environmental credit based on the value of avoided emissions of carbon dioxide.
Xcel Energy, the state’s biggest utility, has questioned the calculation, saying the carbon cost is artificial.
“We don’t pay any out-of-pocket costs for carbon,” said Frank Prager, Xcel’s vice present for environmental policy. “We want to get the rules right so our business model evolves.”
The solar leasing industry also has criticized the Minnesota tariff — which locks in an average rate for 25 years. Under net metering, payments rise with electricity rates.
“The big leasing companies’ business model has been built on net metering,” said Lynn Hinkle, policy director at the Minnesota Solar Energy Industry Association. “The are concerns the value of solar will have a negative impact.”
So, far the Minnesota tariff has not been used by any utility in the state.
Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe
