- Utilities face increasingly affordable solar, increasingly affordable energy storage, and expanding nanogrids, all cutting utility revenues and taking away control of ratepayers, but new bill charges and rate structures are only “semi-effective short-term” responses, an analyst says.
- Utilities can compete by divesting costly generation and procuring and delivering lower-cost energy, which would eliminate customers’ incentives to self-generate, though it would make utilities’ distribution and energy management assets more valuable than their generation assets.
- In this strategy, Yieldcos and other yield vehicles that involve power purchase agreements (PPAs), such as offerings from Pattern Energy Group, NextEra Partners, Abengoa Yield, Hannon Armstrong, Brookfield Renewable Energy Partners, TerraForm Power, and NRG Yield, may not remain good investments throughout the term of the PPAs and, therefore, should be considered as investments only with caution.
Significant change in utility operations will come sooner where solar is more abundant and cheaper, but even utilities where solar is a less abundant resource must attend to “the power of the solar technology cost curve.”
The root of the challenge facing utilities is that customers’ bills are increasing, making investments in solar, storage, and efficiency measures more reasonable just as their increasing affordability and advancing technology make them more accessible.
Solar is a particular challenge for utilities because it meets some peak demand, eroding a portion of their highest priced electricity sales and, though the argument that solar relies on a cost shift may have merit, any increased bill charge makes solar more price competitive without fully compensating utilities for their revenue losses.
Also, utilities' additions of charges to cover the integration costs of solar have been interpreted by ratepayers as restrictions on choice, added to negative perceptions of utilities, and driven consumer commitments to get away from the grid.