I’ve been going to climate and energy conferences for a long time, and I’ll be honest, it’s been a while since I’ve heard anything new. Or, uh, interesting.
It came from David Crane, the CEO of NRG Energy, one of America’s biggest energy companies, which owns several power subsidiaries and a couple of utilities. Under Crane’s leadership, NRG has moved aggressively into clean energy — including distributed solar, as I wrote about a few weeks ago.
Crane is, unlike many utility types, a big believer in distributed energy. He said yesterday that the whole approach of covering vast swathes of desert in solar panels and piping the energy hundreds of miles through high-voltage transmission lines “was stupid in 2008 and it’s stupid today.” Rather, the key advantage of solar is that it can cover houses and buildings and car parks and other urban structures, enabling them to generate their own power.
What this means, Crane said, is that solar and wind, which have seen themselves as natural allies, are about to “part ways.” Wind needs transmission and solar doesn’t.
Instead, solar needs allies that will help it help customers generate and manage their own power and become energy independent, or at least more resilient against grid failures.
Among those allies will be energy management companies — as Crane said this, he was on stage with the CEO of Nest, the company that makes those cool thermostats. Nest recently struck a deal with NRG (and several other utilities) to help get its product into more homes.
But — and here’s the interesting part — among other allies of distributed solar, says Crane, will be … wait for it … natural gas. Why? Because solar homeowners will need other generation sources when the sun doesn’t shine. The top candidate for that role: natural gas microturbines.
Crane noted that natural gas prices have plunged in recent years. However, average citizens have seen very little benefit, because for the most part (excluding those who have natural gas heat), natural gas only reaches them through intermediaries — manufacturers and electrical generators — who pocket most of the extra value. Crane thinks natural gas should “disintermediate” and pipe directly into homes for microturbines. That way homeowners will harvest the savings of cheap natural gas and make themselves more independent from crappy grids. (Crane noted that there are 130 million wooden utility poles in the country; “the economy of the 21st century should not be based on wooden poles.”)
So … solar and natural gas are natural allies in the development of distributed energy. Interesting, right? I don’t know if I’m totally ready to endorse it. Obviously I’d much rather biogas or something more renewable play that supporting role. But in the near term, there aren’t many alternatives to natural gas in that space. And anything that accelerates distributed energy is good for me.
At least it made me stop short and ponder, and it’s been a while since a conference has done that. What do you think about it?
Yesterday I wrote that solar PV and other distributed-energy technologies pose a radical threat to U.S. power utilities and the centralized business model they’ve operated under for the last century. This is, I hasten to add, according to the utilities themselves.
So what should be done about it?
It’s complicated. On one hand, more distributed renewable energy is a good thing. It reduces carbon emissions, increases resilience, stimulates the growth of new industries with new jobs, and gives Americans a taste of energy democracy.
On the other hand, it just won’t do to have utilities view the spread of rooftop solar PV as an existential threat. Whatever you think of them, utilities still have tons of political power. If they want to slow the spread of distributed energy, they can. A lot.
So let’s look at their complaint. But one key thing to keep in mind as we do is that the utilities’ primary objective, the impetus behind the recent report from their trade group, Edison Electric Institute, is to protect their business model and their profits. That’s what business groups do.
Which is fine. EEI’s concern is what it should be: how the industry and regulators can act quickly in the short term to protect utilities, to give them room to develop a long-term strategy for grappling with the rapid spread of distributed energy. However, it’s not clear why protecting utility shareholders ought to outrank other social goals. EEI’s recommendations should be taken with a grain of salt.
Here’s the problem, as EEI sees it: Utility customers are being subsidized in various ways to install solar panels — tax credits, state renewable energy standards, feed-in tariffs, net metering, what have you. Those are the explicit subsidies. But there’s also an implicit subsidy. As solar customers pay less to the utility, they contribute less to the maintenance of the electric grid and other utility “fixed” assets. The utility’s fixed costs (as opposed to the variable costs of fuel and electricity) must be recovered from the other ratepayers. “This type of lost revenue recovery drives up the prices of those non-participating customers,” EEI writes, “and creates the environment for ongoing loss of additional customers as the system cost is transferred to a smaller and smaller base of remaining customers.”
This is always the rap on solar PV programs from critics: They amount to forcing poor ratepayers to subsidize the green indulgences of the more well-to-do.
Now. If it’s true that distributed solar is raising costs for those who don’t have it, as a shrinking class of customers shoulders more and more of the burden, then it’s obviously not sustainable and something will have to change.
However, it’s worth pausing a moment to consider whether it is true. In some ways, EEI’s discussion reflects utilities’ instinctive hostility toward distributed energy. It makes a great deal of the costs of incorporating rooftop solar PV into the system, but says little about the benefits.
And there are benefits. In January, energy analysts at Crossborder Energy did a careful study [PDF] of California’s net-metering policy, tallying up costs and benefits. (The study was commissioned by the Vote Solar Initiative.) The costs are those described above — all utility customers pay for credits to solar customers and for the metering and billing necessary to integrate them in the grid.
But as utilities get power from solar, they don’t have to get it elsewhere. There are “avoided costs,” which benefit all ratepayers, not just the solar few. Here are the benefits Crossborder considered (and the California PUC has considered in rate cases):
• Avoided energy costs
• Avoided capacity costs for generation
• Reduced costs for ancillary services
• Lower line losses on the transmission and distribution system (T&D)
• Reduced investments in T&D facilities
• Lower costs for the utility’s purchase of other renewable generation
Long story short, Crossborder found that a) the costs and benefits alike were relatively small beans, and b) the benefits outweighed the costs by a small margin.
Now, obviously this doesn’t mean distributed solar always and everywhere lowers costs for non-solar utility customers. But it does suggest that utilities shouldn’t assume the inverse either. It’s a case-by-case, location-by-location determination. Midwest Energy News (which you should be reading) did a great piece on this subject recently. I thought this bit captured it well:
“This is exactly the same as when a private company, an electric utility, for example, is approved by its regulator to build a conventional power plant ‘in the public interest’,” says [renewable energy analyst Paul] Gipe. The costs and benefits are studied, and if regulators think the plant is in the public’s interest, they will approve it even if it results in new costs for customers.
In other words, programs like net metering and feed-in tariffs aren’t “subsidies,” per se, they are simply different ways to pay a fair price for power generation.
If it is true that encouraging rooftop solar does not — or does not necessarily — raise rates for non-solar customers, then part of EEI’s case falls apart. Massive rate increases on non-solar customers are its way of scaring policymakers into action to protect utility profits. If those rate increases don’t manifest, all EEI has is a raw plea to lawmakers to protect shareholder profits. Not quite as compelling!
However, the prospect of a bunch of utilities going bankrupt isn’t exactly attractive. So what does EEI think it needs for utilities to avoid being swept away?
Not surprisingly, the short-term recommendations mostly amount to making rooftop solar customers pay more. First, EEI wants all power bills to include a flat charge for fixed costs, which would apply to all grid-connected customers. That would insure a minimum contribution from everyone. Second, they want solar customers charged for the services the grid provides them: “off-peak service, back-up interruptible service, and the pathway to sell [distributed energy resources] to the utility or other energy supply providers.” And third, it wants net-metering programs revised to pay solar customers only the going market rate, not some fancy subsidized rate.
All these measures would have the same effect: reduce the economic incentives for rooftop solar and thus slow its adoption. That seems less than ideal. But there is a need for costs to be more transparent and for all ratepayers to be charged appropriately for the services they receive. And again, the utilities cannot be locked into a death spiral this far in advance. It’s not healthy for them to be in a pitched battle with their customers and the planet. It’s politically untenable.
On energy efficiency, which poses many of the same threats to utilities, the conflict has been somewhat papered over by “decoupling,” whereby a utility’s profits are disassociated from its sales of energy. (If usage declines, rates rise to cover the difference.) In practice, this mostly amounts to paying utilities — or rather, having ratepayers pay utilities — to run energy efficiency programs. One can imagine something similar with distributed energy programs.
But decoupling has always struck me as a classic kludge. It amounts to forcing utilities to slowly dig their own graves, strand their own assets. They’ll do it if forced by law, but they won’t do it enthusiastically. They won’t innovate. They’ll do what they have to and no more.
What’s needed, then, is something deeper, a more fundamental restructuring of the utility model, a way to escape once and for all the cross-incentives that are pitting utilities against energy democracy.
What would that look like? This is where I admit: hell if I know. Making utilities work is so complicated it makes my head hurt. I do know that lots of smart people are working on this problem right now, and the work they’re doing is some of the most interesting and important happening in the energy world. It’s a bit of an anticlimax, but let me … suggest further reading:
At the Center for American Progress, Bracken Hendricks and Adam James recently put out a report called “The Networked Energy Web” that addresses many of the same questions.
The Rocky Mountain Institute has a program called eLab devoted to creating a modern electricity system. Check out this video they made and see if it doesn’t sound familiar!
Let me know if you’ve seen other good resources on the topic.
Anyway, that’s all I’ve got for now: reading assignments. Sorry! I’ll definitely be writing more on this as I see good ideas pop up. Share yours in comments.
This week I’ve been writing about U.S. utilities and their struggle with distributed solar power. Now, along comes a story that might as well have been custom designed to illustrate the point.
The city of San Antonio is served by CPS Energy, which provides it with both electricity and natural gas. CPS is different from the utilities involved in the Edison Electric Institute, the ones who put out the report I wrote about on Wednesday. Those are investor-owned, for-profit utilities; CPS is a municipal utility, which means it is owned by the city — theoretically, owned by its ratepayers.
Nonetheless, CPS faces the same basic problem with distributed solar as its investor-owned brethren.
Residential and commercial customers in San Antonio who install rooftop solar are compensated via a net-metering program. What this means is, every kilowatt-hour of power they produce cancels a kilowatt-hour they consume. Their bill is the remainder.
It’s important to understand what this means. Customers pay retail rates for electricity; if their solar power cancels out the power they would buy from the utility on a one-to-one basis, it means that they are being paid retail rates for the electricity they produce.
From CPS’s point of view, that’s a problem. See, when CPS buys power (from itself, effectively; it owns power plants), it pays the wholesale rate, which is considerably cheaper than retail. It marks that power up before it sells it to customers. Why? Because the retail rate reflects not only the cost of power but also the cost of all CPS’s other assets. Charges for “fixed assets” — power plants, power lines, transformers, meters, and all the other stuff involved in providing electricity — are mixed with charges for “variable assets” — fuel and electricity — into a single rate: the retail rate.
Under net metering, if a rooftop solar customer generates as much electricity as she consumes, she pays nothing. If she generates more than she consumes, the utility pays her. In either case, her portion of the utility’s fixed costs is transferred onto other, non-solar ratepayers. As more and more people opt for solar, fixed costs are paid by a smaller and smaller group of customers, which drives rates up, which drives more and more of them to solar, in a vicious cycle. The utility’s fixed assets are “stranded” — it is unable to recover those investment costs because of the shrinking pool of customers. (It’s also worth noting that the first customers to go solar tend to be well-off, which leaves the less-well-off paying more, so there’s an economic-justice angle here too.)
So CPS wants to cancel its net-metering program. It wants to stop paying rooftop solar producers the retail rate for their electricity. Instead, it wants to pay them the wholesale rate — a little over half as much — through a “SunCredit.” The roughly 1,000 customers who currently have solar would be “grandfathered in” to the net-metering program until 2023; the new rate would apply only to new solar users.
From CPS’s perspective, this makes sense. Under its proposal, it would be paying rooftop solar producers what it pays other energy producers and charging them for fixed costs like all other ratepayers. And it is taking the strategically savvy step of making this change before the vicious cycle kicks in, and before the solar lobby is powerful enough to stop it.
Naturally, San Antonio’s fledgling solar industry sees it differently! If you cut the incentive for rooftop solar in half, you’ll get less rooftop solar and you’ll need fewer solar installers. ”They’re going to kill the solar industry,” said the head of advocacy group Solar San Antonio.
Now, if rooftop solar were just another source of power, we might conclude: tough luck, solar industry. You’ll have to play on a level playing field. Sorry about all the lost jobs.
But rooftop solar is not just another source of power. For one thing, it produces savings for the utility, in terms of avoided transmission and equipment costs, as I discussed yesterday. But more broadly, it produces positive social externalities — it reduces air pollution and carbon emissions, benefiting the public health, and drives down the costs of subsequent solar, expanding markets. Plus the whole energy democracy thing. Solar power is something we should be encouraging through public policy. We should be subsidizing it.
CPS can’t let a shrinking group of ratepayers face perpetually rising costs. It can’t allow its assets to be stranded. Then again, when solar penetration is still tiny, rates are rising for other reasons having nothing to do with solar, and CPS executives are busy granting themselves enormous bonuses, abruptly yanking the rug out from under the solar industry doesn’t seem like a great solution either.
The dilemma, again, is how to align CPS’s incentives so that it can drive rapid solar adoption and reliably recover costs from its fixed assets and protect its lower-income ratepayers from being unfairly burdened.
If we can’t figure out a solution to that dilemma, more and more utilities will do what CPS is doing and the spread of rooftop solar in the U.S., which has barely gotten underway, will slow to a crawl. That isn’t what we want, is it?
Almost a decade ago, I was part of a group that lost a standby rate case with a Massachusetts utility, when the utility convinced the commission to approve a rate that would incentivize solar at the expense of combined heat and power (CHP). The package fractured the green coalition we’d assembled and the utility got to greenwash its terrible new rate. Yes, I’m still bitter.
When the dust settled, I told friends on the solar side of our group that they shouldn’t celebrate too hard. The message wasn’t that utilities liked solar, but that they liked technologies that didn’t eat into their sales. (At the time, there was 80 gigawatts of CHP deployed nationwide; solar capacity was basically zero.)
With the release this Edison Electric Institute (EEI) report, it appears solar’s time may have come. The gist of the report (nicely summarized here and here) is that distributed energy resources generally, and solar specifically, are eating into utility profit margins and potentially compromising their ability to attract capital. Utilities should take action to stop it. Specifically, note these passages:
[Utilities should encourage] an immediate focus on revising state and federal policies that do not align the interests of customers and investors, particularly revising utility tariff structures in order to eliminate cross subsidies (by non-DER participants) and utility investor cost-recovery uncertainties.
… utilities and financial managers of investments have a fiduciary responsibility to protect the value of invested capital. Prompt action to mitigate lost revenue, while protecting customers from cross-subsidization better aligns the interests of customers and investors.
The first of these paragraphs is aimed at utility government-affairs departments. The second is aimed at regulators. They both carry the same message: the interests of utility investors and customers are misaligned thanks to all these pro-efficiency, pro-renewable policies, and we better change course.
The cleantech community should assume that this means a broader roll-out of the standby rates* that have been put to use so effectively over the past 30 years to slow the spread of CHP.
What are standby rates?
The costs associated with running an electric utility are dominated by large, fixed expenses that are invariant with sales: labor, maintenance, insurance, and — most significantly — capital recovery. If customers pay for power solely on the basis of variable rates (e.g. $/MWh of use), utilities could face significant under-collection and therefore falling returns on capital. However, the inverse is also true — if MWh sales rise, utilities generally see rising returns on equity from the same rate classification. For this reason, the ideal rate (from a utility investor perspective) is one that charges a high price on a marginal increase in sales, but allows a comparatively smaller loss in the event of a marginal reduction. A standby rate is basically a tool designed to deliver that outcome.
An example may be helpful. Suppose a utility has $1 million of fixed costs in a year and $1 million of variable costs. Against this base, suppose that their most recent rate case sets rates at $80/MWh on 27,500 MWh of annual sales. This yields $2.2 million in revenue on $2 million of expenses, or $200,000 of profit (9.1 percent of revenue).
If this utility’s sales were to fall by 10 percent, they would earn $1.98 million in revenue, but incur $1.9 million in expense, leaving just $80,000 of profit (4.0 percent). By contrast, if their sales rose by 10 percent, they would earn $2.42 million in revenue against $2.1 million in expense, leaving profits of $320,000 (13.2 percent). It should be pretty clear why utilities fear load loss.
This isn’t unique to utilities though — the basic math is true for any business with fixed expenses and variable revenues — and it’s not necessarily bad. Indeed, it works to the benefit of any growing business. For example, car dealers don’t require you to pay them for holding inventory whether you buy a car from them or not, even though they must absorb that cost if you don’t buy their product. (And even utility executives prefer to buy cars from dealers who are desperate to move their inventory as the result of this “flawed” pricing model.)
This is important because there is nothing inherently wrong with utilities trying to protect their downside risk — except for the fact that their monopoly control over the “last mile” removes the competitive discipline that might other penalize particularly egregious design. A car dealer who asked you to pay them $1,000/month for the privilege of maybe buying a car from them in the future would not last long, but a utility who profers the same rate — with the approval of their regulator — is effectively unchecked. This is the ultimate problem that has slowed the deployment of CHP in the U.S.
So how do the rates work? There are a lot of variants, but generically, they break electricity charges into a $/MWh payment and a $/MW payment, with the latter set to your peak demand over the prior year plus the nameplate of your onsite power plant. If your load goes up, you pay more in $/MW charges, but if your CHP plant permanently reduces your MW use, you still pay for the MW you’re not using. The net result is that the utility gets the financial upside of rising sales but puts a floor on the downside if sales fall. Heads I win, tails you lose.
There is a very close analogy here to banking regulation, in that both give executives the ability to make one-way bets, with society bearing all the downside risk. With respect to utilities, this means that a utility need not focus on making a competitive product: never mind the value proposition, just grow the sales volume. It also makes electric utilities perhaps the biggest institutional barrier to energy conservation. (Also like banking regulation, the public conversation places proportionally too much blame on the regulated entity and proportionally too little on the enabling regulator.)
Moving from CHP to EE and solar
Thus far, those utilities who have managed to get standby rates approved have done so primarily in order to thwart CHP deployment. That’s partly because it’s the gorilla in the unregulated room, but also because a rate that is truly designed to address fixed/variable cost recovery is politically untenable: a factory that cuts production and drops to 2 shifts/day imposes the same costs on a utility as a factory that installs CHP to produce a third of their power, but it’s hard to imagine a rate that forces the struggling factory to keep paying yesterday’s energy bill.
As such, these rates have generally focused narrowly on CHP (which is their Achilles heel, from a rate-equity perspective). This in turn has given a relative boost to non-CHP DER investments, like efficiency and solar, where the design of the rate causes their MWh savings to generate greater $/MWh savings. When you add on top of that the other EE/renewable-specific incentives (grants, tax credits, RECs, expedited interconnection, etc.) and the unsurprising result has been a preferential deployment of capital into those technologies and a rapid growth in their deployment … to a point where these technologies that utilities once could ignore are now eating into utility profits. Which brings us back to that EEI report.
So what should we assume happens next? A few thoughts.
Solar is no longer irrelevant to utility planning. It’s grown up and has earned a seat at the big kids table. But that also means the rules are going to change, and the fights are going to get nastier. The solar industry needs to plan accordingly.
To the extent that the utility deploys the same tools to block solar and efficiency that they’ve historically used against CHP, it should encourage greater coherence and less infighting amongst various green-energy advocacy groups — who, to date, have not earned a seat at the big-kids table that is Capitol Hill, in no small part because of their inability to form and hold coalitions.
Finally, there is going to be a need for creativity on clean energy rate design and incentive. Utility rates are flawed, but they are designed to solve real issues. The current top-down grid regulatory model has no shortage of problems, but an anarchic bottom-up system would be worse. In that vein, regulatory tools designed to deploy low levels of technologies that are too small to matter are almost certainly not the right tools to drive technology deployment and dispatch as those technologies become economically and operationally significant.
More posts to follow on that last point.
* A semantic clarification. “Standby rates” has a precise meaning referring to a rate that charges a customer for the service that the grid is providing as a “standby provider” in the event that their existing generator trips off line and they want backup supply. However, the economic impact of standby rates to remove the economic incentives associated with energy conservation are common to a broader suite of structures including exit fees, demand ratchets and certain block pricing structures. I’ve used “standby rates” herein in this more general sense.
Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model, which has remained virtually unchanged for a century, to the ground.
That is not wild-eyed hippie talk. It is the assessment of the utilities themselves.
Back in January, the Edison Electric Institute — the (typically stodgy and backward-looking) trade group of U.S. investor-owned utilities — released a report [PDF] that, as far as I can tell, went almost entirely without notice in the press. That’s a shame. It is one of the most prescient and brutally frank things I’ve ever read about the power sector. It is a rare thing to hear an industry tell the tale of its own incipient obsolescence.
I’ve been thinking about how to convey to you, normal people with healthy social lives and no time to ponder the byzantine nature of the power industry, just what a big deal the coming changes are. They are nothing short of revolutionary … but rather difficult to explain without jargon.
So, just a bit of background. You probably know that electricity is provided by utilities. Some utilities both generate electricity at power plants and provide it to customers over power lines. They are “regulated monopolies,” which means they have sole responsibility for providing power in their service areas. Some utilities have gone through deregulation; in that case, power generation is split off into its own business, while the utility’s job is to purchase power on competitive markets and provide it to customers over the grid it manages.
This complexity makes it difficult to generalize about utilities … or to discuss them without putting people to sleep. But the main thing to know is that the utility business model relies on selling power. That’s how they make their money. Here’s how it works: A utility makes a case to a public utility commission (PUC), saying “we will need to satisfy this level of demand from consumers, which means we’ll need to generate (or purchase) this much power, which means we’ll need to charge these rates.” If the PUC finds the case persuasive, it approves the rates and guarantees the utility a reasonable return on its investments in power and grid upkeep.
Thrilling, I know. The thing to remember is that it is in a utility’s financial interest to generate (or buy) and deliver as much power as possible. The higher the demand, the higher the investments, the higher the utility shareholder profits. In short, all things being equal, utilities want to sell more power. (All things are occasionally not equal, but we’ll leave those complications aside for now.)
Now, into this cozy business model enters cheap distributed solar PV, which eats away at it like acid.
First, the power generated by solar panels on residential or commercial roofs is not utility-owned or utility-purchased. From the utility’s point of view, every kilowatt-hour of rooftop solar looks like a kilowatt-hour of reduced demand for the utility’s product. Not something any business enjoys. (This is the same reason utilities are instinctively hostile to energy efficiency and demand response programs, and why they must be compelled by regulations or subsidies to create them. Utilities don’t like reduced demand!)
It’s worse than that, though. Solar power peaks at midday, which means it is strongest close to the point of highest electricity use — “peak load.” Problem is, providing power to meet peak load is where utilities make a huge chunk of their money. Peak power is the most expensive power. So when solar panels provide peak power, they aren’t just reducing demand, they’re reducing demand for the utilities’ most valuable product.
But wait. Renewables are limited by the fact they are intermittent, right? “The sun doesn’t always shine,” etc. Customers will still have to rely on grid power for the most part. Right?
This is a widely held article of faith, but EEI (of all places!) puts it to rest. (In this and all quotes that follow, “DER” means distributed energy resources, which for the most part means solar PV.)
Due to the variable nature of renewable DER, there is a perception that customers will always need to remain on the grid. While we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically “cut the cord?” [Emphasis mine.]
Indeed! Just the other day, Duke Energy CEO Jim Rogers said, “If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using [the grid] for backup.” What happens if a whole bunch of customers start generating their own power and using the grid merely as backup? The EEI report warns of “irreparable damages to revenues and growth prospects” of utilities.
Utility investors are accustomed to large, long-term, reliable investments with a 30-year cost recovery — fossil fuel plants, basically. The cost of those investments, along with investments in grid maintenance and reliability, are spread by utilities across all ratepayers in a service area. What happens if a bunch of those ratepayers start reducing their demand or opting out of the grid entirely? Well, the same investments must now be spread over a smaller group of ratepayers. In other words: higher rates for those who haven’t switched to solar.
That’s how it starts. These two paragraphs from the EEI report are a remarkable description of the path to obsolescence faced by the industry:
The financial implications of these threats are fairly evident. Start with the increased cost of supporting a network capable of managing and integrating distributed generation sources. Next, under most rate structures, add the decline in revenues attributed to revenues lost from sales foregone. These forces lead to increased revenues required from remaining customers … and sought through rate increases. The result of higher electricity prices and competitive threats will encourage a higher rate of DER additions, or will promote greater use of efficiency or demand-side solutions.
Increased uncertainty and risk will not be welcomed by investors, who will seek a higher return on investment and force defensive-minded investors to reduce exposure to the sector. These competitive and financial risks would likely erode credit quality. The decline in credit quality will lead to a higher cost of capital, putting further pressure on customer rates. Ultimately, capital availability will be reduced, and this will affect future investment plans. The cycle of decline has been previously witnessed in technology-disrupted sectors (such as telecommunications) and other deregulated industries (airlines).
Did you follow that? As ratepayers opt for solar panels (and other distributed energy resources like micro-turbines, batteries, smart appliances, etc.), it raises costs on other ratepayers and hurts the utility’s credit rating. As rates rise on other ratepayers, the attractiveness of solar increases, so more opt for it. Thus costs on remaining ratepayers are even further increased, the utility’s credit even further damaged. It’s a vicious, self-reinforcing cycle:
One implication of all this — a poorly understood implication — is that rooftop solar fucks up the utility model even at relatively low penetrations, because it goes straight at utilities’ main profit centers. (It’s already happening in Germany.) Right now, distributed solar PV is a relatively tiny slice of U.S. electricity, less than 1 percent. For that reason, utility investors aren’t paying much attention. “Despite the risks that a rapidly growing level of DER penetration and other disruptive challenges may impose,” EEI writes, “they are not currently being discussed by the investment community and factored into the valuation calculus reflected in the capital markets.” But that 1 percent is concentrated in a small handful of utility districts, so trouble, at least for that first set of utilities, is just over the horizon. Utility investors are sleepwalking into a maelstrom.
(“Despite all the talk about investors assessing the future in their investment evaluations,” the report notes dryly, “it is often not until revenue declines are reported that investors realize that the viability of the business is in question.” In other words, investors aren’t that smart and rational financial markets are a myth.)
Bloomberg Energy Finance forecasts 22 percent compound annual growth in all solar PV, which means that by 2020 distributed solar (which will account for about 15 percent of total PV) could reach up to 10 percent of load in certain areas. If that happens, well:
Assuming a decline in load, and possibly customers served, of 10 percent due to DER with full subsidization of DER participants, the average impact on base electricity prices for non-DER participants will be a 20 percent or more increase in rates, and the ongoing rate of growth in electricity prices will double for non-DER participants (before accounting for the impact of the increased cost of serving distributed resources).
So rates would rise by 20 percent for those without solar panels. Can you imagine the political shitstorm that would create? (There are reasons to think EEI is exaggerating this effect, but we’ll get into that in the next post.)
If nothing is done to check these trends, the U.S. electric utility as we know it could be utterly upended. The report compares utilities’ possible future to the experience of the airlines during deregulation or to the big monopoly phone companies when faced with upstart cellular technologies. In case the point wasn’t made, the report also analogizes utilities to the U.S. Postal Service, Kodak, and RIM, the maker of Blackberry devices. These are not meant to be flattering comparisons.
Remember, too, that these utilities are not Google or Facebook. They are not accustomed to a state of constant market turmoil and reinvention. This is a venerable old boys network, working very comfortably within a business model that has been around, virtually unchanged, for a century. A friggin’ century, more or less without innovation, and now they’re supposed to scramble and be all hip and new-age? Unlikely.
So what’s to be done? You won’t be surprised to hear that EEI’s prescription is mainly focused on preserving utilities and their familiar business model. But is that the best thing for electricity consumers? Is that the best thing for the climate?
It’s a little after sundown, and Arun Kumar is hawking his wares in the neighborhoodfor the first time. He’s selling a light, just a small half-circle tied to a three-inch-wide solar panel. An older man tests it in his home, a tiny hut of tarp and tin built like the 30 others in this slum settlement on the far north side of Bangalore. A kerosene lamp flickers inside.
At a second home, Arun wields his 1,600-rupee ($29.48) gizmo for a woman seated with nine children. He points out the small cellphone charger in the light’s rear. The woman turns inside, pulling out her phone to consult her husband.
She is one of millions in India and worldwide in a surreal contemporary fix: She owns a cell phone, but her home has no toilet or power line. The country’s mobile users mushroomed in a few short years, reaching some 900 million. Cheap phones have not suddenly lifted owners out of poverty. But they have given them access to resources and economic ladders once unreachable.
Mark BergenPollinate Energy’s solar light.
Arun fails to sell any here, yet he will return tomorrow. The hyperactive 20-year-old is a salesman for Pollinate Energy, a social enterprise NGO that has, in the past five months, sold 400 private solar systems to slum dwellers in north Bangalore. Pollinate is one of a growing number of companies betting on “leapfrog” technology designed to help the urban poor in developing nations to skip right over fossil fuels for electricity.
On their first visit to a slum, the staff never make a sale, explains co-founder Monique Alfris. Residents are understandably skeptical of consumer goods in India. Though the panels pay for themselves in about six months, those making $3 to $4 a day are reluctant to put down the 400-rupee ($7.47) installment plan payments.
And many are transitory, like the migrant construction laborers Arun visited, nervous of investing on land they could be booted from.
When the Pollinate Energy founders arrived from Sydney, they expected urban communities to prep them for rural markets, where far more people lack power. By some accounts, Bangalore was the second Asian city, after Tokyo, to be electrified. According to estimates, only 20,000 slum dwellers here lack electricity.
That figure “is clearly wrong,” says co-founder Jamie Chivers. Of the 100 city slums they work in, only “one or two” are on the grid. A survey of their work area found 3,400 families without power in a six-mile radius. And their urban market is a booming one.
Last week, India’s Ministry of Housing released a “Slum Census” of 2011, the most comprehensive government estimation since 2000. One in six urban Indians, about 64 million people, live in slums — cramped quarters of 20 households or more in “unhygienic conditions.” (The fraction, below earlier projections of 27.5 percent, prompted the housing secretary to issue the bizarre verdict that the data “comes as a pleasant surprise.”)
The report predicted the total Indian slum population would topple 104 million by 2017. Many will clamor to get onto the grid, one India clearly cannot stretch beyond its existing users. The colossal blackout this past summer was followed by persistent shortages in several states.
Slowly, the government has begun pushing alternatives. In the winter, three states unveiled sizable solar installation plans. Rooftop solar, whose unit cost in India has dipped below diesel and natural gas, can grow quickly, from 1,000 megawatts to 12,500 in four years, according to a recent report from the consultancy KPMG.
Experiments are cropping up across the country. In Ahmedabad, a company recently started offering water “ATMs”: stands that dispense drinking water treated with solar power.
Simpa Networks, another Bangalore startup, is trying to replicate the success of India’s mobile revolution. Co-founder Michael MacHarg recalls their first question: “Why has that grown so rapidly?” The answer is the payment model, which allows phone owners to pay as they go, in manageable increments. Since 2011, Simpa has sold over 100 solar PV units to households across the state using a similar system. “We’re looking to be the first electricity that a family has,” explains MacHarg.
While Simpa’s focus is primarily on the unplugged rural, its first customers were a group of eight migrant families in Bangalore who make the small, cheap cricket bats swung in every Indian alley.
Arun has sold units to 13 families in a similar settlement, an established slum, tucked behind railway tracks, that makes bangles. One of the panels, tied to the tarp roof, has a thick rope through its center, blocking the sun. Another has gathered considerable dust.
But most panel owners appeared more prepared to reap the benefits. Standing in the compact home of her family of four, Amruti, an early customer, says the solar light allows her work at night and finish four times as many ornamental goods. She used to rely on squat wax candles for light.
“It’s a nice idea — the poor leap-frogging the rich,” says Chivers of Pollinate Energy. Without prior home energy, slum residents are poised to do what the West envies: kick fossil fuel habits and conserve. “They’re much more resource-efficient than the rest of us,” he says. “That’s where solar works really well.”
It’s a little after sundown, and Arun Kumar is hawking his wares in the neighborhoodfor the first time. He’s selling a light, just a small half-circle tied to a three-inch-wide solar panel. An older man tests it in his home, a tiny hut of tarp and tin built like the 30 others in this slum settlement on the far north side of Bangalore. A kerosene lamp flickers inside.
At a second home, Arun wields his 1,600-rupee ($29.48) gizmo for a woman seated with nine children. He points out the small cellphone charger in the light’s rear. The woman turns inside, pulling out her phone to consult her husband.
She is one of millions in India and worldwide in a surreal contemporary fix: She owns a cell phone, but her home has no toilet or power line. The country’s mobile users mushroomed in a few short years, reaching some 900 million. Cheap phones have not suddenly lifted owners out of poverty. But they have given them access to resources and economic ladders once unreachable.
Mark BergenPollinate Energy’s solar light.
Arun fails to sell any here, yet he will return tomorrow. The hyperactive 20-year-old is a salesman for Pollinate Energy, a social enterprise NGO that has, in the past five months, sold 400 private solar systems to slum dwellers in north Bangalore. Pollinate is one of a growing number of companies betting on “leapfrog” technology designed to help the urban poor in developing nations to skip right over fossil fuels for electricity.
On their first visit to a slum, the staff never make a sale, explains co-founder Monique Alfris. Residents are understandably skeptical of consumer goods in India. Though the panels pay for themselves in about six months, those making $3 to $4 a day are reluctant to put down the 400-rupee ($7.47) installment plan payments.
And many are transitory, like the migrant construction laborers Arun visited, nervous of investing on land they could be booted from.
When the Pollinate Energy founders arrived from Sydney, they expected urban communities to prep them for rural markets, where far more people lack power. By some accounts, Bangalore was the second Asian city, after Tokyo, to be electrified. According to estimates, only 20,000 slum dwellers here lack electricity.
That figure “is clearly wrong,” says co-founder Jamie Chivers. Of the 100 city slums they work in, only “one or two” are on the grid. A survey of their work area found 3,400 families without power in a six-mile radius. And their urban market is a booming one.
Last week, India’s Ministry of Housing released a “Slum Census” of 2011, the most comprehensive government estimation since 2000. One in six urban Indians, about 64 million people, live in slums — cramped quarters of 20 households or more in “unhygienic conditions.” (The fraction, below earlier projections of 27.5 percent, prompted the housing secretary to issue the bizarre verdict that the data “comes as a pleasant surprise.”)
The report predicted the total Indian slum population would topple 104 million by 2017. Many will clamor to get onto the grid, one India clearly cannot stretch beyond its existing users. The colossal blackout this past summer was followed by persistent shortages in several states.
Slowly, the government has begun pushing alternatives. In the winter, three states unveiled sizable solar installation plans. Rooftop solar, whose unit cost in India has dipped below diesel and natural gas, can grow quickly, from 1,000 megawatts to 12,500 in four years, according to a recent report from the consultancy KPMG.
Experiments are cropping up across the country. In Ahmedabad, a company recently started offering water “ATMs”: stands that dispense drinking water treated with solar power.
Simpa Networks, another Bangalore startup, is trying to replicate the success of India’s mobile revolution. Co-founder Michael MacHarg recalls their first question: “Why has that grown so rapidly?” The answer is the payment model, which allows phone owners to pay as they go, in manageable increments. Since 2011, Simpa has sold over 100 solar PV units to households across the state using a similar system. “We’re looking to be the first electricity that a family has,” explains MacHarg.
While Simpa’s focus is primarily on the unplugged rural, its first customers were a group of eight migrant families in Bangalore who make the small, cheap cricket bats swung in every Indian alley.
Arun has sold units to 13 families in a similar settlement, an established slum, tucked behind railway tracks, that makes bangles. One of the panels, tied to the tarp roof, has a thick rope through its center, blocking the sun. Another has gathered considerable dust.
But most panel owners appeared more prepared to reap the benefits. Standing in the compact home of her family of four, Amruti, an early customer, says the solar light allows her work at night and finish four times as many ornamental goods. She used to rely on squat wax candles for light.
“It’s a nice idea — the poor leap-frogging the rich,” says Chivers of Pollinate Energy. Without prior home energy, slum residents are poised to do what the West envies: kick fossil fuel habits and conserve. “They’re much more resource-efficient than the rest of us,” he says. “That’s where solar works really well.”
It’s a little after sundown, and Arun Kumar is hawking his wares in the neighborhoodfor the first time. He’s selling a light, just a small half-circle tied to a three-inch-wide solar panel. An older man tests it in his home, a tiny hut of tarp and tin built like the 30 others in this slum settlement on the far north side of Bangalore. A kerosene lamp flickers inside.
At a second home, Arun wields his 1,600-rupee ($29.48) gizmo for a woman seated with nine children. He points out the small cellphone charger in the light’s rear. The woman turns inside, pulling out her phone to consult her husband.
She is one of millions in India and worldwide in a surreal contemporary fix: She owns a cell phone, but her home has no toilet or power line. The country’s mobile users mushroomed in a few short years, reaching some 900 million. Cheap phones have not suddenly lifted owners out of poverty. But they have given them access to resources and economic ladders once unreachable.
Mark BergenPollinate Energy’s solar light.
Arun fails to sell any here, yet he will return tomorrow. The hyperactive 20-year-old is a salesman for Pollinate Energy, a social enterprise NGO that has, in the past five months, sold 400 private solar systems to slum dwellers in north Bangalore. Pollinate is one of a growing number of companies betting on “leapfrog” technology designed to help the urban poor in developing nations to skip right over fossil fuels for electricity.
On their first visit to a slum, the staff never make a sale, explains co-founder Monique Alfris. Residents are understandably skeptical of consumer goods in India. Though the panels pay for themselves in about six months, those making $3 to $4 a day are reluctant to put down the 400-rupee ($7.47) installment plan payments.
And many are transitory, like the migrant construction laborers Arun visited, nervous of investing on land they could be booted from.
When the Pollinate Energy founders arrived from Sydney, they expected urban communities to prep them for rural markets, where far more people lack power. By some accounts, Bangalore was the second Asian city, after Tokyo, to be electrified. According to estimates, only 20,000 slum dwellers here lack electricity.
That figure “is clearly wrong,” says co-founder Jamie Chivers. Of the 100 city slums they work in, only “one or two” are on the grid. A survey of their work area found 3,400 families without power in a six-mile radius. And their urban market is a booming one.
Last week, India’s Ministry of Housing released a “Slum Census” of 2011, the most comprehensive government estimation since 2000. One in six urban Indians, about 64 million people, live in slums — cramped quarters of 20 households or more in “unhygienic conditions.” (The fraction, below earlier projections of 27.5 percent, prompted the housing secretary to issue the bizarre verdict that the data “comes as a pleasant surprise.”)
The report predicted the total Indian slum population would topple 104 million by 2017. Many will clamor to get onto the grid, one India clearly cannot stretch beyond its existing users. The colossal blackout this past summer was followed by persistent shortages in several states.
Slowly, the government has begun pushing alternatives. In the winter, three states unveiled sizable solar installation plans. Rooftop solar, whose unit cost in India has dipped below diesel and natural gas, can grow quickly, from 1,000 megawatts to 12,500 in four years, according to a recent report from the consultancy KPMG.
Experiments are cropping up across the country. In Ahmedabad, a company recently started offering water “ATMs”: stands that dispense drinking water treated with solar power.
Simpa Networks, another Bangalore startup, is trying to replicate the success of India’s mobile revolution. Co-founder Michael MacHarg recalls their first question: “Why has that grown so rapidly?” The answer is the payment model, which allows phone owners to pay as they go, in manageable increments. Since 2011, Simpa has sold over 100 solar PV units to households across the state using a similar system. “We’re looking to be the first electricity that a family has,” explains MacHarg.
While Simpa’s focus is primarily on the unplugged rural, its first customers were a group of eight migrant families in Bangalore who make the small, cheap cricket bats swung in every Indian alley.
Arun has sold units to 13 families in a similar settlement, an established slum, tucked behind railway tracks, that makes bangles. One of the panels, tied to the tarp roof, has a thick rope through its center, blocking the sun. Another has gathered considerable dust.
But most panel owners appeared more prepared to reap the benefits. Standing in the compact home of her family of four, Amruti, an early customer, says the solar light allows her work at night and finish four times as many ornamental goods. She used to rely on squat wax candles for light.
“It’s a nice idea — the poor leap-frogging the rich,” says Chivers of Pollinate Energy. Without prior home energy, slum residents are poised to do what the West envies: kick fossil fuel habits and conserve. “They’re much more resource-efficient than the rest of us,” he says. “That’s where solar works really well.”
Account Manager – Solar Distributor (Cambridge, MA)
CivicSolar.com is an innovative solar distributor with lean operations and a progressive customer service infrastructure. Our mission is to reduce the cost of solar equipment distribution through the utilization of an online platform allowing installers to access the right equipment at the best price for every job. We pride ourselves on our commitment to customer service and operational efficiency.
By providing buying power for solar installers, CivicSolar is able to negotiate with global PV equipment manufacturers to offer our customers:
- The best value for every project
- Robust selection
- Pre-qualified equipment based on reliability and performance history
To help us realize this vision, we're looking for candidates who exhibit CivicSolar's core values. You should be a results driven problem solver, self-motivated, unafraid of challenges, an astute decision-maker, and an overall team player. We are looking for candidates with a passion to sell solar solutions to solar installers and developers nationwide. A great plus if you also have 1-2 years of solar equipment sales and/or solar installation experience with an interest to succeed in a phone sales environment. We are looking for teammates who are intellectually bright, continuously strive for improvement, have job-specific knowledge, and possess integrity.
Position: Account Manager
Location: Cambridge, MA
Reports To: Director of Sales
Job Responsibilities:
- Execute sales of solar electric power systems and related products and services to solar installers, developers, and property owners.
- Evaluate the customer's energy needs, available space, shading issues, electrical service limitations, and aesthetic concerns to arrive at a suitable recommendation for the solar electric system size and configuration.
- Identify, isolate and overcome customer concerns and objections.
- Accurately execute all contractual documents with customers including paperwork associated with procuring solar equipment.
- Prepare a roof sketch with measurements and build project quotes.
- Follow-up with prospective customers, give an accounting of specific status of all leads and produce regular sales reports.
- Aid in performance of customer contact functions throughout permitting and installation processes.
- Support the company in assuring customer satisfaction.
- Aid in retrieval of customer payments.
- Attend company meetings, work trade shows, attend seminars and perform other sales related functions as needed.
Ideal candidate is likely to have:
- Bachelor's degree in Business Administration, Engineering, or equivalent.
- Experience installing and/or selling solar equipment/projects.
- Proven communication skills — verbal and written.
- Detail orientation with strong organizational skills.
- Strong computer application skills including PowerPoint, Excel and MS Office.
- Demonstrated ability to close sales orders.
- Desire to become a domain expert in PV system design.
All interested and qualified candidates: Please submit your cover letter and resume to jobs at civicsolar.com. CivicSolar is an Equal Opportunity Employer, committed to a diverse and inclusive work environment.
Location: Cambridge, MA
Compensation: Competitive compensation package based on experience and performance.
Principals only. Recruiters, please don't contact this job poster.
Please, no phone calls about this job!
Please do not contact job poster about other services, products or commercial interests.
About Independence Solar
Independence Solar develops and builds commercial solar projects in the New England and Mid-Atlantic U.S. The company was founded in 2007 and has offices in Boston, MA and Cherry Hill, NJ. Currently a small, tight knit team, Independence Solar seeks to add new team members as it grows. Independence Solar is an equal opportunity employer.
Position Description
The Business Assistant will help the company’s principals with day-to-day operations, including bookkeeping, office administration, preparation of materials, and customer service. The position will require taking on various and changing administrative tasks, so the right candidate must be flexible, able to learn quickly, and adept at prioritizing and multi-tasking. The Business Assistant will work closely with the other team members and partners, gaining exposure to all aspects of the business and accessing a valuable opportunity to learn about entrepreneurship and the renewable energy industry.
Qualifications
⎯ Positive attitude
⎯ Flexibility
⎯ Strong work ethic
⎯ Strong organizational skills
⎯ Strong written and oral communication skills
⎯ Able to work independently and also take instruction
⎯ MS Office, internet, email
⎯ Background in light bookkeeping helpful
⎯ 2 years previous work experience or college degree
Time: Full-time position (40 hours/week)
Compensation: Commensurate with experience
Send resume and cover letter/message as directed. (No phone calls, please)
Independence Solar/Boston, MA