Four years have passed since ILSR’s initial report on utility-owned rooftop solar and this 2019 update shows small growth but some potentially large repercussions. This update rehashes the costs and benefits, updates the progress of the four initial programs, highlights a few new programs, and discusses the wider implications.
Still Worse for Customers Than Self-Ownership
In 2015, ILSR profiled four few large utilities that had proposed programs to own rooftop solar arrays, and in exchange customers sharing their rooftops would receive a credit or payment on their energy bill. While convenient for consumers due to the lack of an upfront cost, the deals disproportionately benefited the utilities. The following graphic, from ILSR’s 2015 post, illustrates the difference in value to the customer between the utility-owned rooftop solar programs provided by Arizona utilities and a customer owning their own rooftop solar array.
Four Pilots with Limited Implementation
In 2015, ILSR showcased four utilities in the early stages of offering a utility-owned distributed generation program. This list provides a status update on the four originally profiled programs:
- Tucson Electric Power’s Residential Solar Program reached its target of 600 projects and a total of 3.5 megawatts. The program closed after the initial offering.
- Built on an earlier pilot, Arizona Public Service’s Solar Partner program consists of 1,600 residential solar customers with a total of 10 megawatts. A similar-sized second phase of the program has launched, called APS Solar Communities. It limits single-family participation to income-qualified participants, but adds non-residential and multi-family residential customers. New participants may include “multifamily housing, Title I schools, nonprofits serving limited-income groups and government entities serving rural communities in APS service territory.” Single-family customers receive the same $30 monthly rental fee from APS, while other customers will receive a bill credit relative to the size of the rooftop or parking lot canopy solar array. The utility intends to spend up to $15 million per year over three years on the solar access programs.
- Nearly 10,000 customers made inquiries with Georgia Power’s “solar advisers,” since 2016. But of the 800 who received a detailed analysis from the utility, only five customers proceeded to installing solar. Poor compensation is a likely culprit, with customers only receiving bill credits equal to their own consumption in a given month, with a very poor buyback rate for energy produced in excess of their own use. The utility and its subsidiary have yet to offer a utility-owned solar program.
- CPS Energy in San Antonio, TX, implemented a rooftop solar, SolarHostSA, by buying electricity from independent solar developer, PowerFin. Under the agreement, CPS agreed to purchase electricity from the 5 megawatts of solar panels PowerFin installed on 600 residential and commercial rooftops. Customers received 3 cents per kilowatt-hour produced by the panels hosted on their rooftop for twenty years. Although analysis by PowerFin suggests the program could expand eight-fold based on available rooftops, the utility has offered no plans to expand the program.
Other Utilities Testing the Waters
Several utilities have launched new pilots since our initial investigation (and ILSR uncovered one earlier program we missed).
- The We Energies (a.k.a. Wisconsin Electric Power Company) proposal to provide rooftop leasing was approved by the Wisconsin Public Service Commission in December of 2018. No implementation steps have been taken.
- Duke Energy’s Indiana subsidiary recently opened a pilot program to install up to 10 megawatts of solar for “businesses, schools and nonprofits” that would lease the systems for 20 years. Participants would receive bill credits via net metering.
- Duke Energy’s North Carolina subsidiary ran a distributed generation program back in 2010. The $50 million project installed 8 megawatts of solar on homes and businesses, paying participants a small rental fee. The program has not been replicated.
- In 2019, Entergy New Orleans launched a program mimicking the APS roof rental program. The utility will own 100 solar arrays on the homes of low-income customers, providing a $30 bill credit each month. The program is a small pilot, likely less than a single megawatt.
The following map illustrates where utilities have operated or plan to operate rooftop solar programs.
Despite a small surge several years ago, few utilities have shown much interest in owning rooftop solar. There are several potential explanations for the mild interest despite significant growth of rooftop solar:
- Transaction costs –– Rooftop solar projects require a significant number of individual transactions, in contrast to how utilities typically acquire power plants at large scale, transacting with just a few project developers.
- Alternative clean energy strategies –– Rather than allow customers to indulge clean energy desires through owning solar, utilities can promote their large-scale wind and solar energy investments.
- Regulator reluctance –– As rooftop solar grows, regulators have been (rightly) reluctant to allow utilities to wield their monopoly power in this competitive market. Proposals from Arizona Public Service and Entergy highlight how utilities and regulators have shifted focus to low-income customers instead of general programs.
Even Utilities That Promote Rooftop Solar Lobby Against It
Many utilities engage in active lobbying campaigns against rooftop solar, including every single one with a utility ownership program. In 2017, the New York Times highlighted the slowing growth of rooftop solar in a piece called “Rooftop Solar Dims Under Pressure From Utility Lobbyists.” Indiana provided a particularly effective case study:
“Indiana’s five investor-owned utilities are among the biggest contributors to Indiana’s elected officials, together giving at least $3 million to mostly Republican candidates over the past four election cycles, according to campaign finance filings. They are also known to play an outsize role in drafting energy-related bills.”
Duke Energy Indiana, now proposing a utility-owned rooftop solar program, was among the utilities lobbying to kneecap customer-owned solar. Its North Carolina subsidiary has similarly lobbied to slow a competitive solar market. We Energies, proposing a rooftop leasing program in Wisconsin, has been cited in Midwest Energy News as “[reluctant] to approve interconnection for third-party-owned installations” and “in the past has said customers with solar are not paying their fair share for grid upkeep and are unfairly passing costs on to others.” Both Arizona utilities with utility-owned programs have lobbied to reduce the financial viability of customer-owned solar. Entergy has lobbied against a key rooftop solar policy, net metering, in Arkansas, and was recently exposed for paying actors to mislead the New Orleans city council in a bid for a gas plant. Even city-owned CPS Energy used the announcement of its utility-owned solar to complain of the perceived costs of customer-owned solar.
A Clear Conflict of Interest
State legislators shouldn’t be surprised by investor-owned utility opposition to rooftop solar. The utility trade organization Edison Electric Institute wrote an entire paper highlighting a potential “utility death spiral.” An analysis by the National Renewable Energy Laboratory, captured in the chart below, explains it more bluntly: utility shareholders fear losing market share to the utility’s own customers.
At least one state tries to address the tension between customer-owned and utility-owned solar by prohibiting utility-owned distributed generation. The New York Public Service Commission banned utility ownership of distributed generation, with the exception of integrating existing energy storage on the utility’s generation system, projects targeting underserved portions of the community (e.g. low income residents), or demonstration cases.
Other states, like Georgia, prohibit the regulated monopoly utility from owning distributed generation, requiring the utility to create an unregulated subsidiary that must compete with third party solar companies.
A Seemingly Small Problem
The threat of utility-owned solar stealing significant market share in the rooftop solar industry remains small. The 30 megawatts of utility-owned rooftop solar built since 2010 is less than 1 percent of the rooftop solar installed by non-utility companies in 2018 alone. But the small number of installations masks the larger issue of perception. Every utility with a rooftop solar program has simultaneously lobbied to quash customer-owned solar, advancing spurious claims of superior cost or performance.
Utility-owned solar programs may not be crowding out the competition in the rooftop solar market, but they act as a powerful arm of the monopoly utility’s marketing department that requires regulators and legislators to pay careful attention.
Photo credit: Grid Alternatives