rowth in solar microgrids — and all forms of distributed solar — is accelerating. So much so that utilities better jump into the market now or risk watching it pass them by. That’s the message from a new white paper, “Utilities and Distributed
Solar: Go Bold (and Smart) or Go Home,” recently published by ICF
International.
Utilities be forewarned: the economics of distributed solar are so
strong, the industry can even withstand what the paper calls “the skunk
at the solar party” — which is next year’s reduction in the U.S. federal investment tax credit. Sure, there probably will be a boom and bust, a flurry of activity in
2016 as consumers rush to take the credit, then a lull in 2017. But ICF
predicts that the industry will pick itself up and continue to grow
over the next 5-10 years.
It turns out that even without the credit, solar is cost-effective in
states where electricity is pricey, like Connecticut, a key microgrid
market. And analysts expect pricing to get even better. Commercial solar
costs fell by more than 60 percent from 2002 to 2015; Deutsche Bank
forecasts another 40 percent drop by 2017, ICF says.
Further, solar microgrids and distributed solar are increasingly used
in grid management (especially when paired with storage) to improve
reliability, serve demand, and decrease costs. Most interesting, the report finds that distributed solar is seeing
tremendous growth even as macro factors work against it. Demand for
electricity is down. Natural gas and oil prices are low. So is
inflation. None of this makes for an ideal solar climate. Yet in first
half of this year, 40 percent of all new generating capacity came from
solar.
Consider what will happen, the report says, if these factors reverse;
if inflation rises, for example. Add to that the boost solar is likely
to get from upcoming pro-renewable regulations, such as the federal
Clean Power Plan, and it’s easy to see why analysts are bullish. All of this is bad news for utilities, right? Maybe, maybe not. Some
will lose sales to solar. But others are starting to go ‘bold’ and
‘smart’ on distributed solar, figuring out ways to leverage it, rather
than pretend it’s not in the rearview mirror, gaining on them fast.
Palpable Utility Shift
“The good news is that a year or two ago, the greatest potential pitfall for many utilities was not seeing the trend, not believing it would last, or hoping that it would only be a factor elsewhere but not in their own market. There has now been a palpable shift,” says the ICF report. “While there are certainly some utilities feeling less impetus to have a proactive solar program, the majority are actively engaged and working effectively to protect their key values.” New Jersey-based PSE&G offers a good example, according to the paper. The utility strengthens its customer relationships and earns a regulated rate of return with a solar loan program that has led to 80 MW of installations so far.
“The good news is that a year or two ago, the greatest potential pitfall for many utilities was not seeing the trend, not believing it would last, or hoping that it would only be a factor elsewhere but not in their own market. There has now been a palpable shift,” says the ICF report. “While there are certainly some utilities feeling less impetus to have a proactive solar program, the majority are actively engaged and working effectively to protect their key values.” New Jersey-based PSE&G offers a good example, according to the paper. The utility strengthens its customer relationships and earns a regulated rate of return with a solar loan program that has led to 80 MW of installations so far.
“This is a big market opening, and utilities can provide unique benefits to it,” ICF says. The engaged utilities now must decide which distributed solar
programs to pursue. ICF cites as some options solar microgrids,
community solar, and customer incentive and loan programs. Utilities
also might consider combinations of options — pairing solar with
storage, microgrids, electric vehicles, energy efficiency and other
distributed energy to improve project benefits and economics, says the
report.
“But utilities cannot afford to wait, and increasingly, they are not
waiting. They recognize that change is just around the corner on utility
planning time scales, and the change will be significant,” the report
says.
http://www.renewableenergyworld.com/articles/2015/11/will-utilities-look-at-solar-microgrids-in-the-rearview-mirror-and-say-uh-oh.html
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