SPI 2013: NEM solar and utility battlers live to fight another day

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Solar Power International yesterday saved the most controversial debate to last as the conference came to a close.

Net energy metering is probably the single most important policy discussion in town, not just Chicago, but every town, city and community across the United States. On November 14, the Arizona Corporation Commission (ACC) will issue its decision on proposals from the state's largest utility that could impose monthly fixed charges for solar customers of up to US$100 or change the price the utility pays solar customers for excess electricity exported to the grid from retail (around 12c per kWh) to wholesale rates (around 4c per kWh).

Some in the solar industry say this would crush the market in that state; at the very least it would slow adoption, if not snuff it out entirely.

When asked whether APS's proposals would crush solar in Arizona, Greg Bernosky, manager of the utility's renewable energy programme, almost made an admission of guilt by neither confirming nor denying this outcome was underlying the proposals.

Bernosky was generous in his response by word count but not specifics as he also left unanswered my question about whether the utility had modelled for what kind of penetration levels it would find acceptable in terms of revenue protection.

“The revenue protection question comes up a lot – it is not about collecting more money and having more money available for the utility. It is a cost shift issue; rates will be set around cost shift and revenue requirements are needed to serve all customers.”

But APS is clearly concerned about revenue losses, and has estimated that solar customers avoid US$1,000 in costs annually, a cost that is borne ultimately by non-solar customers.

“Our proposals were designed to better calibrate the cost benefits of rooftop solar and allow that to be part of the actual rate transaction based on services provided, value provided and avoided fuel O&M capacity value that we realise from rooftop solar and recognise that would likely by itself have a damaging effect on the potential growth of future solar systems in our service territory.”

This hovering and hedging around the issue is really not that unfamiliar as a communications strategy for APS. Earlier this year, tempers flared between APS and the solar community over the utility's direct involvement in attack advertisements squarely aimed at the industry.

Bernosky previously appeared to suggest that the adoption of solar could be controlled around generation hubs, rather than growth based purely on customer demand.

“We also have organic growth of rooftop solar… we have a system vulnerability that could be strengthened by a concentration of distributed solar in one particular area,” he said. “Are there mechanisms by which we could work on that side to create generation hubs and have opportunities for the system to benefit from concentration of sites in one area, thereby offsetting some of the distribution needs we have over time.”

Diktats over where solar can and can't be installed is unwelcomed by the industry and consumers, and should be unwelcomed by utilities.

Micah Myers, senior vice president of corporate development at Clean Power Finance, offered some really quite valuable alternative insight into what may be happening at other utilities.

“I'll take the optimistic view,” he said. “Our company raised our last and final round and had several strategic investors come in last year, including four of the top 12 utilities. They see change coming and they want to learn how distributed resources work, how it gets sold, how does it get installed, how does it get built, how does it fit with my business model. It is really buying a seat at the table to have access to information to see how it works.”

Myers said the unregulated side of the business at one utility is buying distributed resources in 10 different states.

Edison International and Duke Energy have both made equity venture capital investments in Clean Power Finance, while Pacific Gas & Electric has invested in SolarCity and Sunrun.

“Why should only third-party banks and corporates be able to own these resources when the utility can own those resources too?” he asked. “There's nothing insurmountable that has to happen like an act of Congress to do it. So we see a lot of proactive work go into what a utility could request of their regulators in order to provide distributed energy generation as a service. We're optimisitic about that.”

Myers is not one to shy away from a battle having served in combat operations in Iraq and Afghanistan and graduated from the TOPGUN Strike Fighter Weapons Instructor School. So on the question of NEM, he gave a military analogy.

“[In the] military, we used to have this concept called centre of gravity. If you're looking at an opponent you can look where the tipping point is of the centre of gravity where you can channel all of your resources into one single thing that topples [it].

“It's not a coincidence that this is the biggest discussion because everyone has figured out that this is probably the centre of gravity for this tension between business models.

“The ACC needs to ask themselves what do we want for our state? California has clearly said we want continued adoption of distributed renewable resources, we want state economic growth and a sustainable grid. There are probably multiple ways to deliver that service, but that's the conversation going on in Arizona.”

Fred Zalcman, SunEdison’s managing director of regulatory affairs for the eastern United States, said that collaboration is essential as we move from today's NEM framework, which is very simple and doesn't require any regulatory process, it's an automatic mechanism that adjusts as retail rates adjust.

“As we move to a much more precise mechanism such as Value Of Solar Tariff, my worry as a solar developer is that it really embroils us in a very deep, labour intensive, resource intensive regulatory process; it's a process where there's a significant information disparity. The utility gets much more sophisticated real-time understanding of its system than the developer does.

“We look at NEM policy as fundamental to the industry in a post-incentive environment … [we don't want to] further subsidise solar through incentives but have NEM as a part of a constellation of mechanisms to enable a self-sustaining [industry].”

At the beginning of this year, the Edison Electric Institute put out a report warning that distributed generation was the biggest threat to the utility industry. A representative from EEI who was sitting next to me gave a not-so-subtle clue as to how important this issue is.

My guess is that NEM will still be on the agenda for SPI 2014 in Las Vegas but a lot could happen in that time given the ACC's decision and as the California Public Utilities Commission hammers out the details for NEM after the passage of AB327 and a report forecasting that in 2020, NEM would shift US$1.1 billion a year to non-solar ratepayers.

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