August 10, 2013 – Vol.18 No.21

Big-Box Retailers Turn To Solar, How Can Electric Utilities Adapt?

by John Finnigan, Senior Regulatory Attorney, Environmental Defense Fund.

The electric utility industry faces the risk of declining revenues as more customers install solar panels on their homes and businesses. Solar power currently supplies 2% of the country’s electricity needs, and is projected to grow to 16% by 2020. In 2013, solar panel prices for commercial installations fell 15.6%, from $4.64/watt to $3.92/watt. To protect their revenues, some utilities are raising electricity costs for solar panel owners – but with mixed results. Credit ratings agencies are also expressing concern. Is there real cause for alarm or are these companies crying wolf? Judging by one customer segment – big-box retailers – the threat is real.

The Solar Energy Industries Association (SEIA) ranks U.S. companies based on their solar energy capacity, and the top five companies on the list are big-box retailers:

The SEIA top 20 list also includes:

 

As a whole, the top 20 big-box retailers have over 18,000 U.S. stores, representing enormous potential for solar power growth. These retailers are only part of a larger group of commercial customers, which in total make up about one- third of U.S. electric utility sales. But other commercial customers are turning to solar too. The National Renewable Energy Laboratory reports that 40% of the nation’s 86,000 supermarkets are located in areas with grid parity (the cost of power from solar panels is equal to the cost of buying power from the utility). Commercial customers are also making impressive strides in reducing their energy usage through energy efficiency.

What does this mean for electric utilities? We can expect to see the following changes to the electric utility business model going forward:

These changes present a host of legal and regulatory challenges. As a guiding principle, utilities must have an opportunity to earn a fair return in exchange for keeping the lights on. Similarly, electricity rates for solar panel owners should fairly reflect the full costs of serving these customers, as well as the full benefits that solar power provides to the electric utility. These changes will be disruptive for electric utilities, but will allow customers to choose affordable clean energy and new technologies. We’ll all benefit from cleaner energy and a reliable electric grid.

 

John Finnigan is the senior regulatory attorney for EDF’s US Climate and Energy Program, representing EDF before state public utility commissions on smart grid deployments and energy efficiency matters.

 

Environmental Defense Fund (EDF)

 

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