The recent net metering fight and the future of utilities

It’s become apparent that the fight over net metering, a program in which distributed producers of renewable energy can sell their excess power back to utilities, is just the beginning of a larger conversation over the future role of utilities. If the future world is one in which power generation can be done price competitively at a local, distributed level, what critical piece of the supply chain should utilities play?

That’s a far off question, one that will take decades to resolve. But for the time being the answer to the question is playing out in the form  utilities fighting distributed power generation. The fight over net metering took another turn recently when California’s three biggest utilities, Edison International, PG&E, and Sempra Energy said they are rejecting net metering applications from rooftop solar customers who have paired their solar system with a backup battery.

Utilities in these cases have argued that they can’t be sure that the power stored in those backup batteries is in fact power from solar panels and not power stored off the grid and sold back. Net metering programs require power sold back to the grid to only come from renewable sources. The solution to this issue, from the utilities’ perspective, is to require a second meter to verify that the energy sold back to the grid comes from the solar panels, which would add costs to a solar system.

In this recent skirmish over net metering, utilities see an even bigger threat to their role as power generators. Pairing energy storage with solar at the residential level is the biggest threat because it takes customers one step closer to complete grid independence since customers will now have stored power for the times when the sun isn’t shining.

Right now, rooftop customers are still reliant on the grid for power in the evenings and as a general backup in case of failure of a solar system. Battery storage will further move customers off the grid.

But it’s not just battery storage that utilities may one day be dealing with. I’ve wondered also if fuel cells may finally find a place at the residential level as an emergency backup source of power. In post-Fukushima Japan, startup Aquafairy has introduced a fuel cell that weighs 7 kilograms and delivers 200 watts of power. With natural gas pricing so competitive, might we  see a more robust fuel cell option that operates as a backup.

Fuel cells are slowly starting to find their place among outage conscious data centers, and one of the pieces of analysis that was done for companies like eBay that invested in fuel cells was how reliable the natural gas grid is since natural gas powers Bloom Energy’s fuel cells. The conclusion was that the natural gas grid was just as reliable if not more so than the electrical grid.

A recent survey of utility executives done by PwC reported that 94 percent of executives polled believed the utility business model would undergo important changes or a complete transformation within the next two decades.  The top three most impactful factors changing the market were energy efficiency measures, the declining price of solar power and deployment of demand-side management technology.

Executives understand that how utilities generate revenue will need to change as the industry is disrupted. In terms of net metering, utilities are pushing for steep interconnection fees, arguing that rooftop solar customers should have to pay for grid infrastructure since they’re spending a fraction of what they were spending on buying energy from the grid but still require the grid as backup.

But even if utilities can convince public utility commissions to scale back net metering and implement new fees on rooftop solar customers, it doesn’t insulate utilities from the reality that it’s only going to get easier and cheaper for customers to produce and store their own energy.

The real question now for utilities is whether they can transform into robust IT cultures that help manage smart grid data, help orchestrate demand side energy management, even get into the rooftop solar business themselves as some utility execs have pondered. There’s no magic solution for the utilities as a disruptive technology comes online, but one thing is clear to me: Just fighting rooftop solar with the hope it can be stopped won’t solve the problem.

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Adam Lesser

Cleantech Curator Gigaom Research

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