Rhone Resch, president and CEO of the Solar Energy Industries Association, discusses the debate surrounding net metering.
Monica Trauzzi: Rhone, in your view, does distributed generation pose a net positive or a net negative for the changing landscape of the electric power sector?
Rhone Resch: Distributed generation is by far a net positive. If you think about electricity generation, it's basically unchanged in the last 100 years or so. Now with the advent of distributed generation, you're not only allowing customers to generate their own electricity, but you're also stabilizing the grid and providing a lower-cost option for all the retail ratepayers.
Monica Trauzzi: In terms of growth within your industry, how much of a game-changer is DG?
Rhone Resch: DG has really caught on in the last couple of years. Today it represents about 40 percent of the total solar market, but it's the fastest-growing segment of the solar market, and we see by 2016 distributed generation being a larger market segment than utility scale in the United States.
Monica Trauzzi: One of the key issues surrounding DG is net metering. Former Chairman of FERC Jon Wellinghoff classified it as an ongoing war, this debate that we see between distribution utilities and solar distribution providers. Would you classify it as such? How would you qualify it?
Rhone Resch: At the moment, it's a battle, and the battle is being fought state by state. But rather I view net metering as an opportunity. I mean, this is a business opportunity for utilities. It's a business opportunity for small and large solar developers. But, more importantly, it's a business opportunity for customers. When you look at what's available today from a technology and a cost perspective, solar is the lowest-cost option for retail electricity in many of the markets in the United States. Being able to provide that either through the utility or a local installer is critical, ultimately, to keeping the United States cost-competitive globally.
Monica Trauzzi: Is the issue being magnified disproportionally based on how much solar penetration there actually is?
Rhone Resch: Absolutely. I mean, today distributed generation in the big states of California, Hawaii and a few others represents about 1 percent of total retail electricity sales, but net metering itself is about a quarter of 1 percent, so it's definitely overblown. But, ultimately, I think this conversation that we're having at the state level is going to set the path forward for both rate design and a balanced relationship between utilities and solar developers going forward.
Monica Trauzzi: So why do you think that utilities are then overblowing the issue? What is the fear or the concern there?
Rhone Resch: I think there's a real threat to their business model. If utilities do not evolve and adapt and start providing more services, the services that their customers want, then they are at risk for losing a significant amount of market share. So this is a wakeup call, I think, in large part to utilities to start getting more entrepreneurial: a little bit more aggressive in providing the kinds of products and services that their customers want. And their customers increasingly want solar.
Monica Trauzzi: Are some utilities being hostile towards solar?
Rhone Resch: Not directly hostile to solar, but directly hostile to competition. And that competition is coming in the form of homeowners who are using their available roof space to put solar up. And utilities are increasingly trying to block you as a homeowner from putting solar on your roof or business. So we're not seeing necessarily the hostility towards solar as a technology, but rather some of the market applications that are occurring.
Monica Trauzzi: So is this debate disruptive to technological advancements?
Rhone Resch: Not at all. The technology that is developing in distributed generation, and this is everything from smart meters, to storage technologies, to solar, to a wide variety of other generation technologies, continues to move at an extremely rapid pace. And if utilities do not embrace distributed generation as a business model, or accept the competition that's going to be provided, they are going to find that they're going to be overrun in a very similar way that happened in the telecommunications industry in the last 20 to 30 years.
Monica Trauzzi: So what's the best way to bring the two sides together to solve the issue? What's the proper forum?
Rhone Resch: I think the proper forum is really an open dialogue on the value of distributed generation. And we're starting to have that in several of the states with those local utilities. And it's really understanding both the costs and the benefits of solar energy. When you look at the benefits of solar compared to the costs, the benefits outsupply the cost by a 1.5-to-1 ratio, meaning you're getting 50 percent more benefit from installing a solar system than the cost would actually occur to the utility. Ultimately, they're finding that installing solar is a great attribute to have on the utility distribution network.
Monica Trauzzi: What's the role for regulators in all of this?
Rhone Resch: I think the role for regulators is to provide flexibility; is to ensure that we keep net metering; we don't cap it artificially; we allow innovation and entrepreneurialism to thrive in this country; we create competition between a government-protected monopoly interest, like the utility and a small developer. Then it could be a solar or a small wind or other developer. But ultimately allow the utility to compete in this marketplace, give them the ability to install solar, to lease solar, some of the other business models that are flourishing today. Ultimately, we'll all be in a great, better position if that occurs.
Monica Trauzzi: How critical is the commercialization of cost-effective battery technologies to the success of solar in distributed generation?
Rhone Resch: Well, today with net metering, effectively you are exporting your extra electricity to the grid and getting a credit for it. Literally two or three years from now when you have commercially viable and affordable storage technologies, you're not going to need net metering, so this conversation is going to be moot in just a short period of time. So, ultimately, I think utilities need to figure out what their business model is to embrace distributed generation rather than fight it. Because if I can install a solar system on my roof and have a battery backup system, I don't need net metering. I don't need some of these other policies that we're talking about today. And, unfortunately, utilities will be left out in the cold if they don't start figuring out how to evolve today.
Monica Trauzzi: What can FERC do to improve the storage process?
Rhone Resch: I think ultimately it's to create more market opportunities for storage. And you see in California large investments and large-scale storage, which is fantastic. But ultimately, we should be looking at storage being used in critical infrastructure areas, meaning those areas with grid congestion, those areas where you really need to provide reliable backup where we know that the utilities have not been able to provide that type of guaranteed service, and really make sure that in those areas where it has the greatest value we're deploying storage today and creating lower-cost options for all users in the future.
Monica Trauzzi: We've seen headlines pointing to the end of utilities. Do you think there's such a thing?
Rhone Resch: I do not. No, I think for a long time utilities will play a very important role in ensuring that we provide electricity throughout the entire grid. I mean, we've got an incredible resource in solar. It's our largest domestic source of energy in this country, yet it provides less than one-half of 1 percent of our electricity. Going forward, there's no doubt that solar is going to be a much larger part of our electricity generation, but the utilities are also going to play an important role, both in owning the generating assets that are solar, acquiring solar generation, and then ultimately providing new services to customers using solar.
Monica Trauzzi: What are your predictions for solar's market penetration in the utility sector moving forward?
Rhone Resch: Well, the utility solar today is the largest segment of our market. It's about 60 percent of all of the solar installed. It's very fast-growing. And that's really occurring throughout the entire country. It may be large-scale in the desert Southwest where you're installing 500 megawatts at a time, but you also see utility scale in New Jersey, New York, Massachusetts and other areas in a 50- to 20-megawatt type of scale. I think ultimately what you're going to find is, because solar is such a large domestic resource and we have so much available roof space that's underutilized today as a potential source of electricity generation, that you will easily see solar be 20 percent of electricity generation at the retail level within the next 30 years.
Monica Trauzzi: How do you see the distributed generation issue going in 2014?
Rhone Resch: Well, we're going to continue to slug it out state by state. The industry is extremely aligned on how we're going to be working on net metering issues. We are going to continue to support those net metering programs that are in place. We're going to expand that meter. There's net metering in 43 states today. We think that this is a consumer right, that you as a homeowner have the right to put solar on your rooftop and to generate your own electricity, so we want to make sure that the free market has the ability to allow solar to grow, and that's our focus in 2014. It's Georgia. It's Colorado. It's Massachusetts. It's New York. It's continuing to work in states like Arizona and California. But really making sure that the utilities understand this is what their customers want. Ninety percent of all Americans want greater use of solar energy and want to put solar on their home. It's time for the utilities and the public utility commissioners to figure out the best way to do it going forward.
Monica Trauzzi: What do you think the utility sector will look like in 10 years?
Rhone Resch: I think you're going to see continued mergers and acquisitions. I think you're going to see many of the companies who are more aggressive today as utilities or as an unregulated subsidiary of utility developing solar have a much larger market share. These are the NextEra and the NRG, those types of companies. And I think what you're going to continue to see is that supplies are going to come from different resources. Not just from solar. Also from microturbines with available, affordable natural gas or fuel cells, small wind, and a variety of other new technologies that are being developed today. So while solar may be getting the brunt of the force from the utilities in the fight on net metering, ultimately there are dozens of technologies right behind us that are also going to be competing in the marketplace, and the key for us to allow that competition to occur.
Monica Trauzzi: We'll end it right there. Thank you.
Rhone Resch: Great. Thank you.
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