The energy transition and how some utilities are dealing with it

With consumers installing solar panels in greater numbers, utilities in the US are taking action to maintain their position. Kim Brunhuber writes a good article on the Canadian Broadcasting Corporation website about recent developments.

 

As solar installations multiply, U.S. utility companies fight back

Below the Mandalay Bay Hotel in Las Vegas, they glimmer in the relentless Nevada sun like scales on a monstrous grey dragon. More than 26,000 solar panels cover 113,000 square metres of rooftop. It’s the biggest solar array of its kind in America.

“Just look at its physical size,” says MGM’s chief sustainability officer Cindy Ortega from high atop the Delano hotel which overlooks the arrays. “We have a lot of sunshine here and we want to take advantage of that renewable energy.”

The solar panels were installed by MGM to power its chain of 15 Vegas hotels, and generate so much electricity the MGM hotels can now leave the grid.

“At the hottest part of the day, it produces enough power to power 1,350 customers of the Nevada utility,” Ortega says.

Fantastic, if you’re a fan of clean energy. Disaster, if you’re privately owned Nevada power utility NV Energy. Seven per cent of its revenue will disappear when the hotel chain pulls the plug, but the utility wouldn’t allow that to happen without a fight.

MGM to compensate utility

After a protracted legal battle with NV Energy, MGM has now agreed to cough up $87 million to make up the shortfall.

“What that money goes towards is making sure all the other ratepayers here in southern Nevada aren’t harmed or don’t have higher power bills because MGM left the grid,” says Ortega.

This is what happens when disruptive technology becomes popular: The monopolies fight back. And increasingly, those who are actually being disrupted are the people who have chosen to go solar, like Judi Penna.

“Right here are my solar panels‚” she says, pointing at the panels covering half of her extensive roof in North Las Vegas.

Last year she heard about what she calls “a beautiful plan.” It’s known as “net metering;” if you install solar panels you can earn credit by sending excess energy back to the power company.

“I jumped on it!” she says. “But that‚” she says, pointing at her roof, “is only half the panels I need.”

Net metering scrapped as panels half installed

She had panels installed on the right half of her roof. Then the Nevada power utility suddenly scrapped the deal. With so many people switching to solar, the utility said it was losing revenue and would have to pass the costs off to its non-solar customers. Instead it chose to slash the amount of credit solar customers like Penna got for selling electricity back to the system, effectively cancelling the net metering program. And elected officials did nothing to stop it, she says.

“It’s politics at work to help a few keep their money,” Penna says.

With that, the consumer solar industry in the country’s sunniest state was basically shut down.

As of June of this year, there are approximately 30,000 rooftop solar customers in Nevada, producing more than 265 megawatts of electricity, about three per cent of NV Energy’s peak demand.

The impact of the utility’s decision to end net metering can be seen at SolarCity, which last year was selling solar panels in Nevada faster than the company could install them.

“So we’re here in SolarCity’s call centre,” says Chandler Sherman, the company’s spokeswoman, as she walks down an aisle between dozens and dozens of cubicles. About 200 salespeople are on headsets, some sitting, some standing, some walking, almost all of them trying to convince someone to go solar.

Sales of panels in Nevada dive

“They are selling solar around the country but they can’t sell solar to their own neighbours here in Nevada because of the policy decision that made solar unaffordable for Nevadans,” Sherman says.

“There were about 1,400 people applying to go solar every month in 2015,” she says. “After the new rates went out, it’s about 15 per month, in the entire state of Nevada. One-five people. Out of a state of three million.”

At a nearby SolarCity warehouse, there’s only one worker and one empty truck. Inside are dozens and dozens of solar panels with names taped to them; panels that were destined for Nevada customers who no longer want them.

And it’s not just happening in Nevada. Two other states — Hawaii and Louisiana — have pulled their net metering programs, and, according to Hugh Bromley of Bloomberg Energy Finance, more than two dozen other states are re-examining them.

“What you’re seeing across the country is that demand — energy demand — is no longer growing,” Bromley says.

Utilities’ market share shrinking

The utilities’ total market share is shrinking, he says, “and that is a threat to their business model.”

When the utility companies complain that solar customers aren’t paying their fair share, Bromley believes they have a case.

“It gets to a tipping point where ultimately customers who install systems later are quite a burden to the system,” Bromley says. “There’s investment in the network which someone needs to pay for. They’re no longer procuring energy from the utility, it’s ultimately borne by the rest of the ratepayers.”

“Of course the utility is powerful,” Sherman says. “The utilities had a monopoly on energy here since… since there’s been energy here. And they have a lot of friends in the legislature. What we’re seeing is the utility, rather than adapting to the changes that are happening in the energy sector, they’re choosing to blame rooftop solar and trying to place discriminatory charges and fees on rooftop solar customers.”

This past week at a recent solar power trade show in Las Vegas, several CEOs worried openly about what the trend would mean for the industry across the U.S.

Solar needs a strategy

Guy Sella, CEO of SolarEdge, is calling for federal guidelines to help both the conventional power utilities and the solar industry find a way to co-exist.

“We saw the change in Nevada, and we understand that what we do today puts lots of pressure and risk on the utilities after investments of hundreds of billions over 130 years,” Sella said.

David Kaiserman, president of Lennar Ventures, believes the solar industry is to the power utilities as Uber is to cabs, and Airbnb is to hospitality. The solar industry isn’t doing enough to convince the public, and politicians it’s worth the pain, Kaiserman says.

Disruptive technology means change

“It’s a disruptive technology that causes pain as all disruptive technologies do.” To survive, solar should start marketing itself as aggressively as Apple or Google, he says.

“The symptom is what you see here in Nevada,” Kaiserman said. “We’re going to eliminate an industry where we induced people into putting solar on the roof and then we said, ‘Ooh by the way the contracts that we told you — these 20-year leases that we said were great, that we gave you a rebate for and made you real comfortable about — oh, those stopped.’ Those types of things are nonsensical. But they’re born from the fact that there isn’t a counter-balancing consumer viewpoint that says ‘look this is what we want, this is what we demand as a society.'”

In Nevada, at least one part of Kaiserman’s wish has been granted. The net metering program was wildly popular and there was political pressure to restore it. Nevada’s governor came out in favour of a deal that would bring back the old rates NV Energy had been paying solar customers, though only for the panels that have already been installed. On Friday, regulators approved the deal.

Penna greeted the announcement with a shrug.

“I’m just going to wait and see and figure out what I’m going to do,” she says.

After all, the new deal is great for half of her roof. But not the other.

3 thoughts on “The energy transition and how some utilities are dealing with it

  1. Can we clarify: was the $87m that MGM paid the Nevada utility equivalent to the subsidy it received from them for installing the solar panels? If not, where did this particular figure emerge from? It would be very strange world where a utility was able to sue any consumer who saved energy!

    • Reading the article, that is what I understand. Maybe someone else can clarify. I agree with your last sentence, but that appears what happened. This is a strange energy transition.

      • If that $87 million sum is NOT the same as the subsidy provided for solar panels, this really does open the door to litigious energy purveyors seeking to block energy saving. I assume many of your many North American readers must know all about this, and can confirm (or deny) our suspicions. Surely this Nevada case is by now notorious in the USA?

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