SolarCity eliminates net metering need

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Net metering drives solar sales but is unsustainable. By adding Tesla batteries to their installations, SolarCity eliminates net metering need.

SolarCity Tesla Battery

SolarCity battery – the T is for Tesla

Net metering allows customers with solar panels to “bank” excess kilowatt-hours with their utility for withdrawal later. During long, sunny, summer days, solar panels produce more electricity than customers use. Net metering gives customers a credit for that energy to be used later when their electric use is greater than what the solar panels produce, typically at night or even in the winter.

Net metering is unsustainable, though. Customers with solar still need the utility to produce and provide power when their solar panels do not, but they may be paying nothing to the utility. Imagine if everyone had solar panels equal to their annual use; with net metering, they would pay the utility nothing, but still need the utility to provide them power. That is not a sustainable situation, and, logically requires net metering to be replaced by a different approach which will necessarily be less advantageous for sales of solar panels.

SolarCity realizes this will be a challenge, having declared it in its October 2012 S-1 filing with the Securities & Exchange Commission that “the absence of net metering for new customers would greatly limit demand for our solar systems”. SolarCity is uniquely positioned, however, because their sister company is Tesla Motors, maker of the most successful electric car in the world, the Model S.

For Tesla to be successful enough to match its stock price, they will need a cheaper electric car to have high volume sales, their planned Gen III car debuting in late 2016. The key to making this car less expensive and having large sales is simple, cheaper batteries. While skeptics believe Tesla cannot lower battery costs fast enough to make the Gen III a success, the symbiotic relationship between SolarCity and Tesla can help them both achieve the lower battery costs necessary for their longer term success.

Additional battery sales through SolarCity will help Tesla lower battery costs. Lower battery costs not only helps Tesla, but also helps SolarCity sell more battery integrated systems. That will help SolarCity eliminate its net metering need and put it well ahead of other solar system providers.

From Bloomberg:

The company plans to introduce in 2015 a bundled package of solar panels to generate power during the day and batteries that will retain the power for use at night, Chief Executive Officer Lyndon Rive said in an interview today. San Mateo, California-based SolarCity will test it at 100 sites this year.

“There won’t be a need for net metering when storage is deployed onsite,” Rive said today in an interview in New York. “Storage is going to have a big impact.”

SolarCity is testing 8 kilowatt-hour battery packs provided by Tesla Motors Inc. (TSLA), the electric car company run by Rive’s cousin Elon Musk.

Rive says declining battery prices means he can include the the cost of storage and still provide electricity to consumers in California and Hawaii at rates that beat utilities.

via SolarCity Says Batteries Reduce Risk of Utility Backlash – Bloomberg.

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Integrated inverter-storage system supercharges solar

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Integrated inverter-storage system supercharges solar

Integrated inverter-storage system supercharges solar

Integrated inverter-storage system supercharges solar installations, combining energy management software with storage to maximize on-site consumption.

According to the SMA website, the battery storage, with the home energy management software that optimizes use of solar production and the battery, can increase self-consumption from 30% to 55% of production based on German production and consumption parameters (including 5,000 annual kWh of consumption and solar production). In different situations where production and consumption are more correlated (air conditioning load, Australia), the results could be different or require more storage.

Still, it is interesting that a small amount of storage (2 kWh) can have a big impact. Australia does not have net metering and power fed back into the grid is now paid a relatively low price. If this advances fast enough, in the U.S. it could really blunt any pain that occurs when net metering goes away as well as represent a further reduction in utility sales.

See on reneweconomy.com.au

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Utility-scale solar no longer makes sense

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Brightsource Ivanpah concentrating solar thermal power plants: Utility-scale solar no longer makes sense

Brightsource Ivanpah concentrating solar thermal power plants

In an article titled “Siemens Will Shut Solar Unit on $1 Billion Loss in Two Years“, Bloomberg reported that “Siemens AG will close its solar power unit after struggling to find a buyer following losses of at least 784 million euros ($1 billion) euros since 2011 amid Chief Executive Officer Peter Loescher’s failed push into that business to expand renewable energy offerings.”

This is continuing confirmation that Utility-scale solar no longer makes sense. Siemens is the second company to exit the concentrated solar thermal power market after Brightsource Energy. At the same time, utility-scale solar installations are losing ground, as a percentage of the market, to rooftop installations.

If utilities own solar as a central station generating source, then it increases revenues and profits for them. If customers own rooftop solar, utilities lose sales, revenues, and profits. Solar is better geared to rooftop use than central station power plant use.

I think this recognizes the facts David Crane, CEO of NRG Energy, laid out at the Bloomberg NewEnergy Finance Summit in April. As reported by David Roberts in Grist:

He said yesterday that the whole approach of covering vast swathes of desert in solar panels and piping the energy hundreds of miles through high-voltage transmission lines “was stupid in 2008 and it’s stupid today.” Rather, the key advantage of solar is that it can cover houses and buildings and car parks and other urban structures, enabling them to generate their own power.

With advances in the cost-effectiveness of solar panels and as part of building integrated photovoltaics (BIPV), how  will recently built utility-scale solar farms remain economic? Not nearly as long as their purchased power agreements, I fear.

http://en.wikipedia.org/wiki/Concentrated_solar_power

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Unilever CEO: For sustainable business, go against ‘mindless consumption’

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Many companies focus on short-term results. The CEO of consumer-products giant Unilever, Paul Polman, says long-term strategic planning builds better businesses.

It is worth listening to the interview, not just reading it. My favorite quotes:

After taking the helm, Polman immediately got to work developing a better, more sustainable culture around the office. That included putting an end to quarterly reporting and changing the company’s compensation system accordingly.

“We had to create the right environment so that people would start to think about the longer term,” he says. “What we have seen is that discussions with our financial community have become a little bit more strategic. The decisions in the company are a little bit more long-term.”

“We know it’s very easy to optimize — short-term — the share price,” he admits. “But lives of businesses are getting shorter and shorter, and yet society needs them more and more. Nine out of ten people in this world depend on businesses, and I think it’s in all of our interests to create healthy institutions… You cannot get a successful, healthy business model if you also don’t create a healthy environment. Business has a hard time succeeding in societies that fail.”

“What we’ve created here is an enormous force to lift people out of poverty,” Polman points out. “But at the same time, we haven’t figured out how to do that without incurring these enormous levels of government or private debt; overconsumption; and frankly, leaving too many people behind. You cannot say that the system properly works if there are over a billion people going to bed hungry.”

See on www.marketplace.org

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Utilities Strike Back! Bad rates for solar, good rates for “aircon”

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Utilities Strike Back!

Gareth Weeks, stock.xchng

Australia continues to show the U.S. what the future looks like when you price incorrectly.

In case you have not been following Australia, here is a thumbnail of the situation that makes utilities strike back. Back in the mid-2000s, air conditioning (“aircon” to Aussies) took off. In response, utilities built lots of new transmission and baseload power plants to meet a significant increase in peak demand that occurred in a very small number of hours each year.

Retail prices soared to over 30¢/kWh. Price structures did not change, so people without air conditioning subsidize those with aircon by about $330/year. They instituted retail competition that created artificial profits for retailers, so now people pay an extra $138/year for the privilege of retail competition that does nothing to lower their rates.

Then solar became much cheaper. People started installing it on their roofs to avoid the 30¢/kWh retail prices even though there is no net metering. Instead, the utilities/retailers only pay 6¢/kWh for any excess power they receive from households with solar panels.

Now the utilities want to change their price structures for solar customers to recoup the $30/year in costs they say solar households avoid. No  changes for the retailer subsidy, though. No changes for the aircon subsidy either. People are incensed.

Does the ESAA suggest that air conditioning households should be hit with higher fixed tariffs to pay for network extensions? No, of course not, because the increased use of air conditioners adds to the revenue pool of the electricity industry, and they want to get a return on their grid investment.

The use of solar, however, detracts from the incumbents because rooftop solar households draw less electricity from the grid – leading to the now well documented “death spiral.”

The ESAA wants to arrest this spiral by lifting fixed charges or introducing tariffs for solar households to maintain the revenue pool and protect its business model. This has already begun in several states, and to make itself look like an innocent bystander, the industry has brought the violins to play a song of woe on behalf of the least well off. But this is not about protecting less wealthy households, it is about protecting the business model of the utilities.

What seems inevitable however is that the industry will one day soon need to change its business model of face the same decline as fixed priced telephony or printed photos. They are fast approaching their Kodak moment. (emphasis added) Utilities want higher charges to shade business model from solar : Renew Economy.

This is exactly what Idaho Power tried to do recently. It is similar to what Hawaii Electric tried to do to forestall solar. The comments on the Renew Economy article were very knowledgeable and can be summarized pretty succinctly: charge prices that reflect how costs are incurred and make every customer subject to them.

The problem for the utilities is that they have no concept of pricing or customer service or listening to customers to retain customers and sales. They have been monopolies and have not had to deal with these issues to make money. Now they do and they are woefully equipped, tone deaf,  ham-handed, and pig-headed.

The future is being written on the walls of Australia for our utilities to see, but they do not want to look. They are worried about the next quarter, about investing more capital to raise prices to increase profits, completely unaware or uninterested that they now must compete at the point of use on price, service, and customer relationship. Long term equity and debt investors should be concerned, as an EEI report states, but instead we continue to roll toward a coming train wreck.

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Utility Crony Capitalism in South Carolina

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Utility Crony Capitalism: South Carolina maintains its laws granting utilities monopoly rights on the sale of electricity, blocking solar.

Utility crony capitalism in South Carolina

Why solar power rarely shines in SC – From thestate.com

Electric utilities wield large amounts of political control in a lot of states. (I have heard it said that the Southern Company is the fourth branch of state government.) Apparently that is true in South Carolina.

A recent opinion piece in Myrtle Beach Online (Third-party solar sales: Chorus calling for clean energy access) lays out the case:

Wiley Cooper, a retired Methodist minister, has been on a mission to change South Carolina energy law, creating a petition after his church was prevented from entering into a contract for solar energy. Earlier this year, InterTech’s Grant Reeves penned a column in the Post & Courier with the same call to action. Both Cooper and Reeves are seeking the elimination of a decades-old restriction in South Carolina law that effectively prevents churches, businesses, and any other organization from installing solar panels at a reasonable cost. It’s not that the panels themselves are too expensive. It’s that the law restricts a market-based solution for financing clean energy.

Businesses like InterTech, organizations like Mr. Cooper’s church, and investors like myself are not calling for something radical. Instead we’re calling for an update of restrictive utility laws like those that have been made in numerous other states. In many other states, individuals and institutions can enter into third-party solar energy sales agreements, in which the developer of the solar project finances and maintains the panels and then sells excess power back to the grid. This way, organizations can get a low-cost, fixed-price on renewable energy without paying to purchase or maintain their own miniature power plant.

What possible reasons can their be for maintaining a utility monopoly so it does not have to compete with another potential supplier, especially if you espouse an belief in free market capitalism? The only thing I can think of is that you really believe in utility crony capitalism.

According to The State (South Carolina’s Home Page!):

During the past two years, utilities have spoken against a policy that could make solar cheaper for Monson and others, spoken against a bill requiring power companies to use more renewable energy and watched quietly as a bill to increase solar tax credits withered in the state Senate.

Records show that big utilities and the state’s electric cooperatives association have spent $2.2 million lobbying lawmakers in the past 2½ years. (Why solar power rarely shines in SC)

It looks like a spend of almost $1M per year on South Carolina legislators buys a continuation of utility crony capitalism.

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EEI Highlights Coming Retail Electric Disruption

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EEI Electric Disruption CoverThe Edison Electric Institute (EEI) recently published a report titled “Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business”. Peter Kind, Executive Director of Energy Infrastructure Advocates (an investor lead initiative to educate and advocate public policy that is supportive of infrastructure development) and Senior Advisor to Macquarie Capital’s U.S. Utilities and Power industry group authored the report. In it, Mr. Kind predicts dire consequences for retail utilities and their investors from “distributed energy resources” (DER) and demand-side management (DSM).

Mr. Kind sounds the alarm from, predominantly, the utility’s point of view, drawing on investor behavior. His analysis of the likely outcomes matches what I have been writing, as do many of his recommendations. Perhaps his focus on the financial aspect will light a fire under utility CFOs to do something.

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Years Before Solar Shines On Miami Rooftops

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Miami Solar Disruption Graph

The dashed lines represent the cost per kWh of residential rooftop solar assuming installed costs of $3.00/Wp in 2013 (reflects Federal income tax credit) dropping to $1.50/Wp in 2020 (DOE SunShot Residential Rooftop target), and 5% annually thereafter, and different return requirements as indicated. The yellow line represents the variable price portion of the current residential rate escalated at 2% per year. The green line represents an escalation of 5% per year.

Miami is blessed with lots of sun, so it must be great for solar, right? Not on your rooftop!

Somewhat surprisingly, a rooftop solar PV system in Miami would produce only about 8% more kWh annually than one in Boston. And given the difference in kWh prices, that is not nearly enough. The current variable price, the costs charged by kWh, in Boston is about 15.6¢. Miami, served by Florida Power & Light, (FPL) has one of the lowest variable prices in the country for an investor-owned utility, about 8.65¢.

As you can see from the graph above, even as the installed costs of solar photovoltaics fall to the DOE SunShot target of $1.50/Wp for residential rooftops, it would still take large increases in FPL rates to make it economical for customer to install solar themselves. If FPL can hold variable price increases to 2% per year, it might well be 2028 before it is cost-effective for residential customer to install solar PV.

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Of course, the case is different for FPL. Continue reading

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NRG & Duke Confirm Rooftop Solar Disruption. Their Plan?

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Photograph: Iconica

In an interesting interview with Bloomberg, NRG President David Crane finally has put his company’s actions behind his thinking. They have the NRG Residential Solar Solutions unit. Mr. Crane obviously wants to grow that and add more than solar.

“Crane wants to provide customers with fuel cells and microturbines, which produce electricity from gas. “The individual homeowner should be able to tie a machine to their natural gas line and tie that with solar on the roof and suddenly they can say to the transmission-distribution company, ‘Disconnect that line.’ ” Crane said.”

I do note that Crane has a problem. “NRG, which acquired GenOn Energy Inc. for $2.2 billion in December and Texas Genco for $5.8 billion in 2006, has stakes in 94 power plants, with all except about 1.5 percent of the generating capacity driven by fossil fuels.” If solar is as successful as Crane thinks, he will be losing money on those investments.

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Duke, too, recognizes the problem. Continue reading

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Residential Rooftop Solar To Disrupt Boston Utilities

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Boston Residential Rooftop Solar Graph

Residential rooftop solar spells trouble for Boston area utilities.

The dashed lines represent the cost per kWh of residential rooftop solar assuming $1.50/Wp installed, and different return requirements as indicated. The yellow line represents the variable price portion of the current residential rate escalated at 2% per year. The green line represents an escalation of 3% per year. The goal of the U.S. Department of Energy is an unsubsidized installed cost for residential rooftop solar of $1.50 per peak watt by 2020. The goal looks very achievable.

What kind of return would you need to install rooftop solar? Your current return on checking and savings accounts is less than 1% per year.

If you can install rooftop solar at the DOE target price, your savings will be based on the utility costs you avoid. If you believe being green and fighting climate change is very important, you might settle for earning 4% on your investment over 20 years (includes a return on and return of investment). At the other extreme, it might take 8% over 10 years to get you to invest.

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In Boston, if costs drop to $1.50/Wp by 2020, in 2020 you will be able to earn Continue reading

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Is Your Head Still In The Sand? Big-Bang Disruption In The Electric Industry

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Solar+Battery+Transmission=Disruption HorizontalFinancial firms, news firms, industry CEOs, real world experience, even bloggers have identified the coming sea-change to the electric industry. A new paper from Harvard says disruption now happens at warp speed. Why aren’t you doing something about it?

Very recently, many financial and news firms have written about the coming electric industry disruption that will be caused by onsite solar, including Deutsche BankUBSMacquarie Group, and Reuters.

We have real world experience of disruption from onsite solar in GermanyAustralia, and Hawaii.

Leaders of two large electric conglomerates (David Crane, NRG and Jim Rogers, Duke Energy) have publicly talked about the coming disruption to the industry, although they seem unable to get their company’s cultures on board.

I have previously written about corporate responses to disruption, referencing a Harvard Business Review article about newspapers and asking how much their dilemma sounded like what was going on with electric utilities and other electric industry participants (Clay Christensen, newspapers and the cliff of despair).

I have also written about the coming disruptive effect of onsite solar on the electric industry paradigm and on distribution utilities, and about what they need to do.

Now we have a new paper by Larry Downes and Paul F. Nunes in the March 2013 Harvard Business Review. After many years of analysis and study, they think the pace of disruption has changed and that the old playbook for incumbents will no longer work.

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Reuters: Renewables turn utilities into dinosaurs of the energy world

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A photovoltaic (solar) panel is seen next to solar battery memory system ‘IBC SolStore 6.3 Li’ in the IBC Solar headquarters in Bad Staffelstein

(Reuters) – Every new solar panel installed on European rooftops chips away at power utilities’ centralized production model. Unless they reinvent themselves soon, these giants risk becoming the dinosaurs of the energy market.

The industry faces drastic change as renewable energy turns consumers into producers and hollows out the dominance of utilities. With their stocks at decade lows and a millstone of debt around their necks, Europe’s utilities have little margin for error.

It is no longer just renewables sites like CleanTechnica that are talking about renewables’ effect on the current electric industry paradigm. The Reuters piece talks about the growth of renewables and documents utilities’ complete failure in dealing with it. And, of course, the results are in the utility share prices, down 65% since 2008 for a eurozone-only utilities index.

We all know how hard it is for an organization to change its focus and its culture; the larger the organization, the harder it is to change. German utilities, especially, can be forgiven for not understanding the nature of what they were facing. This will be less true for U.S. utilities that not only have the German experience to refer to, but the Australian and Hawaiian ones as well. (Not to mention the newspaper industry: Clay Christensen, newspapers and the cliff of despair.)

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SolarCity Winning Competition With Utilities For Customers

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Competition For Existing Utilities – It Is All About Price

A lot of people think of SolarCity as a solar company. According to their CEO, Lyndon Rive, that is a mistake. They are not a financing company, either, although many have called them that because they finance the installation of solar panels with no money down. They are, instead, an energy company, and one that has big plans to compete for the customer electricity dollar.

In an interview with Fortune Magazine, Mr. Rive talked about what SolarCity is trying to do and how. His statements in the interview indicate how focused the company is on (1) clean energy, (2) competing with electric utilities for customers, and (3) the huge potential for solar growth in the U.S.

Electric utilities need to gear up for competition at the point of use. They need to look at their prices and determine when they will be subject to retail competition from solar. They need to figure out the best ways to meet that competitive threat. Time is very short; the utilities need to act now.

Lyndon Rive on the type of company SolarCity is:
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German Rooftop Solar Juggernaut Is “Unstoppable”

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Giles Parkinson is a keen, if perhaps partisan, observer of the energy and climate change world, especially with regard to Australia. (Australia is, in many ways, the canary in the coal mine for the United States.) He receives copies of research reports from leading companies all over the world. He recently used a research report by Macquarie for a blog post: Macquarie says rooftop solar juggernaut is unstoppable. This report focuses on rooftop solar in Germany, but the implications translate to much of the developed world.

According to the Macquarie report, as reported by Mr. Parkinson, the two key drivers of the cost-effectiveness of rooftop solar in Germany are the drop in solar costs and the rise in retail prices.

“Macquarie notes that wholesale prices in Germany have fallen 29 per cent over the last five years, while retail prices have risen 31 per cent – both movements at least partly due to the impact of renewables. But those movements pale in comparison with the dramatic fall in the cost of rooftop solar PV.”

We know all the reasons solar costs have fallen and continue fall. Wholesale prices have dropped in Germany predominantly because of a huge increase in renewable capacity that has essentially zero variable costs (wind and solar). This capacity has been added to the bottom of the dispatch stack, effectively squeezing out higher variable cost units that set the wholesale market price as well as removing all surplus pricing capability from the suppliers.

But the real driver is the increase in retail prices, which now makes self-consumed solar power cost-effective with grid-supplied retail energy, i.e., grid parity. How did that happen?

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