Energy

Solar

As solar photovoltaic economics continue to improve relative to
alternatives, utilities will begin facing significant disruption to their
business models.

Solar PV has reached retail rate parity in many locations across the U.S.  Retail rate parity is the point at which a utility customer is indifferent to purchasing power from the utility or from a solar provider.  The timing of retail rate parity is impacted by net metering policies, solar installation costs, retail rate structures, and availability of means on monetize tax and other incentives.  Both utility scale systems and distributed scale systems are gaining popularity.  Furthermore, many state legislatures are considering legislation to enable virtual net metering or community solar to allow apartment dwellers and others with insufficient rooftops access to solar.  

Despite declining legislative incentives, installation growth is being driven by rapidly declining system costs.  Costs have typically declined by about 15% per year.  This trend is expected to continue for the foreseeable future.  Furthermore, with rising retail rates at utilities and energy retailers, the future for distributed solar PV is looking brighter than ever.  Furthermore recent community solar legislation in states like California and Maryland will expand the market to individuals who might not be able to capture the benefits of traditional distributed solar PV systems due to inadequate rooftops. 

These market changes will require business model adaption.  Companies, such as FirstSolar and GCL Solar, have pursued downstream integration through project development. SolarCity is fast making solar accessible to residential and commercial customers.  Industrials are considering solar for remote, off grid power generation. Not all companies will survive.  Module manufacturing over-capacity should lead to additional bankruptcies and corporate restructurings.

Regulated utilities face the most daunting challenges as their business model around centralized generation is threatened.  For many utilities retail rate parity has already arrived or approaching faster than expected.  As the penetration of distributed solar PV increases, customers purchase less electricity from their local utility.  Given common net metering policies and the typical residential rates structure which has a disproportionate variable component, every kilowatt-hour of electricity supplied by a third party solar company to a utility customer, has a financial impact on the utility.  Over time, this will raise rates for other customers, increasing the numbers turning to distributed solar PV, in a vicious cycle.

Bridge Strategy Group has experience across all segments of the value chain from modules to inverters to systems as well as across key functional areas and strategic planning including:

 

  • Developer market entry strategy
  • Solar PV project assessment and economics
  • Organizational alignment and response
  • Market sizing and assessment
  • Utility legislative and regulatory approaches to fair rate making
  • Utility participation in solar PV
  • Solar PV supply chain and profitability


Bridge Strategy Group has worked with a range of companies to address the opportunities and
challenges associated with solar PV.