White Paper

Distributed Solar PV: Challenge and Opportunity

Disruptive technological change has the potential to alter the regulated utility landscape as seen by distributed solar PV.  As solar photovoltaic economics continue to improve relative to alternatives, utilities will have to revise their rate structures, approaches, and even perhaps their business models.

Critical consisiderations in addressing the challenges and opportunities of distributed solar photovolatics:

Distributed solar photovoltaics (PV) and associated net metering policies are fast becoming a business challenge for many regulated electric utilities. However, distributed solar PV is also an opportunity. Unfortunately, utilities have limited understanding both of what those opportunities are and also how to best capture the opportunity.

Distributed solar PV is a disruptive technological challenge to the existing regulated electric industry. The timing, or even the possible occurrence, of a widespread shift of electricity production to distributed solar PV had been an open question for quite a while. However, it has decidedly shifted from an “if” question to a “when” question. A confluence of positive trends for solar PV installations is accelerating and magnifying this challenge. The solar PV industry is developing at such a rapid pace that forecasts and data from even six months ago may be inaccurate today. Quite possibly, the regulated electric industry will have to rethink its entire business model.

While Bridge Strategy Group expects to see utility scale solar achieve grid parity, becoming a viable least-cost option for utilities, distributed solar PV already poses significant near-term challenges to many utilities. As the price of solar falls, customers become economically indifferent to purchasing power from utilities or solar PV system providers. This point of indifference is commonly referred to as retail rate parity. The retail rate parity point is approaching faster than many utilities realize, resulting in diminished time to prepare.

To successfully transition to a world with widespread retail rate parity, utilities will have to proactively manage the regulatory and legislative process to ensure that fair rate making exists for both solar and non-solar customers. Many existing regulatory and pricing systems do not correctly price the services that utilities provide to solar customers. Moreover, as past regulatory decisions show, no sustainable long-term solutions have been identified to halt the coming “rate spiral.”

While these challenges are rapidly becoming top-of-mind issue for utility management everywhere, various studies conducted by Bridge Strategy Group show significant variations among executives with respect to the timing and magnitude of challenge. Significant disagreement exists over when retail rate parity and the erosion of electricity sales from distributed solar PV will occur. However, retail rate parity is already a reality in a wide range of states and will become a reality in many more in the very near future. The time for action is now.

Due to these rapid changes, the foundation for any successful solar PV strategy will require an alignment across the entire organization based on a fact-based view of distributed solar PV – as both a challenge and an opportunity they will likely face near term.

This paper intends to initiate that dialog by answering the following questions:

  • Why should I care about solar and retail rate parity today?
  • Does widespread adoption of distributed solar PV threaten utility financial performance?
  • How can I address the legislative and regulatory challenges to ensure fair rules and rates for all customers?
  • What are the opportunities to enter this market and how should they be pursued? 

Download the complete white paper for our full perspective.