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Utility Failures as Incentives for Solar Growth

September 30, 2014

Utility Failures May Act As Perverse Incentive For Solar Growth

Solar Energy Farm

The news for solar energy in the USA is optimistic, based on recent reports from Navigant Research and statistics compiled by the SEIA and Greentech Media. The first firm indicates that the market for distributed energy resources, of which solar, mostly in PV forms, is anticipated to reach $625 billion USD in cumulative spending in residential generation and storage between 2014 and 2023. The second report projects that PV installations will reach 6.6 GW in 2014, almost doubling in size since 2012.

Marketing & Crowd Sourcing for Solar Growth

There are several reasons for these healthy growth projections. First, there are more affinity marketing promotions in your mail and email these days, in which environmental organizations such as the Sierra Club team with solar vendors and combine purchase discounts with donations to environmental or social justice causes. Second, there are more financing options as crowd-sourcing, PACE, third-party ownership via power purchase agreements* (PPAs), and Green Bank and Green Bond options make capital more affordable and available for residential, commercial, and municipal projects.

Government Backing for Solar Growth Incentives & Industry

Third, the federal government has a number of initiatives designed to reduce the investment costs in solar and increase the effective energy harvestability of solar technologies. Of the fourteen programs the White House described in its Energy 2030 announcement to double energy productivity this past week, 10 cover renewable energy. Some are already in existence, like the SunShot program to improve technologies and ongoing reporting of solar technology trends and deployments. New activities include industry roundtable discussions intended to improve capital flows and risk assessments for solar projects.

Solar Growth for Self Sufficiency

These are all positive incentives that encourage residential, municipal, commercial and industrial building owners and farmers to invest in solar energy to reduce their reliance on local utilities and/or improve their self-sufficiency in light of grid disruptions. And states like California, Massachusetts, and Arizona have been setting the pace for solar deployments. However, a series of events in Northern California, territory for Pacific Gas & Electric (PG&E), could culminate in an unintended perverse incentive that encourages its customer base to embrace solar and other DER assets.

Solar Safe

A catastrophic natural gas pipeline explosion occurred on September 9, 2010 in a San Bruno, CA neighborhood. The resulting inferno killed 8 people, injured 66, and destroyed 38 homes. PG&E owned the pipeline, and was ultimately fined $1.4 billion USD, based in part on its failures to maintain pipeline safety and keep accurate records.   As a side note, had this pipeline been upgraded with Smart Grid technologies that deliver remote sensing and controls, much of the damage might have been minimized. Instead, a dumb gas grid required manual intervention to shutoff gas, an action delayed for well over an hour as a maintenance truck traversed half of the Bay Area during the afternoon rush hour and first responders battled fires fueled by gas.

The story doesn’t end with the fine. Since then, a number of emails between the utility and the California Public Utilities Commission (CPUC) highlighted a very cozy relationship between the monopoly and the regulatory agency. All these recent revelations have earned the attention of the governing representatives of PG&E customers at the local, state, and federal levels, as well as the customers themselves. A few heads have rolled, but we haven’t seen the last act in this story.

But there’s more. PG&E is also the utility that suffered the still-unsolved April 2013 physical attack to its Metcalfe transmission substation in Silicon Valley. Someone with a high-powered rifle destroyed valuable assets that maintain grid reliability. That event stirred much needed, industry-wide discussion and subsequent actions to upgrade physical security perimeters for critical infrastructure. Yet even after PG&E installed new fence monitoring equipment at the Metcalfe site, on August 27 of this year burglars cut their way into the perimeter and stole construction equipment on site to repair the damages incurred in the previous attack. The fence monitoring alarms worked, but they weren’t addressed, and the fault has been attributed to human error.

PG&E customers are weighing four years of news about this utility’s failures in maintaining the social compact of safe, reliable, and cost-effective electricity and gas distribution. It could add up to become a perverse incentive that motivates people to adopt more solar to generate at least some of the energy they need as confidence in the utility drops. These failures won’t be solved with investments in advertising campaigns about pipeline safety or lobbying the regulatory agency. Focus on running the business on the principles of the social compact.

#Recycled from http://blogs.sap.com/innovation/industries/utility-failures-could-become-perverse-incentives-for-more-solar-growth-01480734?source=email-us-bib-newsletter