Utility-owned rooftop solar: Tom Fanning and Steven Chu agree

Tom Fanning is getting support for his idea of utility-owned rooftop solar. Can we see that tiger team report, Tom? And FPL, how about you get on with this, instead of trying to gouge an unneeded yard-wide methane pipeline through here? Sun, wind, and water can power each U.S. state, so how about FPL in the Sunshine State and Southern Company in the southeast get out in front and lead?

Jeff McMahon wrote for Forbes yesterday, Steven Chu Solves Utility Companies’ Death Spiral,

Utility companies have been looking for new regulations and higher connection charges to save them from a “death spiral” spurred by a surge in rooftop solar installations. Instead, says former Energy Secretary Steven Chu, they should get into the rooftop solar business.

Like that ALEC solar tax for charging people to connect solar generation to the grid that passed in Virginia and was tried by Georgia Power but wasn’t even considered by the GA PSC because of citizen opposition across the state.

Utilities are in danger of being FedExed, Chu said, “like the Post Office got FedExed,” as rooftop solar modules drop in price.

Like Southern Company gets downgraded because of coal and nukes.

“The cost of modules has plummeted. In California where I live, that means for $10,000 you can generate a lot of electricity. The cost of batteries is plummeting, so that in five maybe 10 years at the outside, a $10,000 or $12,000 system will allow me to go, on average, 80 percent off grid.

Solar is now cheaper than any other power source, including natural gas.

“That’s pretty exciting. So this is a technology that could be disruptive to electricity production and generation.”

The industry-funded Edison Electric Institute warned utilities of this scenario in a January 2013 report called “Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business” (pdf). Wall Street Journal reporter Liam Denning described this scenario, in which solar becomes increasingly attractive to the customers who can afford it, as a “death spiral” in December, and utility insiders have been echoing that phrase.

Chu’s solution?

“So I’m telling utility companies, this is coming down the line, so let’s think of a new business model where you can profit from this.”

In Chu’s business model, utilities will borrow money—because “utility companies get to borrow money as inexpensively as just about anyone in the United States”—to buy rooftop solar modules and batteries. Then they’ll partner with private rooftop-solar installation firms—”because I don’t expect a utility company to figure out how to do that”—to install rooftop panels and batteries at customer homes.

The utility will own the panels and batteries and sell electricity to the customers at a much lower rate.

Customers would not only get lower rates, they would get solar power without having to pay for installation, Chu said, and they would get a battery backup that can keep the lights on and the refrigerator running for up to a week in a power outage.

Utility companies, meanwhile, would benefit from a distributed network of panels and batteries “where they need it the most, at the end of the distribution system, for grid stability.”

Tom Fanning, CEO of Southern Company, suggested exactly that at last year’s SO stockholder meeting:

Another way to think about those resources, John — and we’re just considering all this right now in this tiger team — is the idea to think about a rooftop not as a customer-owned or “we own” kind of resource, but as a potential site. And what we’ll pay the home is a site lease. Isn’t that interesting?

Tom Fanning also said:

One of the things we’re trying to figure out is to have the vision and courage to kind of think about the future and how do we participate in a constructive way. We’re getting about that business right now. And, in fact, the initial report of this tiger team is going to happen sometime later this summer. So it’s an interesting kind of prospect for us.

Well, he didn’t say which summer. But I like that vision part, and Steven Chu and Forbes are talking about the same vision.

Like I said in May 2013:

One thing that Southern Company can do that SolarCity cannot do — that Google cannot do — is it can do a reliable, sustainable, adaptable grid. It was very refreshing that presentation about distributed solar and offshore wind. Southern Company is the very company that could do that. It has the financial resources; it has the biggest R&D operation, if I’ve heard you correctly, of any private company in the U.S….

Southern Company could make the Southeast a net exporter of the energy from solar and wind within a decade and could lead the entire country and the world. What is your plan — what is Southern Company’s plan — to make that happen?

Can we see that tiger team report now, Tom?


PS: We don’t even have to wait on SO: local governments can issue green bonds, too.