Sure, solar power and net metering are wondrous solutions for a society on the brink of environmental collapse. But who will crunch the numbers on the declining profits of increasingly obsolete utilities? Lawrence Berkeley National Laboratory, that’s who.
The lab’s scientists recently released a report, Financial Impacts of Net-Metered PV on Utilities and Ratepayers (PDF), that states in part: “Quantitative analyses relating to the financial or economic impacts of customer-sited photovoltaics and net metering have thus far consisted mostly of cost-benefit studies performed from the perspective of utility ratepayers, or society more broadly.” It goes on to say, “By comparison, few analyses beyond several research notes from Wall Street analysts sought to examine the financial implications of net metering for utility shareholders.”
Of course, that is likely because few besides those shareholders actually care, given the resolutely positive impact that photovoltaics have had on customers and “society more broadly.” In an era of irreversible global warming, brought on by way too much burning of the dirty fuels that comprise the utilities’ daily bread, few shed a tear for the 15 percent haircut utilities profits will suffer as more and more of their customers say yes to solar and no to coal, oil and gas.
Using two hypothetical model utilities, one in the Southwest and the other in the Northeast, LBNL leveraged an earlier “pro-forma” utility financial model it used to analyze the impact of utility-sponsored energy efficiency programs. And it found, predictably enough, that after 20 years of increasing solar power market penetration, capped at about 10 percent of total sales, utilities were losing more in profits that they were saving in costs. Revenues declined, depending on the utility and its power plant portfolio, anywhere from four to 15 percent, while shareholder return on equity also fell as PV grew in popularity.
Most solar adopters and investors, to say nothing of environmental activists, might have arrived at the same conclusion without LBNL stat-happy white paper, which even featured a one-page acronym index. But for policy and profit wonks, it is a federally funded reminder that public utilities — and the electricity markets they create — are living on borrowed time if they think they can conduct business as usual.
“Compared to the impact on ratepayers, the impacts of customer-sited PV on utility shareholders are much more pronounced,” LBNL’s report concluded. Tradeoffs and mitigations exists and vary, from changing the way utilities collect revenues (like unpopular solar taxes) to rerouting customer renewable energy certificates to the utilities’ renewable portfolio standard, to finally becoming solar companies themselves.
But none of it adds up to much else beyond the statistical realization that utilities, in their current monolithic incarnation, stand to lose profits from solar adopters. The numbers are what they are, and they are probably here to stay.
“Given the complex set of issues involved in implementing many of the possible mitigation measures,” it added, “regulators may wish to address concerns about the ratepayer and shareholder impacts of customer-sited PV within the context of broader policy- and rate-making processes.”
This article appeared in Solar Energy
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