On the heels of a recent sector-wide downgrade of electric utility bonds, industry experts at New York Energy Week’s Solar Breakfast in New York City on June 17 agreed the continued rollout of distributed generation technologies — importantly, not just photovoltaic solar — offers tremendous opportunities for transformation and growth.
In late May, Barclays lowered its view on the electric utility sector to “underweight” from “market weight,” citing the competitive effect of solar and storage as a significant risk to the utility credit profiles. Responding to the report, clean energy lawyer and Partner at Sullivan & Worcester LLP Elias Hinckley wrote May 28 that while the Barclays report was not the first time the vulnerability of electric utilities to competition from new technology has been discussed, “it is the most important to date.”
Speaking on the breakfast panel June 17, after being asked to comment on the so-called “death spiral” of the electric utility industry at the hands of rooftop solar, energy efficiency and other advancements in the energy space, Hinckley said the threat to the utility business model is real, but there is also, quite certainly, an opportunity.
“We’d like to see them transition and find their way to that opportunity,” he said. “Because the disruption, if they don’t make their way to that opportunity, is a dangerous one.”
Hinckley and Jigar Shah, founder and former CEO of SunEdison LLC and current CEO of Carbon War Room, also stressed during the panel that solar is not the only distributed technology that poses a threat. For the most part, Shah said the industry’s conversation has focused on a “solar versus utilities” argument, leaving out a key piece of the dialogue.
“When Barclays talks about solar, they shouldn’t only be talking about solar,” he said. “What solar really is is sort of the tip of the spear around distributed generation.”
Shah said PV solar, and the enthusiasm around it — the panel spoke to an audience packed into a large meeting room at Morgan Stanley’s global headquarters — has piqued new and renewed interest in other distributed generation technologies such as heat pumps, geothermal, and combined heat and power. Combined heat and power, he expects, is poised for a “heroic comeback” in the coming years in the U.S.
“Utilities effectively killed combined heat and power back in the ’80s with standby charges, and it’s because of the people in this room that we’re going to roll a lot of that stuff back,” Shah said. “And I don’t think they’re going to say ‘thank you,’ but they probably should.”
Hinckley agreed that what is happening is not simply a “solar-only” shift, but a distributed technologies shift, from power generation to power consumption, to storage.
“We’re seeing those technologies mature, and we’re seeing regulatory policy shift quickly, too,” he said. “So when you think about this transition, don’t think about it as simply solar versus traditional utilities. It’s sort of a different argument, because solar is intermittent. It only produces electricity when the sun shines. When you start to think of a full suite of technologies on-site, with a full set of technologies that work, the role of distributed generation changes dramatically.”
Karen Hamilton, director of residential energy services at the New York State Energy Research and Development Authority, said PV systems are going to give consumers and businesses — utility customers — a new opportunity to become more involved with their electric services in a way they previously were unable to. Thus, the dynamics of the relationship between the two are going to need to evolve.
“People are going to become a lot more aware and involved in how the utility services are provided,” she said. “I think it’s going to be great for the public to become a lot more educated [about energy], and I think it’s really an opportunity for utilities to optimize how they’re providing service to their customers.”
New York Energy Week is in its second year, having been launched in 2013 by energy policy data tech startup EnerKnol. Its purpose, according to EnerKnol, is to support investment and collaboration among the diverse sectors of the energy industry.
Source: SNL Published June 17, 2014
