Community Solar Helps Utilities Transition to a New Energy
A disruptive innovation is one that helps create a new market by improving a product in an unforeseen manner, thereby “disrupting” the existing market. Today’s disruptive technologies—from solar photovoltaics (PV) and battery storage to fuel cells and wind turbines—are transforming the electric utility industry, according to a report released by the Edison Electric Institute.
New innovations and technologies are, in turn, causing disruptive behavioral challenges. For example, as the price of photovoltaics (PV) declines, more people are installing solar on their homes, which reduces the load and results in a loss of revenue for utility companies. The impact of this disruption remains unclear. Change, however, is inevitable. “The utility industry must be prepared to address these challenges in a way that will benefit customers, long-term economic growth, and investors,” writes Peter Kind of Energy Infrastructure Advocates who prepared the EEI report. “Ultimately, all stakeholders must embrace change in technology and business models in order to maintain a viable utility industry.”
While disruptive forces may reduce a utility’s profits initially, new market innovations don’t foreshadow the extinction of the traditional electric industry. Gregory Aliff, leader of Deloitte’s Energy and Natural Resources Management, offers the following insight:
“Disruptive innovation, by its very nature, gives birth to new business models. These models will require electricity companies to redefine their value propositions to create a win-win for producers and customers alike. …The question isn’t if thriving in the new environment is possible, but rather if it is plausible: Do today’s electric-sector participants have the capacity and the will to transition to new business models in order to participate in the coming transformation?”
Transitioning Through Community Solar
As the demand for solar PV rises, more people are installing solar systems on their rooftop and property. Yet utility companies must still pay to maintain the grid infrastructure even when these customers—who are producing their own distributed energy—are no longer paying for electricity derived from the grid.
Like rooftop solar, community solar is also disrupting the existing electricity model—but in a more constructive manner. Appealing to the two-thirds of Americans who want to harness the sun’s energy but are unable to install panels on their property, community solar helps utilities transition to a new energy future.
For example, Clean Energy Collective (CEC) partners with different utilities across the nation to develop community-shared solar arrays. These innovative facilities allow the utility to retain its ratepayers by offering them the ability to go solar without installing an on-site system. This element of grid control enables a utility to incorporate more renewables into its energy mix and satisfy the increasing demand for solar while embracing the changing electricity landscape.
Can Utilities Afford Not To Change?
The pace in which the electric landscape transforms will also impact a utility’s ability to evolve. If the evolution to a new utility business model is slow, they’ll face lower barriers to adoption than if the change is rapid or disruptive. “The question shifts from ‘How can we afford to change?’ to ‘Can we afford not to change?’” Aliff says. “Ironically, these are the same questions electricity customers will likely be asking themselves in an environment of rising electricity costs and diminishing confidence in the reliability and security of their current electricity service.”