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Ever notice how sometimes you can stare at a puzzle for a long time and never notice the obvious piece that puts everything in perspective?
Well, that’s been happening with all the arguments about the value of consumer generated electricity, and especially rooftop solar.
When consumer-owned solar started popping up on rooftops across the country, utilities were annoyed but not particularly worried. After all, so few people were using it that it was a tiny niche in the overall market and posed no real threat to their business model. And, it was objectively more expensive than the default — simply buying from your utility.
But as rooftop solar has become economical, consumers have taken a second look evaluating the costs and benefits, and there is little doubt that in the next few years solar will become a mainstream choice. Distributed generation and microgrids are the wave of the future, so much that the very concept is threatening the monopoly business model of a lot of utilities.
Just as the breakup of AT&T and the development of mobile phone technology disrupted telecommunications, distributed generation, storage and microgrid technologies threaten the current business model of regulated monopoly utilities, and they are fighting back. That disruption was painful for the phone company because their business model was blown up, but in the long run has been a boon for consumers as well as for the companies who were quick to adapt to where technology was headed.
Just as with ”Ma Bell,” utilities have some compelling arguments in their favor: as universal service providers they bear some costs and obligations that other businesses don’t have to. And, they argue, customers who generate their own power still impose costs upon the system (particularly system maintenance) and, because they purchase less power, pay disproportionately less than their neighbors to defray those costs.
So utilities have, sometimes successfully, argued that solar customers should pay a fee to stay on the system, and a real battle is taking place on whether they should and if so, how much. The utilities are arguing for big fees, naturally. The fee solves two problems – it helps recoup the utilities’ “lost revenue” from solar customers, but it also makes the project less attractive to the customer, serving to dissuade them from making the choice in the first place. A double win for the monopoly utility.
But in most of these public arguments a simple fact, so obvious as to be missed, is left out: consumers who generate their own power do it on their own dime — essentially paying the infrastructure costs that would otherwise be imposed on every other power customer.
That’s a really big deal, with huge ramifications for the economics of power generation over the coming decades.
Consumer participation in the generation market will drive innovation in a way that a few large purchasers never could: as consumers constantly chase the best deal and the newest technology, innovation is spurred in a way that never could happen with just a few large purchasers building plants at a glacial pace.
In this, distributed generation directly mirrors the revolution in telecommunications. For decades the phone company rented out the same model of phone to millions of customers. The great innovations were the Princess phone and touchtone, and that’s about it. Yet when the phone company was broken up and cell providers sprung up, we moved from the “revolutionary” touchtone phone to having supercomputers in our pockets in no time at all.
The same will happen with distributed generation. And it will all happen because consumers are using their own dollars to chase the best value and the newest technologies. Another obvious lesson — markets are the best way to allocate wealth, and to incentivize innovation.
So with all the talk about the potential costs of distributed generation, the biggest benefit is being left out: the distributed purchasing power of consumers, and the effect that will have on the pace of innovation and the costs to the system of developing new technologies.
Distributed generation pioneers — those consumers funding the growing market in home generation — are funding the research and development of revolutionary technologies that will change things for the better. Their investments aren’t primarily imposing costs on others, but rather picking up the R&D slack for the rest of us, while reducing the need for building additional generation.
What is the dollar value of that contribution? It’s obviously difficult to calculate. But if power generation technology moves at a fraction of the pace we have seen in telecommunications, it will literally be incalculable.