ORIGINAL REPORTING -- Solar as utility partner and good citizen of the grid
SunPower: Keys to solar success are utility partners, being a 'good citizen of the grid'; One of solar’s key companies touts company growth, partnerships with utilities
Herman K. Trabish, September 17, 2015 (Utility Dive)
Editor’s note: Solar’s role as a grid partner has emerged as key to the industry’s future.
The president of one the solar industry’s most important companies believes partnering with utilities is critical to solar success.
SunPower is one of a handful of vertically integrated U.S. solar industry giants, alongside SolarCity, Sunrun, and SunEdison.
“I am really excited about the positive things that are happening with utilities,” SunPower's Business Units President Howard Wenger told Utility Dive in an exclusive interview during the Solar Power International (SPI) 2015.
“We have always regarded utilities as our partners and the grid as important."Wenger said. "Utilities are entitled to fair compensation for delivering a reliable network. That is in everyone’s best interest.”
The question of solar energy’s impacts on the grid was a common theme throughout the industry's most important annual conference.
Solar now supplies about 1% of U.S. electricity, but as growth eventually takes it to 20% grid penetration, solar power producers must learn to be good citizens of the grid, Clean Power Finance President and CEO Nat Kreamer said during the SPI opening session.
“We cannot grow solar without maintaining reliability and safety.”
Because utilities are starting to partner with distributed energy resources providers, solar companies are beginning to understand “what it means to be good citizens of the grid,” said Solar Electric Power Association (SEPA) President and CEO Julia Hamm said later in that session.
Wenger said his company's already got that covered.
“Being a good citizen of the grid is part of SunPower’s DNA,” he said.
Wenger has worked in solar since 1984. In 1989, convinced that “the only way PV could happen in a big way was through utilities because they have all the customers," he went to work for PG&E, one of the largest power companies in the country. When deregulation ended the California utilities’ engagement with generation, Wenger returned to the private sector.
Now, many of the top utilities across the country have re-engaged “and want to figure out how to make this work,” he said.
“Even the Edison Electric Institute seems to be embracing solar in models like community solar that can work for utilities,” he said.
SunPower’s big solar
Sunpower just brought the last sections of the 747 MW Solar Star photovoltaic projects online for Berkshire Hathaway Energy (BHE) Renewables. Covering seven square miles of two Southern California counties, the project came in four months ahead of schedule with SunPower as lead engineering, procurement, and construction contractor.
Despite the project's apparent successes, Wenger was reluctant to elaborate on details.
“I spoke earlier today with new BHE Renewables CEO Rick Weech and we remain engaged with them, but we have no announcement to make at this time,” Wenger said.
Utilities are generally interested in owning assets, and it is logical for them to start with large-scale, central station renewables because that is what they are familiar with, he said. Companies like BHE Renewables are growing comfortable with solar as an investment, building confidence over obtaining promised returns.
SunPower’s lack of community solar plans
SunPower lacks specific new plans in community shared solar, Wenger said.
“There are many community solar market models being developed and understanding how they work is important,” he said.
So far, the amount of talk circling around community solar is inversely proportional to its share of the actual installed U.S. capacity, which remains quite small. Though it will grow rapidly over the next five years, it will likely remain a tiny part of the total U.S. installed solar capacity in 2020, according to Wenger.
Even so, community solar remains significant for two reasons. First, it hasgrabbed the attention of utilities and the solar industry.
The SEPA membership is half solar industry and half utilities, according to Hamm, and community solar "is the number one thing both sides are asking us about."
Second, Wenger said, “more than half of the people in the U.S. can’t get solar any other way. That is exciting. But it is early days.”
A key tenet of SunPower’s marketing strategy is to simplify solar for consumers, Wenger said.
“Community solar can be simple, but underneath there is a complex arrangement between the utility and the developer and the customers.”
Community solar appears complex and seemingly touches every functional area of a utility’s business, Hamm said. But when they see there are tools and existing models, they realize they can implement it.
While they don't have community solar in their pipeline yet, Wenger says they aren't counting it out.
“SunPower is spending considerable time and effort on it,” Wenger said, “but the here and now is that it is a business development activity for us.”
SunPower’s midsize solar business flourishing
Recent numbers in the Q2 2015 U.S. Solar Market Insight Report from GTM Research and the Solar Energy Industries Association show the mid-size commercial and industrial (C&I) segment of the solar industry underperforming.
“There are still a lot more questions than answers in non-residential solar,” Senior Solar Markets Analyst and report lead author Cory Honeyman recently told Utility Dive. In Q2 2015, non-residential PV was down 20% from Q1 and down 33% from 2014’s Q2. Installation dropped below 200 MW, the least activity in since 2011.
Wenger said forecasts he has seen suggest C&I, including the public sector that counts schools and government buildings, might become the fastest growing segment of solar. He cited a 50 MW contract that SunPower recently gained from Southern California Edison, and an almost 70 MW contract it obtained with Stanford University as examples of the segment’s potential.
“For SunPower, institutions want solar and we expect that market segment to keep growing,” he said.
SunPower, like others in the residential rooftop business, is seeing a burst of distributed solar activity. Installation of residential photovoltaic (PV) solar in Q2 2015 was up 6% over the previous quarter and up 70% over the 2014’s Q2, according the Solar Market Insight report.
“Uilities are deciding what to do about it,” Wenger said. “They can fight it, or they can make a business out of it. Those trying to make a business out of it, and enablers of solar far outweigh the number of resistors.”
SunPower can work those utilities at being a good citizen of the grid in several ways, Wenger said. The collaboration with SCE demonstrated its ability to partner on identifying and delivering location optimal solar to help the utility cut distribution costs and increase reliability when an adequatelydetailed feeder system analysis is available.
“The next step is creating a market signal,” he said. Utilities and regulators could develop a market-based program with incentives — perhaps a rebate or a bill credit — that would reward solar developers for taking solar to system locations that maximize distribution system infrastructure investment deferral.
“The incentive wouldn’t exceed the benefit to the utility,” Wenger said, “but the benefit could exceed any lost revenue from the addition of distributed generation enough to justify the incentive expenditure. And the customers would benefit by getting a preferential return for their solar.”
SunPower has teamed up with SunVerge and Stem on solar plus storage systems to provide the same kind of infrastructure investment deferrals for distribution system operators. It is also adding smart inverters and micro-inverters to its residential installations to enable remotely provided distribution system voltage support tailored to the utility specifications.
“SunPower is looking to enhance the grid, not bypass it,” Wenger said. “The grid of the future will have a high degree of hardware and software connectivity and SunPower is well on our way to being the provider of a complete, integrated solution that has very sophisticated hardware and best-in-class software.”
SunPower also believes policy should value “a healthy, reliable, stable grid and insure fair treatment for utilities and solar providers,” he added.
Both sides in the net metering debate need a “durable solution” that doesn’t have to be renegotiated every year, he explained.
Retail rate remuneration for solar generated electricity sent to the grid “is a policy that has worked beautifully since it was put in place in California in 1994,” Wenger said. “It has created thousands of jobs and put thousands of megawatts of clean reliable electricity on the grid.”
He likes net metering because it is a simple construct and easy for the consumer to understand but acknowledged that it was only an approximation of the real value of solar in 1994.
Wenger also acknowledged the unresolved debate between utilities that say the wholesale rate for electricity is closer to the real value of solar and advocates who argue distributed solar’s value to the grid far exceeds the retail rate. He referenced extensive research that concluded the value is 2 to 3 times the wholesale rate.
“Solar is at a very low penetration on most grids,” Wenger asserted. “As penetrations increase, these questions become more relevant. But for now a minimum monthly bill will keep it simple while making sure we cover the utility’s costs. That is common ground.”
Where solar is under-penetrated, net metering is the right vehicle because it is an effective policy, it is easy to understand, and easy to administer.
“It has created a new technology market in California and in markets that are under-penetrated, it can still do that,” he said.“In places where penetration is high, like California and Hawaii, it is time to go to the next step, from rough justice to justice.”
What to tell a utility executive
“You can do it all — big power and distributed power,” Wenger said when asked what advice he'd give a utility executive.
“I would begin by saying this technology is undeniable," he said. "I would show him a solar cell and how light goes in and electricity goes out. There are no moving parts and it requires no water and creates no pollution.”
Costs have come down by a factor of 10 over 15 years, Wenger added, with the industry now shipping 50-plus GW per year. The next step is listening to consumers.
“Figure out how to deliver this value to them because they want it.," Wenger said. "You want to serve your customers. Let us help you do that.”
SunPower can help develop either of the types of rooftop programs it is presently working on with Dominion Virginia and ConEd Solutions.
“There are ways on the regulated and unregulated sides to play in DG and in solar power plants. There are new business models. Solar can be done in a way that is thoughtful and benefits the utility and protects it and its assets.”