Both utilities and distributed generation (DG) solar companies are competing to provide electricity to customers. Utilities have their incumbent business models to protect, whereas DG solar companies are applying new solar and storage technologies so that customers can generate their own power. Unfortunately, this competition between utilities and DG solar companies has the potential to divide the solar industry.
Barry Cinnamon
But we are missing the two most important points about solar power. First, solar power is clean – the best solution to the looming global warming disaster. And second, solar power is inexpensive; an unshackled, competitive market for electricity enables customers to purchase their power from the least-expensive source. The Solar Energy Industries Association continues to focus on these high-level customer benefits while at the same time grappling with the ups and downs of the solar coaster.
Everyone reading Solar Industry magazine already knows that solar is the cheapest way to generate electricity. Utilities are signing power purchase agreements for $0.04/kWh, Apple just committed to power for $0.053/kWh, and residential companies all over the country are installing quality rooftop systems for less than $0.06/kWh.
Unfortunately, most of the U.S. public – not to mention influential journalists and policymakers – are still under the mistaken impression that solar is “expensive.” Because of economies of scale, the enormous solar plants that utilities are installing all over the U.S. generate electricity for much less than gas, nuclear and coal. But these low solar prices extend to homeowners, too. With easy solar financing, 25-year warranties and thousands of experienced solar contractors around the country, there is almost no reason for homeowners NOT to go solar now.
For the first time, we are seeing real competition for retail electric customers, whether residential or commercial. Free markets for solar-generated electricity mean lower costs for residential and business consumers, more local installation and manufacturing jobs, and continued technological leadership. When generation was expensive and centralized, we needed a utility industry run by monopolies. Now with inexpensive DG solar and storage a reality, this monopoly business model adds costs, limits economic growth and constrains our continued technology leadership.
One just needs to compare retail electricity rates to see the savings that can be achieved with DG solar. Homeowners can already compare the average $0.12/kWh they pay for utility power with the $0.06/kWh they pay for power from their own solar panels, and with the $0.04/kWh solar generating costs from utilities.
Comparing investor-owned utilities (IOUs) to municipally owned utilities (MOUs) sheds additional light on the current cost burden from utility power. My local IOU charges an average of $0.22/kWh for residential electricity. Right down the street, a local MOU charges an average of $0.11/kWh for exactly the same product. Same power, same place, twice the price.
The difference is their business models. My local IOU gets a guaranteed 10% rate of return – while at the same time spending hundreds of millions of dollars lobbying the state utilities commission, legislators and the public. On the other hand, my local MOU is incentivized to deliver power to its customers at the lowest possible rate. Without the profit motivation, MOUs do a much better job at delivering inexpensive electricity.
It is my hope that we make this transition to clean and inexpensive power in a way that benefits our customers. I have two suggestions. First, we should take every opportunity we can to correct the “solar is expensive” narrative – especially when statistics about cheap rooftop solar costs are ignored. And second, we should support our state and national solar organizations. Technology is enabling our current transition to rooftop solar, but our individual and corporate advocacy efforts are needed to accelerate this change.
Barry Cinnamon is CEO of Cinnamon Solar, a San Jose, Calif.-based residential solar contractor, and Spice Solar, a supplier of built-in solar racking technology. He is also a former president of the California Solar Energy Industries Association.
