Yale360 Seeks to Understand Utility Aversion to Renewables, John Farrell Helps Clarify

In the News: John Farrell

August 31, 2017

Media Outlet: Yale360 Environment

Jacques Leslie of Yale360 Environment’s research team delves into the complex relationship electric utilities across the United States have with increasing renewable energy deployment. ILSR Energy Democracy initiative director John Farrell lends a hand in analysis of community owned renewable energy and the valuation of solar energy pushed down by electricity monopolies.

Minnesota’s Public Utilities Commission fostered the growth of rooftop solar’s close cousin, community solar (which typically involves placing solar arrays over parking lots and agricultural fields) by abandoning net metering. Instead, it devised a methodology for calculating a fair rate for electricity fed back to the grid by adding up all the components of community solar’s value, including the so-called “social cost of carbon” — the dollar benefit from reduced climate change impacts and air pollution.

“What we found is that every year, the value of community solar has been higher than the retail electricity price,” said John Farrell, an energy researcher at the Minneapolis-based Institute for Local Self-Reliance. “Which means that customers who produce solar energy were giving more value to the grid than they were receiving in net metering payments.”

“The utilities are going to have to either come to the table or they’re going to go out of business,” says one expert.

New York’s Public Service Commission has crafted the most ambitious of state renewable energy regulatory shifts. Its Reforming the Energy Vision, or REV, has begun moving away from typical utility compensation schemes including net metering toward programs that reward innovation. Its first venture was Consolidated Edison’s Brooklyn-Queens Neighborhood Program. Faced with increasing electricity demand in the area, ConEd first considered a conventional solution, building a new substation at a cost of $1.2 billion. Then it asked outsiders for alternative proposals, and selected one that meets the increased electricity demand with distributed resources, including rooftop solar — at a cost of $200 million. Under REV provisions, the utility’s reward for fostering electricity efficiency was earning as much profit as it would have if it had installed the substation.

“It’s not just the utilities that need to change their business model,” Richard Kauffman, New York’s “energy czar” and REV’s leader, said in a telephone interview. “One of things we’ve been pleased about is the way that the solar industry has demonstrated a willingness to change its business model. The solar sector is beginning to view the utility not as the enemy, but as a customer and partner, in just the way that the utility needs to start viewing the solar industry.”

In the long run, utilities are likely to come around, since the rapidly decreasing costs of rooftop solar and other DERs and the expected emergence of cheap batteries promise consumers a chance to leave the grid entirely. “If customers have the choice to cut the cord,” said the ISLR’s Farrell, “the utilities are going to have to either come to the table or they’re going to go out of business.”

Read the full story here.