Who should be able to own and operate rooftop solar systems

The rapid growth of rooftop solar photovoltaic (PV) systems can pose a number of financial challenges for both electric utility shareholders and their customers. One potential pathway to resolving those concerns involves allowing utilities to own and operate rooftop solar systems. However, the financial impacts of this business model are not well understood.

In a new study published in the journal, Nature Energy, Berkeley Lab researchers model the financial performance of a hypothetical utility-owned residential rooftop solar program, evaluating its effects on both utility shareholder earnings and on non-solar customer bills. On a 20-year net-present-value basis, the program increases shareholder earnings by 2-5% relative to a no-solar scenario, depending on certain assumptions. This compares to a 2% earnings loss when an equivalent amount of rooftop solar is instead owned by non-utility parties. The impacts on non-solar customers are more mixed, with average bills of non-participating customers increasing by 1-3% compared to the no-solar scenario, similar to the 2% increase under traditional, non-utility ownership structures coupled with full retail-rate net-metering.  The study further decomposes these effects in order to illustrate the relative importance of the various underlying drivers. As shown in Figure 1 below, which reflects the study’s “base-case” set of assumptions, the net gain in shareholder earnings under utility-ownership is driven largely by the fact that rooftop solar is more capital-intensive and has a lower capacity factor than the generation resources it defers. By connecting rooftop solar on the utility-side of the customer meter, it also avoids any shareholder earnings erosion associated with reduced retail sales and the lost revenues that would otherwise occur under net-metering. The same two factors are also the largest drivers for the effects on non-solar customer bills, though program operating costs—which includes a monthly payment to solar customers for use of their rooftops—also contribute heavily to the net bill impact on non-solar customers.

The results of the analysis show that utility ownership of residential rooftop solar can offer a potentially significant earnings opportunity to utility shareholders, especially compared to the earnings loss that accompanies behind-the-meter solar under more typical ownership structures. However, its prospects for addressing concerns surrounding cost-shifting between solar and non-solar customers are less clear. That said, this study considered only a limited set of options for how utility ownership might facilitate higher value forms of rooftop solar deployment, and further analysis of those opportunities could reveal a greater potential for utility-ownership to mitigate those concerns as well.

The study is titled Benefits and costs of a utility-ownership business model for residential rooftop solar photovoltaics. A link to the article published in Nature Energy, as well as a downloadable pre-print are available at https://emp.lbl.gov/publications/benefits-and-costs-utility-ownership.

The authors will also host a webinar highlighting key findings from this work on August 26, 2020 at 10:00 AM Pacific/1:00 PM Eastern. Register for the webinar here: https://lbnl.zoom.us/webinar/register/WN_fcUIO9fxSXiyATu3z_Gbig. For questions on the report, feel free to contact Galen Barbose (510-495-2593, GLBarbose@lbl.gov) or Andy Satchwell (510-486-6544, ASatchwell@lbl.gov) at Lawrence Berkeley National Laboratory