SolarCity Proposes Solution to Revenue Shift

Many electrical utility companies see distributed solar generation as a threat and have reacted against it in a variety of ways. In his blog post, “A Possible Solution to the Revenue Shift,” SolarCity’s Peter Rive addresses the complaint from utility companies that distributed solar shifts costs from rooftop solar customers to non-solar customers. Citing studies by the Nevada Public Utilities Commission and the California Public Utilities Commission, Rive asserts that “[s]olar customers continue to pay utility bills after going solar that are on par with those of many utility customers who do not go solar.”

On the other hand, Rive assents that a “revenue shift” does occur as more residential customers embrace solar, but he downplays it as a minor concern when compared to the pressing need to slow CO2 emissions. Instead, he encourages utility companies to start to shift their focus from infrastructure to services and to learn from the software industry, which has embraced a service-based approach to revenue: “This … phenomenon is playing out in information technology with cloud-based computing. Companies are increasingly paying for services on a monthly basis from companies like Amazon, Google and Microsoft, rather than buying physical equipment to create their own datacenters.”

To illustrate, Rive provides an example from New York. Consolidated Edison plans to avoid the cost of building a $1 billion substation by investing in “demand-side management programs (distributed solar generation) and substation upgrades to reduce its load by 52 megawatts by 2018, at significantly lower cost to ratepayers.” He also points to encouraging measures in California (Distribution Resource Plans) and New York (Reforming the Energy Vision) that “acknowledge the utilities’ revenue diminution dilemma and seek to realign incentives to accept and encourage clean distributed generation resources to the benefit of everyone, including utilities, clean energy providers, and consumers.”