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Wednesday, August 14, 2013

Analyst: Utilities Challenged By Spread Of Solar

View of mountains and new solar panels at Bear River Migratory Bird Refuge in Utah. The Refuge continues to pursue sustainable electricity production with the addition of the solar panels near the James V. Hansen Wildlife Education Center. (Jason St. Sauver/USFWS via Flickr)

View of mountains and new solar panels at Bear River Migratory Bird Refuge in Utah. The Refuge continues to pursue sustainable electricity production with the addition of the solar panels near the James V. Hansen Wildlife Education Center. (Jason St. Sauver/USFWS via Flickr)

Twenty-nine states, plus the District of Columbia, require utilities to source a certain percentage of their electricity from renewable energy sources, such as wind and solar.

Publicly, critics of solar and wind have discounted the notion that renewable energy could gain a foothold in the energy industry.

But there are reports that behind closed doors, the electric industry is talking about getting out in front of this disruption.


  • Chris Nelder, energy analyst and author of “Profit from the Peak” and “Investing in Renewable Energy.” He tweets @nelderini.



It's HERE AND NOW, and we're taking a look at the battle in the energy industry, fossil fuel utilities saying that at stake nothing less than the future of their industry. Before the break we heard about Colorado energy provider Xcel's efforts to reduce the payments that company makes to solar users who feed their extra power into Xcel's grid.

Xcel and other utilities across the country say they're paying too much to buy that solar power, but 29 states plus the District of Columbia have renewable energy standards that require utilities to have a certain percentage of their electricity from renewable sources like solar. Many utilities are angry about that and about government subsidies to renewable users.

In the past year, legislation backed by the fossil fuel industry was introduced in more than a dozen states to weaken or repeal renewable standards. All those measures failed. Let's bring in Chris Nelder. He's an energy analyst based in California. And Chris, this is so interesting because publicly industry critics of solar and wind have been pooh-poohing this notion that renewables could take hold.

They're only less than one percent of energy, but we're reading reports, here's one in the New York Times, that they are scared. The Annual Power Company Convention last month, a lobbyist from the Electric Power Research Institute said renewables were threatening the industry and if we don't get in front of this disruption, it may be too late. Your thoughts.

CHRIS NELDER: Well, one percent of the total nation's energy or electricity production is not really the problem. The problem is at a specific utility they might have a significantly higher percentage of their total power generation coming from rooftop solar and things like it.

And so what's happening as that progression continues is that more and more customers are generating their own power instead of buying it from the grid, from the utility. At the same time, the utility is required to maintain its lines, to maintain the associated infrastructure, and so they have to now distribute those maintenance costs over essentially a declining base of rate payers who are actually giving them revenue by buying power from them.

And so this is creating a situation that a recent paper from the Edison Electric Institute, which is an association of the shareholder-owned or private utilities in the country, what they call disruptive challenges. And one of them is this notion of a so-called death spiral, where you have more and more customers generating their own power, the utilities are losing the revenue from those customers, and yet they still have to pay for the associated infrastructure and so on.

And so as time goes on and that progression continues while the cost of solar itself is falling, it just continues to put the economics in the direction where it's more advantageous for more customers to put solar on their roof.

YOUNG: Well, weigh in on the debate over how much, as we just heard in Colorado, how much the utilities should pay solar users for that extra energy that they store up and how much the government should subsidize the solar industry. Solar backers say they can't survive right now unless they have these subsidies. But as you just explained, the industry is saying wait a second, we're picking up a lot of the maintenance costs, and we're not getting - you know, we're having fewer customers. What is true?

NELDER: Well, all of those things are true. It's really a question of how are they going to adapt to this dynamic, which seems firmly in place. I mean I think it's helpful to kind of step back from the question and say what's best from a public policy perspective.

You know, most people favor renewable energy. Most people want to see more solar and wind on the grid. Most people are in favor of allowing there to be more and more rooftop generation. And so it makes sense for there to be incentives, subsidies and favorable policies that would continue to support the deployment of more solar, and really there's bipartisan support amongst most, you know, citizens for that kind of a policy.

On the other hand, regulators have been slow to give the utilities the latitude they need to accommodate that, and utilities are really struggling to sort of adapt their business models. And some of them have just been basically trying to dig their feet in and say no, we're not going to do this, we're going to try to do everything we can to stymie the increase in distributed solar power.

YOUNG: Well, but the question that comes, and it did for me, is, well, why don't these companies do - you know, take the time-honored path of other industry and just co-opt the new industry since they think that it's going to grow so big that it's going to disrupt their own. And you write that there are, there are a lot of utilities not just digging in their heels against change but going with it.

NELDER: That's absolutely right. For the most part, it's been the municipally owned utilities, the publicly owned utilities that have been most accommodative to distributed energy because ultimately they're answerable to their taxpayers and their rate payers. It's mainly the investor-owned utilities who have to be answerable to their shareholders, who have put up the most resistance to this sort of thing.

But it seems to me that we do need to maintain policies that continue to support solar, and we need to allow the utilities to have a certain amount of latitude to adjust.

YOUNG: Well, you write about the San Antonio-based CPS Energy, which is the largest municipally owned electric and gas utility in the U.S. and also the solar leader in Texas. And part of their, you know, being in this field is that they have a really good rebate program there in Texas. So they figured out it's beneficial to them.

Where do you think this is going? Because you talked about how the utility companies are complaining about how they have to maintain the grid. There's been talk for so long about redoing the grid, especially after Hurricane Sandy, but also dating back to the blackout in the Northeast in 2003. Is this a time to sit all the players down and say we have to do this, and as we do this somehow the utility companies have to be nudged into more renewables?

NELDER: You know, there's no doubt in my mind that the economics are going to continue to tilt in favor of renewables and distributed generation. There's no doubt in my mind that that kind of energy generation is going to continue to grab a larger market share on the grid.

So it's really just sort of a question of when, how are we going to make sure that everyone is made whole during that transition, not only consumers and owners of solar systems but shareholders and utility companies and so on. And they're simply going to have to do it.

I think that if the utilities - especially if the investor-owned utilities continue to sleep on this transition, they're going to wind up simply being converted to municipally owned utilities. You know, they're going to move from private to public, sort of whether they like it or not, and a lot of that is being driven by rate payers and citizens in their service areas.

YOUNG: Well, but the biggest takeaway here seems to be the biggest secret in the industry is that solar works.

NELDER: Oh, it absolutely works. And as economics continue to improve - that is, as the cost of solar continues to fall, it's just going to become even more so. You know, there's been a lot of interesting forecasts made lately, particularly by analysts at investment banks who are saying, you know what, by the end of this decade, wind and solar are going to be the cheapest way to generate power in about 75 percent of the world, and that includes us. That includes the developed world.

They are simply going to undercut fossil fuels on economics alone, without subsidies. So when that's the trend, when this stuff is going to become cheaper than traditional conventional fossil fuel and nuclear power just on economics, well, you can argue about the incentives, you can argue about the regulatory environment and the laws and so on, but at that point they're simply going to win the day.

YOUNG: Energy analyst Chris Nelder. By the way, he's also author of "Profit from the Peak" and "Investing in Renewable Energy." Chris, thank you.

NELDER: You're very welcome.

YOUNG: And your thoughts are welcome at hereandnow.org. News is next. Transcript provided by NPR, Copyright NPR.

Please follow our community rules when engaging in comment discussion on this site.
  • dd

    Robin, will you please tell everyone listening that this legislation is being pushed by ALEC, who wrote the “model” legislation on behalf of Big Oil?

    You know, ALEC is not on the side of consumers.

  • http://neilblanchard.blogspot.com/ Neil Blanchard

    The true cost of fossil fuels – i.e. climate change – means that not only that renewable energy is not only less expensive, but also that it is the *only* way we can go.

    There is nothing stopping the profit-driven power companies from building their own solar and wind and wave and tidal and biomass power plants!


  • Jerry Lee Miller

    The change is inevitable. Let’s get on board, establish policies friendly to the transition to solar and wind, and speak up wherever necessary to educate our neighbors.

  • Thorium Energy Alliance

    Mr. nelder is tragically mistaken.
    Solar will NOT work.
    When the (cheaply made) panels start losing their already poor efficiencies in a few years, and fail completely in 10 years, who will pay for their mindbending expensive replacement?
    Who will recycle these solar cells made from silicone and heavy metals?
    And what happens when people wake up and realize the horrible environmental poisoning we pushing onto the Chinese people to get these Solar panels?
    And NO Robin – there is no such thing as “storing” solar energy at utility scale as you misspoke – as Bill Gates points out ” if every battery on earth were used to store energy from solar – today, that would provide just 10 minutes of base load power for just the USA”
    So as Robert Kennedy himself admitted ” when you build solar and wind, you are automatically building natural gas as a backup ”
    I won’t even get into what constantly switching the grid back and forth will do to our factories and refrigerators and all of our airconditioners – not to mention the grid wear itself.
    The renewable dream is a nightmare when you spend even a little time with it.

    • JH

      I agree and I’ve been in wholesale energy 30+ years, the last 10 in renewables. I believe in global warming. We will go broke (and thereby not succeed) on our current subsidized path. So if you are serious about global warming, I suggest you need to listen to other points of view seriously.

    • Ace

      Try spending more time with it and with an open mind! You assume there will be no improvements in efficiency, manufacturing, storage, disposal etc! Very backward looking or just obstructionist. The future won’t wait for the naysayers to wake up and get out of the way. I KNOW of PV units still operating acceptably after 10 years (and that’s over 10 year old technology!).
      And for you winers about subsidies – look at the enormous amounts that the poor oil, gas and nuclear industries get!!!!!

      BTW our current system is ancient and very vulnerable to attack, so we need to get on with distributed power and individuals becoming self-reliant for US security. That should be a no brainer!
      But enough of the realities – How about a clean and hopeful goal and vision for the future? If you’re not part of the solution you’re part of the problem.

      • Thorium Energy Alliance

        I spent several years working on Solar and Wind and Hydro with NREL, the national renewable energy lab. – I have seen first hand, in the most optimal settings possible, just how unrealistic trying to replace baseload energy supplies with systems that use vast amounts of resources that provide very little energy in return.
        I can not stress how wasteful so called green energy is. I hope folks start to learn just how poisonous green energy is, and the lives it takes each year for such a small percentage of our needs.
        The green hype has folks wishing for a fantasy – ANY energy is dangerous, and we in the West use vast amounts of it. There is no such thing a clean energy – you always pay a price somewhere.
        So I have picked the densest energy source there is to support:

        I now work on Thorium Energy Alliance on Molten Salt Nuclear Energy – it provides vast amounts of safe clean carbon free energy with none of the issues that existing Light or Boiling Water reactor exhibit. – I would hope that your mind is open enough to learn about Molten Salt Reactors.

  • http://SDsustainableFuture.com SustainbleFuture

    All Investor Owned Utilities (IOUs) need to become publically owned.http://www.rmi.org/reinventingfire

  • Aaron

    The segment mentioned that the utility companies must continue to maintain the grid. It seemed as if there was an important aspect of this discussion that was left off. That is that distributed generation like rooftop solar actually reduces many of the costs of maintaining that grid as well as the cost of actual power, particularly during peak times. Peak power can cost more than 10 times the amount of power during off-peak times. Distributed generation has many benefits and cost savings to the utilities that they do not like to talk about. The debate and calculation of what the net cost or net benefit to ratepayers from net metering is going on in many places including in California as mandated by the PUC.

  • NoahU

    Maybe after solar power reaches a certain legislated percentage of the utilities customer base, (around 5% to 10%), utilities can start charging a grid rental fee to their solar users. Then the solar owners would have enough numbers to elect a representative board from among themselves to negotiate this grid fee and how much their utility should pay for the solar energy. Until then the subsidies should stay in place to allow the industry to grow.

  • it_disqus

    This issue is all about the supply and demand of the generation of power, not maintenance of the grid. Power is not stored. It is generated and moves down the lines instantaneously. So the lights above your head are being powered by a generation source running somewhere right now. The lines or “the grid” is a relatively static cost that doesn’t care if it comes from solar, wind, gas, coal or hydro; that cost will be passed on to the customer either way. The reason the gas and coal plants fight solar and wind is because those plants are required to run day and night, wind or no wind. A lot of these generation plants lose money at night when the demand/price for electricity is low, but they make it up during the day when the demand/price is high. Now you throw solar in there and it only produces during the day when the demand and prices are high. The power companies have to make a profit to keep running. So it is economics 101 that as solar begins to take a bigger piece of the peak price load that to keep the generators that provide power when the sun doesn’t shine viable we may need to slowly back away from the subsidies to solar. There may be a time in the future where solar will be greater and we subsidize gas plants to get us through the night.

    Some of this transition will come through attrition. A local generation plant just announced that they will not do an upcoming multi-million dollar overhaul of a coal generator. The plan is to run it into the ground for the next five years then shut it off. I hope solar and wind are ready.

  • dw

    We get all our home electricity, including all our in-town driving with a plug-in hybrid, from rooftop solar. The $5.25 per month we pay for our grid connection is surely not an adequate fee for that service. We would be glad to pay a larger and more appropriate fee for this service, but only if the power companies, and others, paid an appropriate fee for disposal of carbon dioxide into our atmosphere.

    • it_disqus

      You pay $5.25, but the American tax payers subsidize you. You’re welcome.

      • dw

        I’m not sure you read my previous note carefully. One of my points was that our grid connection service fee was too small. It is subsidized by the power company and other customers, not taxpayers in this case. My more important point was that we ALL subsidize the power companies and wasteful consumers to a much greater extent by letting them discharge their waste carbon dioxide into our atmosphere for free.

  • Wayne

    The story is incorrect to say that electricity consumers are
    paying for grid maintenance while the small producers are not. My electric bill
    includes about $10 in connection charges regardless of what I use. The first
    300 KWH are much more expensive than the rest, so home grid tie PV will be best
    used by those that don’t normally exceed this first pricing tier, and if the
    grid operators don’t like it, they should change their rate schedule. The real
    grid maintenance issue is moment to moment power management. The small grid
    tied PV installation puts as much power on the grid as it can whenever it can
    so load management has to come from elsewhere. That is the limitation.

    Another problem comes from the inverters used to put the power on the grid. While the price of PV panels has come down drastically, the electronics needed to mate them to the AC grid is another matter. Those sold by the same companies that sell
    high quality PV panels for power in the 1 to 2 KW range seem outrageously priced.
    I recently purchased some from China (apparently the same as can be bought on
    eBay) but they have problems making them unsuitable for use without modification. They produce horrific RFI and would never pass FCC part 15 regulations, they have no protection against the inevitable power line surges, and while they are described as operating at the Maximum Power Point of the PV panels,
    they can’t because they impose a large ripple voltage on the PV to drive it out
    of the MPP voltage during much of the AC output wave. All these problems can be
    (have been) solved but not by the average purchaser. Perhaps good economical electronics will become available, but not yet.

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