DALLAS – The year is 2031. An electric utility company becomes the first utility in U.S. history to receive its primary form of generation from solar power. This was the scenario presented by Julia Hamm, president and CEO of the Solar Electric Power Association (SEPA), during a Solar Power International session on Oct. 19.
But what would need to happen in order for this fictitious scenario to become a reality? The obvious answer lies in government subsidies, which are now looking grim in the aftermath of Solyndra’s bankruptcy.
Beyond the hopes of tax grants and a national renewable standard, what can the power industry do to see solar implemented into utilities’ portfolios on a higher scale? Hamm said that collaboration between utilities and solar businesses is key, introducing six executives of municipal or public utilities to discuss solar integration at the utility level.
Randall Mehrberg, president of PSEG Energy Holdings, said that financial decisions to install solar projects have to compete with another price tag most U.S. utilities are currently facing – the cost required to retire or retrofit a large percentage of their coal-fired fleets. “Cost, at the end of the day, is what haunts us all.”
While some utilities may turn to solar power as filler to replace pre-existing coal-fired generation, Mehrberg said that most will turn to “low cost, prevalent natural gas.”
Electricity costs are bound to escalate over the next 20 years, said James Rogers, chairman, president and CEO of Duke Energy (NYSE: DUK). This will happen as a result of a large amount of coal generation being turned over and necessary improvements to grid reliability. However, solar will become increasingly attractive to utilities as the cost of solar power continues to descend, Rogers said.
Utilities must be instrumental in educating their customers on the value of solar – that it’s worth paying a few extra cents each bill, said Larry Weiss, CEO of Austin Energy. “I continue to be dumbfounded by consumers who want to have their cake and eat it too. They have to be willing to pay more for renewables.”
While the inherent cost of solar can be disconcerting, utilities must recognize that solar power presents an element of cost avoidance not found in traditional forms of generation, said Doyle Beneby, president and CEO of CPS Energy. “For every 1 MW of solar I install, I don’t have to worry about the Clean Air Mercury Rule, or a host of other EPA regulations.”
CPS Energy is in the process of retiring 850 MW of unscrubbed coal, Beneby said, some of that generation will be replaced with solar power.
When looking long-term, utilities should also consider that the U.S. may eventually implement a carbon tax, said Armando Olivera, president and CEO of Florida Power & Light Co. “The U.S. is the only major country not imputing the cost of carbon. It will eventually be taken into consideration.”
Rogers of Duke Energy echoed his thoughts. “By investing in solar, you’re putting a hedge on against what a lot of us think is inevitable: carbon regulation.”
For now, the addition of renewable energy into most utilities’ portfolios will be incremental, said Weiss of Austin Energy. “We cannot switch all our generation overnight to solar and wind. But solar is a small part of the equation.”
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