Someone once said, “If you want to know where you’re going, you have to know where you came from.” That is certainly true if we want to understand where we are in the solar industry right now and what the future might look like. One major stepping stone, of course, was the birth of net metering. For me, it started with a phone call while I was still working for PG&E, the big California utility.
So we get a phone call from somebody saying, “Hi, I’m the ranch manager for Robin Williams,” the actor-comedian who passed away recently, “Mr. Williams has this beautiful ranch up in the North Bay and he wants to put solar on his property and not pay seven or eight bills. He just wants to put one big solar system up and net out his load.” I was listening to this and said to myself, “That’s a great idea. PG&E’s going to benefit because the ranch had all these really valuable peak juice in the middle of day and then they’re going to sell them off peak load at night through his meters and it’s all good.”
Until we tried to get that through at PG&E which got me into a screaming match with the law department. They were basically saying, “Well, you can’t do that because, god forbid, one of those electrons escapes Mr. Williams’ property and makes its way over the border to Oregon or to Arizona and then you’re going to violate interstate commerce.” I was trying to explain to the attorney that the juice is going to be consumed on the property or in the immediate vicinity thereof, but it was hopeless.
It bothered me that we couldn’t get it done and after I left PG&E, I lobbied for net metering and testified for it both at the California Energy Commission and the California Public Utilities Commission. We were successful in getting net metering passed in California and it’s been replicated in almost every state in the U.S. Originally they said, “Okay, we’re going to let this through but you’re limited to 0.1%, because, god forbid, if more solar gets into the grid, that would be bad.” We blew through 0.1%, eventually 0.5% then 1%, then 5%. At the end of 2015, net metering 2.0 was passed, the cap is gone in California.
What’s happened in the last couple of years were tectonic shifts in the markets. First, the European solar market took off. Then China became huge. Now the U.S. shows up very strong, over 7,000 MW of solar generation capacity were installed in the U.S. last year. Today, U.S. market’s running at a clip of about a gigawatt a month, so about 12 GW new solar in 2016. That means, there was more solar generation capacity installed last year in the United States than natural gas or coal generation capacity. We are not just a tiny blip on the screen anymore.
I still remember when the Bush-Cheney administration was in full throttle. Dick Cheney said, “You guys are less than 1%, you always will be.” I loved that he said that because it made all the hairs on the back of my neck stand up. I said to myself, “We’re going to commercialize this technology and really make this thing the largest source of energy, period.” And I still believe that’s where we’re going.
One of the big challenges that we still have are the incumbent industries. The fights will not go away. It’s going to keep getting bigger and more intense. Because at the end of the day, people will go to Home Depot and buy a super efficient solar panel that has the electronics integrated, they’ll just put it outside and plug it in the wall. There’s no stopping that.
The utility industry certainly cannot stop this technology trend. It’s as if you were manufacturing manual typewriters and say, “Well, this computer thing is really bad. We got to kill it.” I’m sorry, you will not be successful in that.
I my opinion, we have to partner with the utilities. But how can we do this? What are utilities good at? They’re really low risk and they’re really good at raising large amounts of money at very low cost. What does the solar industry need? Well, it has all the capital costs upfront but then it has super lower operating cost. So we need low cost capital to accelerate the solar industry even faster.
We actually put a plan together saying, let’s partner with utilities and walk in arm in arm to the public utilities commissions around the country and we say, we want the utilities to be able to own more solar and work in partnership with the local solar businesses. The utilities will add those solar projects to their rate base so that they can get an authorized rate return on those and the solar industry benefits by having lower cost of capital. There are tens and billions of dollars on the table here that we can put in our pockets and everyone wins.
We organized meeting with a very senior executive at a major utility. We were laying this plan out, giving it to him on a golden platter. The gentleman said, “Yeah, we should put together a study group to work on that and figure it out.” I agreed, “Okay. We’ll join. We’ll bring some really smart people in.”
I never got a call back on that.
Now, having said that, it’s going to happen because we’re dismantling the fundamental model of the utility system and how they’re earning revenues. There’s a great opportunity for progressive utilities to engage and make a ton of money with new service models. But if they don’t, they’re going to go the way Kodak went.