At the Bloomberg New Energy Finance Summit in New York City, a German utility questioned how long customers would continue to pay by the kilowatt-hour for electricity.
“I think we’ll see something similar to telecom,” said Urban Keussen, SVP of technology and innovation at E.ON, one of the world’s largest investor-owned utilities. Instead of paying per minute or byte, many phone plans have moved to flat fees for services.
Germany has more than 30 gigawatts of installedsolar, the bulk of which is rooftop PV. Even with diminishing feed-in tariffs, the cost of electricity (about $0.35 per kilowatt-hour) still makes solar a good choice for many electricity customers.
And that leaves everyone else to absorb the cost of the electrical grid system. As larger costs fall to an increasingly shrinking group, solar becomes even more attractive to those who are left, said Keussen.
Regulators and utility executives have been talking about this issue for years, but it is now coming to a head.
“We’re looking at unbundling rate designs,” said Tom Bialek, chief engineer of smart grid with San Diego Gas & Electric, part of Sempra Utilities.
No one on the panel gave specifics about what a new future might look like, but it will certainly include higher connection fees. The answers will be different in deregulated regions like Germany, compared to vertically integrated utilities like San Diego Gas & Electric.
If this seems like a problem that only affects the leaders in PV installations, think again. Earlier this year, Richard Kauffman, New York’s new chairman of energy policy and finance, also discussed what he calls the “Aunt Millie” effect, where fewer people are absorbing the cost of the entire network. He noted that in at least a dozen states, it’s cheaper for large commercial customers to use combined heat and power (CHP) than to pay their utility.
Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission, echoed Kauffman’s sentiments at the BNEF Summit on Tuesday afternoon. “We’ll see natural gas in the form of CHP as the next distributed generation,” he said. The increase in distributed generation, whether solar or CHP, means that “utilities won’t be able to recovered fixed costs,” he said. He acknowledged that larger fixed fees were certainly in the future.
It is yet to be seen how countries and states will redefine the value of delivering electricity with an increasingly distributed generation system while maintaining reliability. Wellinghoff doesn’t think they’re conflicting issues. He worries far more about a coordinated physical attack than a cyber-attack on the electrical grid, adding that “a more distributed system is much more resilient.”