Sunrun, one of the three biggest U.S. rooftop solar installers, has some provocative views about the future of solar.

Its new opinion paper argues the time and money going to reinvent the bulk U.S. power system should instead be invested in distributed resources.

Sunrun ranks with SolarCity-Tesla and Vivint among top national installers. It was founded in 2007 and was the originator of the third-party ownership (TPO) financing that drove the rooftop solar boom after 2009. More recently, Sunrun became one of the first national installers to offer TPO financing for solar-plus-storage systems. CEO/Founder Lynn Jurich has strong ideas about solar’s next steps.

“We are at a crossroads: We can choose a path of building a more affordable, clean, reliable energy system,” according to Jurich’s new white paper. “Or, continue down a path of centralized, fossil fuel-based electricity production, building power plants and power lines that will be redundant in 10 years, while pushing consumers to go it alone.”

There is a “war on solar,” Jurich argued in the paper. It includes an “attack” on net energy metering (NEM), which “has proven to be a simple, effective system to make it possible for Americans to go solar,” she wrote. The attack also undervalues distributed solar in comparison to utility-scale solar.

Caroline Choi is senior vice-president for regulatory affairs with Southern California Edison (SCE), which was named first among 400 U.S. utilities in energy storage and second in providing solar to customers by the Smart Electric Power Alliance (SEPA) on April 25.

There is an “either-or” quality to the paper, Choi told Utility Dive. An example is that it seems to overlook utility-scale solar in favor of distributed solar, while SCE “believes the future is both.”

On the other hand, Choi and a wide range of solar thought leaders unhesitatingly agreed with Jurich that battery energy storage is central to solar’s future. The paper also simulated their own observations about other factors that will determine solar’s future, including the roles of utilities, power lines, and rate design.

How much solar will there be?

“Home solar alone could meet 40% of total U.S. electricity demand,” the paper reports. The National Renewable Energy Laboratory (NREL) study cited in Jurich's paper found there is “technical potential” to meet 38.6% of national electricity sales with solar by using the rooftops of all U.S. buildings, including those over 25,000 square feet.

“In practice,” NREL added, “the integration of a significant quantity of rooftop PV into the national portfolio of generation capacity would require a flexible grid, supporting infrastructure, and a suite of enabling technologies.”

Jurich told Utility Dive the rounded-off 40% figure was “intended to say solar is no longer a niche energy” and “people are missing the true transformative power of solar.” How the remaining U.S. electricity needs will be met will be determined “market by market, based on the local characteristics,” Jurich said.

The U.S. grid is “old and frail and in need of massive upgrades” but investment in large infrastructure is the wrong path, Jurich wrote.

The alternative is to “put the clean power where it’s used,” the paper argues. “Solar power on roofs and batteries in garages.” This does not mean “centralized assets are no longer necessary,” Jurich said. How an “old and frail” grid can deliver those assets is "to be worked out."

Strong growth ahead

Consolidated Edison (ConEd) expects “at least 1,000 MW of solar” on its metropolitan New York City system by 2038, with rooftop arrays accounting for much of it, according to spokesperson Allan Drury. But “a robust grid is essential” for customers, including solar owners who export their excess generation, Drury emailed Utility Dive.

Vote Solar Executive Director/Co-Founder Adam Browing agreed with Jurich that “we should maximize the use of rooftop solar.” The sum of distributed and utility-scale solar, based on an NREL scenario for 80% renewables by 2050, will likely be “about 725 GW, or about 30% of total electricity,” he told Utility Dive. “Our vision includes all the different ways people can access clean energy."

SCE’s goal is 80% zero emission energy by 2030, according to Choi. “I don’t know how much will be solar, but technology will be the driver,” she said. “We don't know where technology is going, but it is coming quickly, and it could eliminate whatever limits on solar we see now.”

Leia Guccione, an Electricity Practice principal with think tank Rocky Mountain Institute (RMI), said solar is rapidly becoming a "first resource." But it is not state mandates or other policies that will bring it to scale fastest, she said. "It is making solar the most cost-competitive choice."

RMI’s landmark Reinventing Fire white paper series concluded renewables could reach at least 80% of U.S. electricity by 2050. Based on that, a 40% share of the U.S. power mix “seems reasonable,” Guccione said. But she differed with Jurich in that she sees reaching 40% would require an emphasis on both distributed and utility-scale solar.

And, in another difference with Jurich, Guccione said that to get to 40% solar, it will be necessary to invest in the transmission and distribution systems and to rethink them.

“The grid is essentially a platform for transactions,” she said. “It can optimize the electricity delivery system and be an economic engine.”

Investments are needed to upgrade or replace physical infrastructure, but the institutions and the governance of the grid also must be modernized, she said. “They are not equipped for what the grid will do in the 21st century.”

The question of NEM

“In 2017 alone, in 250 different places across the country, proposals were put forth to increase rates for households that choose to adopt solar,” Jurich wrote. She cited 50 States of Solar, a summary of 2017 policy actions from the North Carolina Clean Energy Technology Center (NCCETC).

NCCETC senior manager of policy research Autumn Proudlove said there were actually 249 policy actions, and "not all of them would increase rates.” Actions on community solar, third-party ownership, and increasing system sizes or caps would “benefit solar” and “valuation studies can go either way,” Proudlove told Utility Dive.

A central theme for Jurich is the “attack” on NEM in policy debates. “Keeping it intact can provide consistent access to affordable home solar and batteries across the country — and to keep the wheels of innovation turning,” she wrote.

Regulatory changes to NEM threaten the stability of the solar business, Jurich argued. “The value proposition needs to be stable to bring private capital and innovation to the market.”

Utilities have frequently gone to state regulators over the last five years asking that NEM’s retail rate compensation to solar owners be reduced. They argue that revenues lost to solar generation shifts system costs to non-solar-owning customers.

The utilities’ intent is “purposefully destabilizing,” Jurich said. “If there is a cost shift, it is minimal, and offers benefits by bringing innovation and competition into the market.”

Only Hawaii has a high enough distributed solar penetration to justify NEM changes, Jurich said. Policymakers in New York and California “are thinking smartly” about how to evolve NEM at higher penetrations, she added. “They are moving to time-of-use rate structures that match supply and demand.”

SCE’s Choi agreed that NEM proceedings at the California Public Utilities Commission (CPUC) are on target. In 2019, mandatory time-of-use rates will be imposed and the retail rate compensation for NEM will be reconsidered, she said. To replace NEM, the CPUC “is also looking at the locational and other benefits that make up the value of solar.”

The California and New York regulatory work shows that Hawaii is the not the only state where distributed solar penetrations require reconsidering NEM, she added. “Changes are happening right now in customer adoption of clean energy technologies. Pricing has to change to accommodate those choices.”

ConEd’s Drury said New York’s NEM “played an important role in developing a robust solar market” but “a new compensation system” is now needed to sustain growth. The New York regulatory proceeding applauded by Jurich is working on a locational value of distributed energy resources (DER) to replace NEM, he said.

But Vote Solar’s Browning agreed with Jurich that distributed solar has not reached penetrations high enough in most places to require action. “Around the country, utilities have argued NEM and rooftop solar cost too much when it was clear that the proceeding’s cost to ratepayers was far more than any cost shift,” he said.

The next step for NEM is a more refined time and place valuation of solar’s benefits, he said. The goal is “a transactive space that accurately identifies grid needs and allows solutions to be monetized,” Browning said. “It is not just solar. It is solar-plus-storage, plus demand response, plus energy efficiency, plus all the DER.”

Strategen senior VP Lon Huber said NEM “is only as good as the underlying rate design, and it is time to explore other options.” The flat NEM rate “does not send a price signal that encourages new technology deployment like load control devices and energy storage,” he told Utility Dive. “There is good reason for us to think bolder and outside the retail rate offset construct.”

Because retail rate NEM compensates solar generation at any time and provides no incentive to use battery storage, Jurich’s arguments against changing it seem to conflict with Sunrun’s early leadership in the battery solutions space, Huber added.

Everybody loves batteries

The only debate about storage seems to be how soon it will be cost-competitive.

Over time, consumers will be able to use solar and batteries “to insulate themselves from rising utility rates and get clean power,” Jurich's paper forecasts. “All members of society will be better served if solar households remain connected to our broader energy system” but “if it becomes too punitive and expensive to stay connected, people will have more reason to defect from the energy grid.”

Jurich said storage is “where solar was eight years ago.” But the cost is falling, and when it becomes widely competitive with grid electricity, “that is a game-changer.”

ConEd’s Drury agreed, but said the utility is optimizing its system to discourage grid defection. “As customers’ generation and energy efficiency choices grow, load defection becomes a real possibility and we will have to change our business model from selling kWh to selling a connection to a robust network,” he said. 

SCE’s Choi said the utility has been working for two years to integrate utility-scale storage and behind-the-meter storage. “Storage offers the flexibility necessary to accommodate both the large scale and small scale renewable energies coming onto the grid,” she said. “Our white paper projected 10 GW of energy storage on our system by 2030.”

Pace Energy and Climate Center Executive Director Karl Rábago and University of Albany Research Professor Richard Perez constructed a thought-exercise using data from Marc Perez. It demonstrates how storage could potentially make clean energy cost-effective.

New York City has a limited solar resource and a major load, Rábago recently told Utility Dive. But it can, with five steps, obtain 100% of its energy from renewables.

The first two steps are building cost-competitive large-scale solar and increasingly affordable storage. That would bring the price of electricity to about $0.75/kWh, the researchers calculated.

The third step is smart, demand-side technologies that can shape demand to correspond with solar output, Rábago said. Transmission is the fourth essential step because geographic diversity further increases supply and further removes solar's variability, he added.

The last step is overbuilding low cost solar and other renewables. If regulators recognize the capacity value that this new solar-plus-storage resource offers, “it can bring the cost to $0.08/kWh in New York City, where the average retail price of electricity is now $0.15/kWh or more," Rábago said.

RMI’s Guccione said the time has come “to think beyond the value of solar to the value of all distributed energy resources. That will require rate designs and other contractual mechanisms that recognize the value and allow companies to monetize it.”