Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

SolarCity Corp (SCTY), SunPower Corporation (SPWR): Utilities Must Adapt to the Intrusion of Solar

Page 1 of 2

SolarCity Corp (NASDAQ:SCTY)Last week I had the chance to talk with Clean Power Finance CEO Nat Kreamer about the future of the solar market and how utilities and new leasing options will impact the energy industry. Clean Power Finance provides financing and software services  to solar installers and works with a number of utilities and module manufacturers across the industry. Here are the highlights of our discussion on how utilities will adapt to solar.

Will utilities fight, embrace, or just accept solar power?
The utility industry is notoriously slow to innovate, using essentially the same technology to generate and transmit power as it did a century ago. But until the ability to generate your own power came along — ie. residential and commercial solar — there were few viable alternatives to the traditional business model.

As a result, some utilities will fight the adoption of solar energy, particularly on rooftops, and some will embrace it. The answer to who will prefer what depends on that a utility’s incentive is.

After the deregulation of wholesale power — which some in the industry also fought by the way — there are now regulated and deregulated markets. A regulated utility will own power generation, transmission, and distribution and get a set rate of return that’s regulated by the state and regional regulators. Deregulated states are far more complicated because every state is different but in general a power plant owner will sell power to a utility at a market price instead of a set price and a customer can choose the utility they buy their power from (reality isn’t quite this simple).

If you’re an unregulated power producer or utility and you see an opportunity to own solar asset it may be an attractive investment option because you’re in a competitive market. But if you’re in a regulated market there’s little incentive to adopt new technology that might upset the profits of your monopoly, especially if someone else owns the asset (ie. a solar lease).

The forward thinking utility
It is Nat Kreamer’s belief, and one that I agree with, that eventually solar power will infiltrate utilities across the country whether they do so willingly or kicking and screaming. The utilities that view solar as a productive asset that can generate a steady return on investment will be the ones who profit more quickly.

In essence, Kreamer thinks that the role of leasing solar, which is currently dominated by Clean Power Finance, SunRun, SolarCity Corp (NASDAQ:SCTY), and SunPower Corporation (NASDAQ:SPWR), can eventually be dominated by utilities — where CPF could provide financing. If you think about it, this model makes a lot of sense. Utilities have available low cost capital and already have monthly contact with their customers. Why shouldn’t they play a role in building the future of electricity generation?

Page 1 of 2
Loading Comments...