Utilities: where the PV money is

I attended last month’s SVPVS meeting where Chuck Hornbrook of PG&E was the guest speaker. It really changed my viewpoint on California’s PV industry.

Although I’ve had no time to write up here what I heard, blogger Eric Wesoff of GreentechMedia was there and summarized what he heard (and picked up by Seeking Alpha.) Hornbrook’s Feb. 11 slides are also posted to the SVPVS past events website (while some slides match a December 2008 presentation at the City of San Jose).

Wesoff captured the sense of the talk: PG&E wants to avoid generating greenhouse gasses, but will do so by the cheapest means possible. If increasing efficiency is cheaper than PV, then it will use efficiency.

Hornbrook said PG&E is using a three-pronged attack: energy efficiency, increased used of renewable energy that meets California’s Renewable Portfolio Standards, and the ClimateSmart carbon trading scheme. Overall, it sounds like California’s policy to encourage a EE/RE shift seems to be having the desired effects.

I don’t have a chance to elaborate on all the details of the presentation, but there were two big ideas that stick in my mind, even weeks later.

One is that Wesoff says that PG&E has a huge advantage over many (perhaps every) other utility. As Wesoff reports, Hornbrook said PG&E has half the grid-tied solar (i.e. customer-owned panels) in the US. By another measure, PG&E has 2/3 of the PUC’s California Solar Initiative but only 43% of the state’s population.

I didn’t capture the money quote, but the Hornbrook’s point is that PG&E has a lot of customers installing solar — not because we get a lot of insolation, but because of their beliefs. The PG&E territory overlaps some of the most progressive parts of the US — not to mention above-average affluence — so a lot of consumers (and perhaps businesses) are buying solar panels because they believe in them. True believers are a great way to spurt adoption until consumer PV can achieve grid parity.

The second aha! moment was that the PV equivalent of the (alleged) Willie Sutton’s quote. PV manufacturers are making and selling utility-scale PV solutions because that’s where the money is.

On Saturday morning, the lead of the business section in the Merc made my point:

Viewed by many as a potential bright spot in a gloomy economy, solar power's prospects appear to be dimming, at least for the near term.

Applications for new solar projects have plunged in recent months in California as homeowners and business owners struggle to get credit and rein in spending on big-ticket items such as a rooftop full of solar panels.
…
Solar-sector players remain bullish on the long term, and hope the combination of an increased federal tax credit passed late last year and the stimulus package approved in February will persuade people to add solar. They note that more megawatts of solar power were installed in California in 2008 than ever before.
…
[PG&E spokeswoman Jennifer Zerwer] blamed the decline mostly on the economic downturn. But reductions in state rebates for both residential and commercial solar installations didn't help, Zerwer said. Others in the industry cited seasonal factors as well — fewer people buy solar panels during the rainy winter months.

Statewide, the three big investor-owned utilities, including PG&E, received about half the applications in January and February that they had in each of the last four months of 2008.

Both this week‘s story and the Feb. 11 talk point up a key point. Consumer and producer confidence — and also their ability to pay — have collapsed with the recession.

Electric utilities have capital, cash flow and a credit rating to pay for the mega-million dollar plants; small and young PV startups don’t. Utilities also have a gun to their heads: 20% RPS under contract by 2010 and 33% by 2020.

If the economy remains soft for the next 18-24 months, then (even with government subsidies) PV system purchases by electricity customers could continue to remain soft. If so, then utilities will be the customers driving down the costs of PV through the experience curve — favoring those firms and technologies (like CPV) that are particularly suited to utility-scale generation.