Benefits and costs of a utility-ownership business model for residential rooftop solar photovoltaics

Abstract

The rapid growth of rooftop solar photovoltaic systems can pose a number of financial challenges for electric utility shareholders and their customers. One potential pathway to resolving these perceived challenges involves allowing utilities to own and operate rooftop solar systems. However, the financial benefits and costs of this business model are not well understood. Here we model the financial performance of a large-scale utility-owned residential rooftop solar programme. Over a 20 yr period, the programme increases shareholder earnings by 2–5% relative to a no-solar scenario, compared to a 2% earnings loss when an equivalent amount of rooftop solar is instead owned by non-utility parties. Such a programme could therefore be attractive from the perspective of utility investors. The impacts on utility customers, however, are more mixed, with average bills of non-solar customers increasing by 1–3% compared to the no-solar scenario, similar to the 2% increase under traditional, non-utility-ownership structures.

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Fig. 1: Base-case financial impacts of residential rooftop solar.
Fig. 2: Financial impacts of rooftop PV at varying penetration levels.
Fig. 3: Sensitivity of financial impacts to key modelling assumptions.

Data availability

Microsoft Excel files containing all FINDER model input data and outputs are available through Figshare at https://doi.org/10.6084/m9.figshare.12591539. Input files are read directly by the FINDER model and contain all data required to reproduce the results for each scenario, including utility retail sales forecasts and hourly load shapes, the utility generation capacity expansion plan, T&D cost forecasts, ratemaking and cost allocation assumptions, and rooftop solar costs and avoided cost assumptions. Model outputs are provided as a single workbook with individual worksheets containing the outputs for each scenario. Outputs consist of 20 yr annual projections and the NPV of utility revenue requirements, achieved earnings and ROE, and average rates and bills by customer class, with additional post-processing to derive average bills for non-solar residential customers.

Code availability

Solar generation profiles were developed using the National Renewable Energy Laboratory’s SAM, which is publicly accessible at https://sam.nrel.gov/. Utility shareholder and ratepayer impacts of alternate solar ownership models were developed using Berkeley Lab’s FINDER model. That model, written in Analytica, is available through Figshare at https://doi.org/10.6084/m9.figshare.12589423.

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Acknowledgements

This analysis was funded by the US Department of Energy Solar Energy Technologies Office under contract no. DE-AC02–05CH11231. We thank G. Leventis and B. Paulos for research assistance, and A. Qusaibaty of the US Department of Energy for his support of this work.

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G.B. designed the study with assistance from A.J.S., prepared the figures and draughted the manuscript. A.J.S. led the financial modelling with Berkeley Lab’s FINDER model, including preparation of data inputs and quality assurance of model outputs.

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Correspondence to Galen Barbose.

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Barbose, G., Satchwell, A.J. Benefits and costs of a utility-ownership business model for residential rooftop solar photovoltaics. Nat Energy 5, 750–758 (2020). https://doi.org/10.1038/s41560-020-0673-y

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