The Utilities, the Offgrid Market and IPPP

by Don Loweburg and Bob-O Schultze

(December 1993 / January 1994) The offgrid market of photovoltaic systems (PVs installed beyond the utility lines) is now being served by a growing and healthy PV industry. Recently, utilities have taken an interest in PVs used off the utility grid. Our concern here is not whether utilities should be involved with PVs. The utilities should be encouraged to serve their customers by putting PV on the grid. The big question concerns utility involvement in the offgrid PV market and representation from those businesses currently serving this market.

The Electric Utility Grid

First a little background. The electric utilities are natural monopolies. A natural monopoly occurs where one economic entity can function more efficiently than several. In this case, electric utilities have tremendous distribution networks (the grid), requiring huge amounts of capital. In order to attract this capital, the utilities are allowed to be monopolies (inherently anticompetitive)

They are regulated by the state so that their anticompetitive advantage is limited &emdash; limited to the arena that is "natural" to their particular enterprise. The generation of electric power itself is not protected. The distribution network that forms the basis of this natural monopoly allows the electric monopolies to function as state regulated monopolies.

Two groups have been working on ways to promote and develop PV applications involving utilities. UPVG (Utility Photovoltaic Group) is a national group of utilities with DOE and EPRI (Electric Power Research Institute) backing. In California, PV4U (Photovoltaics for Utilities), a group of PV manufacturers, distributors, utilities and, just recently, PV installer-dealers, has been working on a commercialization plan.

As part of this plan, offgrid applications have been targeted as the first market for utilities to enter. Why? A quote from the May 1991 Battery and EV Technology: "According to EPRI's Taylor Moore and John Brigger (Generation and Storage Division), two dozen U.S. utilities of various sizes and ownership types are using photovoltaics for low-power loads in their own operations, having found the technology to be more economical than frequent battery replacement or extending a utility service line....Many such applications involve maintaining charged batteries for remote lighting, monitoring, and communications equipment.

Some utilities are also exploring the cost-effective use of photovoltaics in customer service applications, including livestock water pumping, remote residences, and outdoor lighting. Small, remote loads of industrial and institutional customers represent a virtually untapped utility market for photovoltaics."

Now consider the pending proposal for electric utilities to enter the off-grid market. Off-grid is by definition outside the arena that is "natural" to these companies.

The quiescent feature that identifies these companies is the grid itself. By entering the off-grid market they are leaving the domain for which they were allowed to be a natural monopoly and entering a new market in which they have no "natural" rights. The off-grid PV market needs no transmission lines, substations or other identifiable attributes of the electric power utilities.

Monopolies functioning in this domain would be intrinsically anticompetitive. There is no way to counteract or mitigate the anticompetitive potential they bring to this market.

In 1976 the California State Legislature passed PUC statute 2775.5, ordering the PUC to "regulate the involvement of privately owned public entities in solar energy development, and to ensure that the solar energy industry develops in a manner which is competitive and free from the potential dominance of regulated electrical and gas corporations." (my emphasis on potential) The demonstration of potential dominance should be enough to keep the utilities out of the offgrid market.

Fair Play

During the last month we have attended two meetings, the purpose of which was to address and mitigate the anticompetitive elements of utility entry into the off-grid market. These meetings lacked full industry representation and presumed to answer a question that had not yet been asked openly. Should or should not the solar industry encourage the utilities to enter the off-grid market? To date, an incomplete formulation of procedures has been drawn up, the purpose of which is to allow utility entry into the off-grid market while not violating 2775.5.

Not one of the proposed measures can eliminate the potential of utility dominance mentioned in 2775.5.

One proposal would have all purchasing, installation and maintenance of utility off-grid systems involve a local PV contractor. The process would allow qualified contractors to bid for the job. Since the contractors are local and the bidding would be fair, there should be no complaints about the utilities monopolizing the PV business. There's "something in it for everybody". But wait. Let's take another look. What's different about the picture now? Before, my client was John Q. Homeowner. Now I'm working for the utility as a contract worker. Since we presume this will be a successful program, in the near future I may be working primarily for the utility. My business is now dominated by the utility.

With 10,000 grid-connected homes to every one off-grid, why are the utilities looking to enter such a small market while virtually ignoring the on-grid possibilities?

Why aren't the utilities encouraging more individually owned on-grid PV installations by offering inducements like net billing for on-peak PV power production?

Meet the Bolts and Volts Folks

The Independent Photovoltaic Power Providers (IPPP) started a few months ago as an ad hoc committee of California Mom 'n Pop PV business folks who feel they are not being fairly represented by the existing solar energy organizations. These establishment organizations are heavily dominated by manufacturers and large distributors. Whether as a result of the utilities stepping into the off-grid market, Home Power's editorial in the last issue, or just an idea whose time has come, the concept of IPPP is now a national movement toward free, independent ownership of the sun as an electrical power source.

Who We Are

IPPP (or I3P to save a mouthful) is a group of independent solar electric contractors, dealers, and system designers. Members of this group have pioneered the design and installation of most of the residential and commercial off-grid photovoltaic systems existing today.

Statement of Purpose

IPPP is dedicated to furthering the growth of independent solar energy installations and applications in the USA and the world.

We believe that a healthy and prospering network of independent photovoltaic power providers is vital to the continued growth of the solar energy industry.

Utility entrance into the remote and off-grid market will serve to restrict the growth of our industry, interfere with competition in the market for solar energy systems, and increase the cost of PV produced power to ratepayers everywhere.

Why We Need To Organize

As a group, we have been unrepresented during PVFor Utilities (PV4U) discussions of the Utilities Commercialization Plan which recommends utility entrance into the off-grid business. IPPP has been formed to give independent providers, the backbone of our industry, a voice in the future of the solar energy industry.

We oppose utility involvement with remote or off-grid applications of photovoltaics. The utilities have huge advertising, marketing, and legal departments in place.

They have "name" recognition and ratepayer loyalty &emdash; after all, they've held a legal monopoly for decades.

This publicly-granted monopoly confers an unfair marketing advantage to the utilities over the independents. The utilities hold no natural rights to the off-grid portions of their service areas. Utilities have never serviced the remote or off-grid markets.

What We Can Do

Join together. Organize on state and national levels to assert our voices as legitimate stakeholders in the renewable energy industry. If your utilities have restrictive policies toward acceptance of independently-produced on-grid power, use the media to inform the public about it. If their policies are encouraging, support them. If they haven't got a clue, teach them. Ratepayer-financed, on-peak power produced by renewables should be encouraged with net billing. If the utilities consider all the factors, including environmental and long term generation replacement costs, PVs on the grid look pretty good right now.

Networking

IPPP is limited only by our imagination, energy, and sweat &emdash; three qualities with which all small solar businesses are familiar. It can act as a clearinghouse for information exchange. We need each other's help and input on where to go from here. We need volunteer lawyers' help in forming a legal organization.

The one thing that all IPPP folks have in common is our solid knowledge that renewable energy is the present and the future. Who owns the sun? We all do &emdash; let's keep it that way.

Access

National: IPPP, c/o Home Power, POB 520, Ashland,
OR 97520 • Phone/Fax 916-475-3401
California: IPPP c/o Don Loweburg, Offline, POB 231,
North Fork, CA 93643 • Phone/Fax 209-877-7080
Authors: Don Loweburg, & Bob-O Schultze, Electron Connection, POB 203, Hornbrook, CA 96044 • Phone/Fax 916-475-3401