Distributed Generation – Solar

Good Afternoon,

One of the blackest of the black box elements in WECC power is the level of distributed generation and how it is changing. What makes this essential item even more elusive is the generation takes place behind the meter. All the utility sees is a net metered amount, no one, not even the utility, knows how much gross demand or gross solar generation is lurking behind that meter.

Of course, we all need to know how many MWHs will be generated behind the meter if we are going to forecast future power prices. Arguably, Distributed Generation is the most critical variable in a longer-term forecast. Ansergy makes this forecast daily using the latest utility-level data. We thought you might be interested in a summary table, by Balancing Authority, that compares current (as of March 31, 2018) rooftop solar installs versus prior years.

Rooftop Solar Builds by Balancing Authority

The table is sorted on current installed “behind the meter” capacity (MW) for all customer types (Residential, Commercial, and Industrial and includes both “Behind the Meter Aggregators” and “Retail Power Marketers”. All utilities were mapped to their appropriate Balancing Authorities, except for CISO which was split out into PG&E, SCE, and SDGE.

PG&E has the most installed rooftop solar in the WECC with over 3200 MWs spread across 363,874 customers. The average install is 23.30 kilowatts. You might think 23kw  is on the large-side but bear in mind this includes commercial and industrial customers.  YOY% is the year on year percentage change from March 2017 to March 2018 and speaks to the dramatic changes taking place behind the meters, in that deep and dark black box. Those changes can be summed up in a single word – Bearish. Bearish for longer-term power prices, bearish for IOU stock prices, bearish for retail ratepayers, and bearish for heat rates which is bearish for the gencos.

Housing units are estimates based upon the most recent Census projections for 2017. These are provided at County level; we have mapped counties to Balancing Authorities for comparison purposes. The point of the metric is to compare the current customers to the number of structures which, theoretically, could support solar installs. Also note, the Housing Units excludes commercial and industrial structures meaning the potential is even more significant.

Of course, not all BAs are created equal and not all enjoy the same amount of sunshine; The following table illustrates that point:

Average Cloud Cover by Season

Still, with high enough retail prices, or incentives, Ansergy suggests every BA in the WECC will continue to see growing generation behind the meter. In fact, this trend, we believe, will accelerate simply because it already is accelerating. Think about it, what drives a homeowner to install solar panels? Is it his love for Planet Earth? Perhaps a few, but most have more pecuniary motives, they desire to maximize their wealth by avoiding expenses.

As more solar panels are installed the utilities total loads drop, or don’t grow as fast, resulting in a lower denominator (total kWH) spread against a rising numerator (Rate Base) all of which results in an even higher retail rate applied to that shrinking retail base. The higher rate drives more installs which shrinks the denominator evermore. Call it the death spiral of the world’s utilities.

Be you a utility preparing your IRP or a private equity investor about to drop a billion on an asset; this is must-own data.

Ansergy deploys its distributed generation forecasts in its long-term power forecasts (20+ years). If you are interested in learning more about our long-dated products, please contact us.