By Frank Andorka, Senior Correspondent

Two separate pieces today by Bloomberg New Energy Finance illustrate the ever-increasing gap between how utilities in Europe and the United States view distributed generation.

In Europe, research suggests that utilities have come to the realization that distributed generation like solar and wind are becoming what electricity consumers want and, if they expect to thrive into the future, are what utilities will have to provide.

In the United States, on the other hand, utilities continue to invest in centralized distribution and can’t figure out why those investments aren’t allowing them to make the money they have in the past.

Go figure.

Albert Cheung, head of analysis for Bloomberg NEF, tackles the European side of the issue, saying utilities in those countries are looking at distributed generation as a boon, not a competitor. After all, utilities have the built-in customer bases and expertise to continue offering electricity to their customers even if it’s in a distributed form. Their trusted brand name, after all, carries a lot of weight with consumers. After writing that utilities in Europe appear to be banking on this model, he writes:

If … the value lies in having both scale and a local presence, with a dash of technical and market complexity thrown in, then it may be that our hypotheses prove valid, and that utilities will lead the way into a brave new future of decentralized energy.

Can the same be said in the United States? In fact, at the moment, I can think of at least three situations (without breaking a sweat) where utilities are actively fighting distributed generation because they view it as competition rather than an opportunity. Most utilities in the United States are more interested in investing in technology they know rather than what technology the future will support. And the rub is this: Their customers aren’t buying it any longer.

From BNEF:

Regulated power companies make money by earning a return on capital investments. The business model is simple: the more they spend, the more they earn, all else equal. But investments and profits are ultimately paid for by customers, and sales have not kept pace. Is the utility business model broken?

The simple answer to that final question is yes, and it doesn’t take looking in Europe to find that answer. Even in this country, those utilities that have embraced distributed renewable resources like solar and wind are thriving; those fighting a rear-guard action for nuclear and fossil fuels are not.

It’s time for the utility model in the United States to change and change significantly – and perhaps European utilitiescompanies that have already embraced distributed generation could show the way forward.

More:

Cheung: Decentralized Energy and Flexibility: Reasons to Believe

U.S. Utility Investment is Booming, but Sales Are Not Keeping Up

By Frank Andorka, Senior Correspondent

Community solar is a hot topic right now in the industry. It’s potential to expand solar’s reach to non-traditional solar customers – renters and people whose homes are not suited to individual solar arrays – is enormous, and as more states become solar friendly, community solar is one of the most frequent focuses of policymakers as they try to navigate a new solar world (see Illinois, for example).

And according to a new report from Ellen Emma Foehringer Merchant of Greentech Media, the way of doing business for community solar providers is finally changing to make it easier for consumers to join community solar projects.

Merchant describes the current problems with many current community solar arrangements:

Common contract terms put customers on the hook for cancellation fees or signup periods stretching into two decades. The lack of flexibility is generally a turnoff for customers, limiting signups from the 50 to 75 percent of U.S. consumers who can’t access traditional rooftop solar.

According to Merchant, however, that traditional business model is changing, thanks to innovative companies like Solstice (a primary focus of the article):

Solstice, a community solar organization focused on customer management, recently introduced a “no-risk” contract tied to a new 2.73-megawatt Delaware River Solar project in the Hudson Valley. The contract includes no cancellation fee and lasts just one year. Solstice called the release a “milestone in U.S. solar accessibility” and said the terms “allow renters to participate without fear of getting stuck with a contract that they can’t take with them if they move.” The project will serve 400 households after its estimated Q4 completion.

Merchant acknowledges the Solstice arrangement is still a rarity, but posits that as companies like Solstice begin to see higher subscription numbers, other companies will quickly decide to make their terms easier for customers.

Our view is that the current business model for community solar will change as it becomes more common, and that the current struggles are nothing more than the growing pains that accompany any new market opening up. At least we hope so – as the article notes, 50% to 75% of electrical consumers don’t have access to traditional customer-sited solar arrays. It would be a shame to leave that much of the market on the table when a fix like the one Solstice is proposing is right there in front of us.

More:

Shopping for Community Solar? Contract Terms Are Getting Friendlier

By Frank Andorka, Senior Correspondent

The law of unintended consequences keeps traipsing through the solar industry.

As broader tariffs begin to kick in on products ranging from solar modules to electronics equipment, the real-world consequences are beginning to interfere with product launches like Huawei’s launch of a low-cost residential solar inverter.

Huawei had been predicting its inverter would knock $100 to $200 off the typical price of a residential inverter, allowing it to compete with more well-known inverter companies. Instead, a 25% tariff on Chinese electronic equipment is going to completely wipe out that advantage and is already interfering in conversations with potential distributors.

Reuters explains Huawei’s dilemma:

Huawei will either have to reduce its margins or raise prices, they said, potentially benefiting rival producers including SolarEdge and Enphase Energy, which are ramping up manufacturing outside China.

The problem for Huawei is not unique to them, nor is it unexpected. When you start trade wars with countries without a coherent strategy (other than to punish countries you perceive to have “cheated” you), there are going to be unanticipated consequences. In this case, you’re hurting the residential solar industry by taking away a potential cost-saving piece of equipment that could have helped push residential solar sales higher.

Another analyst told Reuters:

A 25 percent tariff could eat up the margins of cost-competitive Chinese manufacturers and potentially change the player landscape of the U.S. solar inverter market.

Herein lies the central problem, however: Damaging Huawei’s product launch and keeping their technology out of the hands of U.S. consumers doesn’t accomplish the alleged goals of the tariffs, which is bringing well-paying jobs to U.S. citizens. The competitors of Huawei aren’t opening factories in the United States; their manufacturing facilities are outside the United States, too – they just don’t happen to be in the sanctioned country. So in essence, you’re doing exactly what you say government shouldn’t do – you’re interfering with the free market and picking winners and losers. And the U.S. consumer, unfortunately, is one of the biggest losers in this case.

More:

U.S. tariffs cast a cloud over Huawei’s solar electronics launch