Last year, solar power accounted for 40 percent of new electric generating capacity additions in the U.S. Yet the industry faces a number of challenges, including the ending of federal incentives for solar projects and an uncertain future for net metering, both of which have been instrumental in the industry’s growth. The coronavirus will also impact solar adoption as consumers and businesses focus their attention elsewhere.
Anne Hoskins, chief policy officer at Sunrun, the nation’s largest residential solar power company, discusses the industry’s challenges and grounds for optimism, including solar power’s role in addressing the challenge of grid resiliency, particularly where emerging climate impacts are placing unprecedented demands on the electricity system.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. The solar power industry has been growing quickly. Last year, solar accounted for 40 percent of new electric generating capacity additions in the US. Yet the industry faces a number of challenges, including the ending of federal incentives for solar projects, and an uncertain future for net metering, both of which have been instrumental in the industry’s growth. The coronavirus will also impact solar adoption, at least in the near term, as consumers and businesses focus their attention elsewhere.
On today’s podcast, I’ll be talking with Anne Hoskins, head of federal and state policy at Sunrun, the nation’s largest residential solar power company. We’ll look at the industry’s challenges, and at reasons to be optimistic about its prospects, including the role that rooftop solar might play in creating a more resilient electric grid. Anne, welcome to the podcast.
Anne Hoskins: Well, hello. Thanks for having me.
Stone: I thought we might start out by having you tell us a little bit about your role at Sunrun, and your longer involvement in the electric power industry.
Hoskins: Yeah, I’d be happy to. So, I serve as the chief policy officer at Sunrun. In that capacity, I oversee our policy team as well as our communications team. And we operate in 22 states, and in Puerto Rico, and in the District of Columbia. We offer service there. So my team is responsible for working with policymakers in all the states and districts, as well as at the federal government, because there are some very important federal policies that impact the solar industry.
And in addition to that, I oversee our corporate communications and policy communications team, which is very integrated in the policy work and critical to the policy work that we do. I joined Sunrun just about three and a half years ago, moved out from the East Coast, where I’d spent my entire life. And prior to coming to Sunrun, I served on the Maryland Public Service Commission as a commissioner. And it was an incredible experience. I served there for three years. Learned a lot about regulation, and really the importance of engagement in that process. Which was, you know, one of the reasons that I decided to come to Sunrun. I really felt that there was a need for greater engagement by alternative service providers and clean energy voices in the regulatory process.
And just prior to coming to the Commission, I actually served at a utility as the head of policy for a public service enterprise group, PSE&G, for about seven years. Oversaw their federal and state policymaking, as well. So, you know, when I look at my career, I see myself as really being on many different sides of the energy policy sphere. And having a really interesting perspective, from having all of those experiences, that I think has made me a more effective advocate for Sunrun and for the solar industry at this point in my career.
Stone: Now, one of the most important developments in residential solar in recent years has been the pairing of solar with battery storage. Sunrun and other solar companies have increasingly been pushing this. How does storage complement solar power?
Hoskins: Oh, it’s such an exciting time, because of storage. So, I mentioned that I joined Sunrun in 2016. And when I arrived, we were not yet providing batteries along with solar. And now, it’s a core part of our offering. Particularly in — certainly in Hawaii. Most customers who have solar also have storage. The same goes for Puerto Rico. And increasingly the case in California. And our expectation is that going forward, people are going to see the value of having not just the solar on their roof, but the capability, with batteries, to have backup power when we have outages. Which are increasingly frequent, unfortunately, in California and the wildfire situation. As well as in areas that I’m more familiar with. You know, in the mid-Atlantic and Northeast, where not that long ago we were having major hurricane events and significant outages.
So with batteries, it’s really changing, obviously, the capacity and the value for customers, right? Because now they can have a source of backup. But they can also use it to manage when they’re using and how they’re using their energy. And this is turning out to be really critical in places like California, which have instituted time-of-use rates whereby, you know, energy is a lot cheaper in the middle of the day and very expensive in the late afternoon. And with a battery, customers now are able to store that energy when it’s less expensive, and either use it, or share it back to the grid, when it’s more valuable.
So batteries have really changed the regulatory conversations. And I think are going to be really critical as we look forward and try to think about, how will you rebuild this grid? And how can we use these resources to make a more resilient and cost-effective grid? And that’s really happening very quickly over the last couple of years, as we’ve been bringing batteries onto the system.
Stone: Well it sounds like in California, where the duck curve has really been an issue, this is a solution to that.
Hoskins: Absolutely. I mean, the idea that, you know, prior to batteries, there was a concern that there was almost too much clean energy in the middle of the day. Which is, you know, sort of hard to really wrap your arm around, because there’s such a need for us to transform our system to cleaner energy. But with batteries, you’re able to store that energy and use it when it’s really needed. And get rid of some of the dirty, gas-fired, oil-fired peaking plants. Right? And really use this as a source of capacity that can be counted on, so that we can phase out some of that dirtier energy.
Stone: Now, how much does storage add to the cost of a typical residential solar system?
Hoskins: Well, you know, it really depends on how a customer wants to sign up for storage. One of the main products that Sunrun offers and really distinguished Sunrun early on when Sunrun started in 2007, was we offer what we call “solar as a service.” Which is offering PPAs and leasing options for customers, where they can put very little money down and pay for a system over a 20 or 25-year period.
And so the same will go for batteries, where we’re able to offer customers the opportunity to add a battery to their system and pay for it over time. So, you know, when you say, “How much does it cost the customer?” It really depends on how they sign up for this. I think that batteries, the prices are coming down on batteries. We don’t do a lot of cash sales. Others do. But I think they go around the ten or $12,000 range for a battery, depending on the type of battery. Again, with expectations that these costs of batteries are on the decline.
Which is really one of the exciting parts of working in this area right now. Is, we have seen, right, in the last decade, significant declines in the cost of the solar panels and the solar cells. And we’ve been working really hard to drive the cost, what we call the soft costs, out of the solar installation process. And making a lot of progress. With batteries, we’re at the point where we still have a lot of room for the technology costs, the costs of those batteries themselves, to come down that cost curve. And that is the expectation from all of the analysts.
So what we’re looking at now is trying to get these systems out to people, with options like leasing and PPAs, so they are affordable. We found in the states where it’s really taken off, which are California, Massachusetts, New York, states have stepped up and provided incentives. Specific storage incentives, to encourage early adopters of this technology. Which is going to serve to help drive the costs down, right? Of that technology. And go down that cost curve. So it’s a dynamic time. And there are affordable options for customers. And we think it’s going to become more affordable as we move forward.
Stone: Now, I want to come back to the economics there, and a number of additional policy issues that I’d like to ask you about. But before doing that, I’d like to talk about another issue which is obviously very prominent right now. And that’s the impact of coronavirus on the industry. And some recent data from Bloomberg New Energy Finance has projected that overall solar project volumes could fall 30 percent or more this year, based upon the impact of the virus. Sunrun, as many companies, has laid off workers recently and cut its business outlook for the rest of 2020. Can you tell us more about what you’re seeing related to the coronavirus and its impact on the industry?
Hoskins: Sure. I mean, first, I have to say obviously this virus is having a tremendous impact across the economy. Very awful human impacts. And our concern at Sunrun is first and foremost for our employees, for our customers, making sure that everything we do is consistent with the public health guidelines that we’re all living through.
You know, our headquarters is in San Francisco. And we very early on had our employees in our headquarters work from home, before it was required by the state. Because we really wanted to make sure that anyone who was able to work remotely would work remotely. And so we take that all very seriously.
You know, the coronavirus is a real challenge for our industry right now, because what we do is, we bring services to people in their homes. Right? And you know, these are really critical services that we’re bringing to customers. You know, we’re providing energy, which is something that people need. Really need, right, as they’re spending more and more time — almost all their time — in their homes. And particularly in places like California, where we’ve had, you know, during the wildfire seasons, forced blackouts and shut-offs of electricity. We’re very concerned about what’s going to happen when we hit wildfire season again this summer and into the fall, if the coronavirus is still not under control, and we continue to have these stay at home orders.
So we are working very hard to — one, certainly we have stopped all in-person sales activities that — we were quite active in stores like Costco, Home Depot. And we have been able to transition and do remote sales really effectively. And we’re really excited about that, and I think it shows just the ingenuity and the effort of these competitive solar companies, to try to find a way to continue to serve our customers. So we have done that.
Anything that we can do remotely, we’re doing remotely. We have been working with permitting offices across the country, talking with them about ways that we can use e-mail and other automated approaches for submitting permitting requests. And even for doing remote inspections. We’re using drones so that we don’t have to go out to a house to do the design. Right?
And so we’ve really made just a lot of progress, I have to say, in the last few weeks, just really trying to deal with the challenge that’s ahead of us. And to do it in a way that is limiting any kind of interaction with our customers. And then when we do go out and install, which we’re continuing to do most places across the country, we’re doing it with no-contact approaches. And again, really —
Stone: No contact with the consumers?
Hoskins: Yes. With the consumer. Obviously with the consumer. And we are having our — you know, we have very small install groups, right? Like, up to four people. We’re having them all drive separately. We have safety requirements. And we believe that we have put in place the safety measures that are necessary and that still enable us to go forward and provide this part of the energy infrastructure. Which, you know, the federal guidelines have come out and have recognized that renewable energy is part of the energy system that is part of our critical infrastructure. We’ve seen that as well in many of the state orders.
So that’s how we’re proceeding. We’re going to do everything we can to continue to be part of the solution for customers. And particularly, again, in areas where there has not been a reliable energy system. And that’s — you know, a really critical thing for us to keep our eyes on. This is a terrible crisis that we’re under right now with Covid. But we also have the climate crisis, which we believe is really at the heart of some of the wildfire challenges and the hurricanes and the devastation that faced Puerto Rico a few years ago. And we really need to keep focused on, how are we going to continue to build a more resilient energy system? And finding a way that we can deal with multiple challenges at the same time.
Because this Covid situation probably is not going away any time soon, right? And so we need to, as a society, be able to deal with that, deal with the jobs issues that now are going to be tremendous coming out of this, and also prepare for some of these climate impacts. Which, unfortunately, are not going to stop just because we’re also trying to deal with Covid.
Stone: Let’s talk a little bit more about that. About the resiliency. Grid resiliency, as you had just mentioned. And I wanted to bring up a recent example that involves Sunrun. Pacific Gas and Electric, also relatively recently, issued a request for proposals for the development of natural gas-powered microgrids, to power neighborhoods specific, as you were mentioning earlier, that the utility is cut off from the grid to minimize wildfire risk. Sunrun responded to that request for proposal with its own proposal, or a paper, that proposes a combination of solar power plus storage mixed in with islandable neighborhood microgrids. Can you tell us about that vision, and how you would propose, for example, to replace gas generation with renewables in that type of situation?
Hoskins: Sure. Thanks for that question. You know, we really do want to encourage utilities and policymakers to think a little more broadly when we talk about microgrids, right? And options for making a grid more resilient. We have the capacity now, with these batteries and residential and commercial solar projects, to aggregate those, right? And pull together thousands of those systems, and have them available so that either — we believe, and that’s what the paper, our neighborhood grid paper, was about. And it was put out there as a little bit of a thought piece. Because we really do want to work with the utility industry and network engineers, and figure out how this could work. But we think that there is the potential that, you know, you don’t need to have 100 percent of the customers in a community having solar and storage. You could have a subset of that, and it could be segmented off at a substation level. And we could figure out how to basically create a mini-grid, right? Versus maybe what you might traditionally have considered a microgrid.
So, we believe that there’s a potential to do that. Because right now, we have the capability to when we do put out — and this is our proposal up in New England with New England ISO. We’ve committed to install 5000 solar and storage units over the next couple of years. And then those would be aggregated and called on as a source of capacity, and be available in that market. We’re doing the same thing, we’ve made the same type of proposal, down in Los Angeles, with LADWP, where the Mayor of Los Angeles has said his goal is to shut down three gas-fired generation plants by the end of this decade. And we’ve done an analysis to show that there’s enough capacity to put solar and batteries on homes in the LA area, in the LADWP territory, that that could make up for one of those three plants.
So it’s absolutely — we can do it now. Right? We know we have the technology now. The costs have come down such now that you can aggregate these so that you’re essentially pulling power together from multiple homeowners and businesses in a territory, rather than having to rely on a large centralized plan, and the centralized infrastructure like the transmission and distribution system, which we have found in times of climate change is not very reliable. So that’s the concept.
Stone: I’d like to ask you about some of the major policy issues impacting the industry right now. And outside coronavirus, one of the major concerns seems to be the ramping down of the solar investment tax credit, or the ITC. The renewable energy industry sought to have the tax credit extended as part of the recent $2 trillion federal stimulus package, again linked to the coronavirus. That didn’t happen. What will the industry do next, given that the extension wasn’t granted?
Hoskins: Well, we’re still working on it. You know, we came very close to it being included in the December timeframe. We’re having conversations as part of these stimulus packages. You know, we understand there’s going to be more. Because sadly, the situation is so dire for our country right now. And we think this is completely appropriate as one of the solutions to come out of the stimulus packages. For a few reasons.
One, again, we really need to be working on the climate challenge. We can’t be setting that aside and hoping it’s going away because we have this challenge. And so that’s something that we’ve had great advances, both in the distributed front as well as the utility scale clean energy sources over the last decade. This isn’t a time to stop that. And one of the big drivers has been access to capital through the investment tax credit. It’s a tried and true method of accessing private capital for us to be able to go out to do the things like I mentioned, where we’re able to finance systems up front and then have customers pay for them over time.
That’s been, really, the single most valuable tool for expanding access to home solar and any kind of distributed energy. Because customers don’t need to put all of that capital up front themselves, right? They can pay for it over time. And that’s been the investment tax credit, that has fueled that. The investment tax credit has also resulted in the largest job creation. Solar installers, I think, were one of the fastest-growing categories of jobs around the country, until Covid hit. And so it’s really important for us to think about that, when you’re looking at the stimulus goals. Here is a policy that we know how to use, and that will put capital in the hands of companies that know how to use it, and put people to work, and bring a valuable product out to the public.
So we are going to be continuing to have those conversations. One thing I want to clarify — obviously it’s not ending right now. It went from 30 to 26 percent. It would go down to 22 percent. You know, we think that it’s an important time for policymakers to realize that that would be a very significant reduction, at the absolute worst time. So, you know, we’re hopeful that with so many customers around the country, people around the country who believe in renewable energy and who want it, so many folks whose jobs are related to this growing part of the economy, that our legislators and the President will see how critical it is to include this in one of these packages.
Stone: Absent the current health crisis, I want to ask, what was the industry expectation for the development of solar once that ITC does expire? Was the belief that the industry is now strong enough, and solar is economic enough, that it could stand on its own without that?
Hoskins: We’ve been planning on this, as a good company would, in terms of being prepared and making sure we’re going to be able to do everything we can to provide an affordable product for customers who, again, are increasingly wanting to make this transition and have a source of energy that they can control themselves. And what we’ve been really doing is trying to focus on the soft costs part of the cost stack. We’ve had advantage of technology, as I said. The decline in price of the solar panels, the solar cells, all the different parts of the product. But what we really need to focus on are the soft costs. And those are things such as delays that are caused from the permitting process. Delays that are caused from interconnection. The cost of acquiring customers, right?
And so one of the things that’s been, I guess — you know, as I said, I don’t want to say positive. But something that’s come to light for us, and that we’ve worked on in these last three or four weeks with Covid, has been that it’s really forced us to push forward on those soft cost issues. Not really on a cost basis, just out of necessity. And that goes to issues like permitting.
We have reached out and had a lot of success with permitting offices, talking with them about — you know, there are other ways that are less burdensome for us to get you this information, for you to permit our projects and thereby reduce the timeline. Because it’s the timeline that also makes these projects quite costly. You know, the longer they get drawn out, customers get frustrated and there are multiple extra touch points that have to come in. There are multiple trips to homes that have to be made. So to the extent that we can simplify the process and expedite the process, it’s going to take serious costs out of the cost stack of putting these projects on.
And we did some research on this a couple of years ago where we looked at solar installations in Australia and in Germany and saw that they were about a dollar a watt cheaper, of on average, maybe a $3 a watt cost of putting a solar system on a roof. And it really came down to things like, they had automatic interconnection. They had automatic permitting. You know, you would have approval, if you were able to meet certain criteria. And then the solar provider was at risk to make sure they did it correctly, when they were inspected. Right? And that the benefit of expediting that process was to take a third of the cost out of this process.
So we’ve been very focused on permitting. The federal government has supported a project that the National Renewable Energy Labs is working on that we call Solar App, which is going to be tested here over the probably next half a year, with building offices around the country which would basically automate the process and have built into it all the criteria from the different types of agencies that look out for safety. And the criteria for those are going to be built into this app. What we’re planning to do is to try to make that available for free for permitting offices around the country, with the hopes that this really will simplify the process for both the public officials as well as the solar companies.
But the other area that’s going to be my next priority on this is to work with the utilities to find a faster way to do the interconnection. You know, we know that we’ve got some utilities — and California utilities are really very good on interconnection. And they can do it now. They’ve automated it a few years back, and they can go through the process in a couple of days. We have other utilities where it’s weeks, right? And it just doesn’t make sense. These projects are not that complicated. They don’t put that much stress on a system. You know, they’re not large projects that potentially are really going to impact the distribution system in any significant way.
And so that is a big goal of ours, that we’re going to be working with commissions across the country using technology and proof technology with inverters, to get to the point where we are able to limit the impact that any of these systems could even potentially have on the grid. And hopefully work arm in arm with the utilities to make this a more efficient process.
Stone: One other challenge I wanted to ask you about. We’ve talked about the investment tax credit, which is a federal subsidy. At the state level, there is net metering. And that allows residential solar owners to sell their excess electricity from their rooftop system into the grid. A number of states and utilities have pushed to reduce net metering payments, or eliminate net metering all together. How important is net metering to solar economics, and where do you see this going?
Hoskins: Sure. Net metering’s really important. You know, it’s been the foundation for what really enabled customers to have access to solar on their roof. Not just have access to it, but then to be able to interact with the utility, share energy when they weren’t using it, hopefully to provide value back out into the grid and then to interact with the grid to have energy from the grid when they needed it. And so one of the real advantages to net metering from the beginning has been its simplicity, right? That you’re basically having your meter that’s running backwards when you’re not using electricity. And that’s been a great, I think, mechanism for supporting a policy that is trying to transition to a cleaner and more distributed grid.
So at the heart of it, we believe that it’s been an incredibly successful regulatory strategy and policy. We know, certainly we’ve had net metering cases around the country for quite some time. This became a big battle cry for the utilities. I’m not sure, still, why. You know, remember, if you look at it, we’re still a very, very small part of the generation resource in the country. We’ve got some parts of the country that — you know, it’s so small that we just sort of wonder why this is what the utilities would focus on, or even regulators, in some states. But it is.
And I think we’ve had many studies done over the years that have shown that they really call into question this assertion that there is a cost shift. It really depends on what you’re valuing, right? And if you’re looking at the potential, the capacity value, the fact that when you get enough of the solar, that you’re able to replace the need for very expensive transmission and distribution upgrades — those are some of the issues that come into play when you do these analyses. And there have certainly been many, many studies that have shown net positive benefit, certainly not just for the resident, but for all rate payers.
That being said, you know, we know that at the heart of this issue is that utilities have made these investments in their grid. And as customers reduce their demand, whether it’s through energy efficiency, whether it’s through doing their own solar, whether it’s by turning their TVs off, what happens is when you have a system that is paid for on a volumetric basis, on a per-kilowatt-hour basis, those companies who reduce their demand from the utility are paying less of it.
But the answer is not necessarily that that’s a cost shift. It also could be, maybe it’s time to question how we are spending money on this grid. And are the utilities having the incentives to be as efficient as they should be, knowing very well right now that the trend is that more and more customers want to generate their own power? And that’s one of the issues that I think is really critical, as regulators take a look at things. You know, they’re referring to it as grid modernization. They don’t talk about it that way quite as much now. But really looking, and trying to figure out through planning, what should the grid in the future look like? And how do you build it in a way recognizing that you’re going to have these resources? And that yes, those customers are going to be providing value back to the grid.
And that’s the other element of this. So one, you don’t want to overbuild the grid, knowing that there are going to be fewer kilowatt hours to pay for that grid. You want to build it smartly, and it’s got to be safe. But two, you also really want to look and see, how can you use the resources that those customers are investing in, as effectively for the whole grid? And that’s where grid services and batteries, I think, are really going to change the whole discussion around this.
It’s not going to say there shouldn’t be compensation for the energy. I think there should definitely be compensation for the energy that’s shared. And it should be fair. But there are also other values that, by aggregating these resources, by using the batteries so that we can have the power, as we said earlier, used later in the day when these utilities would otherwise have to be calling on really expensive peaking plants — I think as we look at these studies going forward, we’re going to see that there is very strong grid value from us redeveloping this grid. And we want to make sure the customers have the incentive to be part of that solution. And that we can get private capital helping to pay for that, and not have to rely 100 percent on utility capX.
So long answer, I know. But we have a few net metering cases that are scheduled to come up in the coming year. And part of what I’m going to do in those cases is to say, “Let’s step back for a second here. We have to remember to want to encourage customers to help invest in this.” And so what you don’t want to do is to jump too quickly to pull back on the compensation.
Because, you know, one example that is very instructive is to look at Hawaii. Hawaii, a few years back, I think they were worried. In that place, they had way more capacity of the solar than any other state is anywhere near to hitting. I don’t know, it was 20, 30 percent of residents, I think, had solar on their roofs. And I think they were worried that maybe they were hitting a capacity for their distribution system. So they just restricted any exports into the grid. And basically restricted net metering. And the result is, customers all went out and got batteries, which was great for us. You know, we have a lot of customers with batteries. But then the commission realized, “Wait. This isn’t very efficient. Why would we want those customers just to keep all the energy for themselves? We should come up with regulations, when we get to that level of penetration, where we can smartly use their resources.” Right? And they actually came up with rules that allow “smart export”, I think they refer to it as.
So that’s really what we have to be thinking about. Is, you know, you don’t want to have policies that are going to encourage customers to want to separate from the grid. Right? We really want to encourage policies that are going to want customers to integrate with the grid. To make investments. And to come up with and be willing to share their power when it’s most valuable to the grid, and to their neighbors. And that’s where I think these net metering conversations need to go.
Stone: Well, also based on that net metering conversation, and some of the pushback to net metering, brings up one of the age-old questions that relates to renewable energy, right? And that is that renewable energy, or distributed energy, reduces the amount of electricity that utilities sell. Right? So there’s a fundamental kind of disconnect or cross-purposes there for the utilities, in seeing more distributed energy come onto the grid. How do you bring the utilities in so that they also are incentivized to help promote this? Again, this is an old question. But I’d love to hear what your perspective on it is.
Hoskins: Right. I mean, we know that that’s really, I think, at the heart of these cases. Is that utilities are viewing us as competition. And so I’d say there’s two things. One, my view is, you know, many utilities are part of holding companies that have competitive affiliates. And they should look to their competitive affiliates and start participating in competition. Right? And looking at ways that they can also work through the competitive process to come up with innovations and be part of the solution that way.
As for the role of the distribution system–which is critical, right? I mean, we need to have a core distribution system. Nobody — I mean, certainly it’s not our view that we want everybody operating their own utility in their house, right? We do very firmly believe that the approach here should be grid services and integration.
So that means, in my view, there’s a role for distribution utilities to be essentially, if you want to call it the distribution system operator, the way that we have RTOs and SIOs at the wholesale level. It’s a really important role. Because right now, Sunrun is, I’d say, the leader around the country for sure, in solar and batteries and looking at opportunities to do these aggregations. And talking with utilities on grid services. But others are going to be following behind us, right? It’s a very competitive system. And so we know other companies are also working on putting together these offerings.
And so you’re going to start to have this ecosystem where there are many, many players who are all trying to continue to improve and offer new services to customers. And so we need to have, I’d say, somebody conducting that orchestra. Right? And that should be our utilities. And they should be regulated by the public service commissions. Because you really — that would be a monopoly, right? You would have one monopoly provider to manage the grid. And it’s very valuable, and they should get compensated for that.
And I think also, you know, they should be allowed again, as I said, to have competitive affiliates to participate. I don’t think that you want to have the monopoly operator of the grid also being allowed on its own to compete with the competitors who are trying to get access to the grid. I mean, one of the big issues that we’re going to need to make sure happens is that there’s open access to that grid, right? And that we have data that we need, and that we’re able to flourish in that ecosystem.
And to do that, it means you’ve got a regulated grid where they are compensated for it. And I think the other areas that are interesting now — and Hawaii’s really in the lead on this, as well as New York– is, you know, continue to look at incentive regulation. Right? And recognizing, what could we do to give utilities incentives to participate in this? And there have been creative ideas out there such as basically shared savings. I know I think it was in the Niagara Mohawk case a few years ago, a rate case in New York. They were explicitly directed, that utility, to really work with third party providers to look for solutions and non-wires alternatives, and ways to improve the grid with the incentive that to the extent they reduce the cost of providing electricity to customers, that they would benefit from that. You know, they would get a portion of that.
And I think all of those regulatory improvements can make a big difference. But we’re going to need strong leadership from regulators, to push this forward. Because it really isn’t in the incentive of the utilities as they’re compensated now, right? I mean, they basically make money through capital investment. And so what we really don’t want to have happening, going back to the net metering discussion, is to the extent we continue to have high levels of capital investment in the distribution system at a time when we know more and more people are going to want to reduce their purchases from that system, you know, you are going to end up having very significant costs that I think could be avoided if we take the time to really look into the future, see what’s coming, and figuring out, what’s the most efficient way to operate that system?
Stone: Just one final question on this topic. In some states, the electric utilities have actually tried to enter the residential solar market directly. There’s been pushback from the solar industry. What’s your view on that?
Hoskins: Right. You know, I come, again, from the mid-Atlantic. Both as a regulator, and even when I was an advocate for PSE&G. We were always advocating for competitive markets, right? And for, you know, the fact that those markets had been restructured, and you had pulled generation out. And that the idea was that you were going to get more efficient results by allowing competition. And I believe that.
And like I said, from my own personal experience, my day-to-day experience working in these different types of entities, there is a drive towards innovation and cost reduction when you allow competition. And my concern would be — like, yes. If there’s a market failure somewhere, if there’s a place where there are not competitors coming in yet, then I can see a role where utilities can help. If there’s a nascent technology that, you know, there could be a public benefit from.
But for the most part, I think what utilities can do, and their role, is to operate that network and open it up and make sure — like, for instance, as I said, when we have a customer who wants a solar and battery, what we really need the utility to have — we need them to have excellent engineers who can make sure that we can all interconnect quickly. Right? That’s what we need them to do. I don’t think that we need the utilities to go and offer customers batteries and solar systems, and have the rate payers pay for it. I just think that that is probably going to end up in a more costly solution, and you’re going to lose the advantage of having multiple players out there trying to do better than the other one.
Now, I did want to address one issue, which is on access to these services from lower-income customers. And one of the important mechanisms for that, like I said, have been these leasing products that reduce the up-front capital expense. But we are also very focused on that in terms of just trying to work with public officials and public policy programs, to try to figure out how you make that work. Right?
And, you know, one of the successful approaches in California has been, they’ve got targeted programs for incentives for affordable multi-family housing. And so Sunrun has entered into that over the last year. And we’re really excited about it, basically, where we’re able to use–through virtual net metering–to bring the advantage of solar that’s now going to be on the top of these apartment buildings, to the advantage of the renters. And so I think we’re finding ways, through smart policy incentives, to be able to insure that it’s not just the homeowners who are going to have access.
We also know, while Sunrun’s not active in this market yet, community solar is another mechanism where people who may not own a home are able to participate in solar. And I think that’s what we really should be doing. Is continuing to look at those kinds of innovations to expand access and not take the approach where we’re saying all of a sudden we’re going to need to rate-base all of this. Because I just don’t think you’re going to get as efficient an outcome.
Stone: So Anne, a final question for you here. As we’re looking at the current situation we’re in with Covid, and the challenges that the industry faces, what are your particular challenges that you’re going to be looking at or dealing with going forward from this point?
Hoskins: All right. Well, thank you again for the opportunity to speak with you today. You know, one of the challenges that we didn’t really get to talk about is a challenge that probably everyone is facing right now who is at stay-at-home orders. Which is, how do you communicate? How do you continue to, as an advocate, advocate for the work that you’re doing?
And one of the concerns I’m going to have — you know, many of the regulatory proceedings and legislative proceedings, have been either put on hold or scaled down. We’re certainly not having the in-person ability to go meet with legislators or to participate in working groups or stakeholder groups, at commissions. And I think this is going to be a challenge, particularly for organizations like the competitive solar companies, or energy efficiency companies, or environmental advocates, that do not have as many resources, honestly, as some of the utilities do in these proceedings when you look at our issues. And we certainly want to make sure that there’s still going to be an opportunity for advocates across the board to be able to give input to what are really critical policy decisions. We have to find a way that we’re going to be able to have stakeholder proceedings, if these restrictions have to continue on for any extended period.
Because one of the things over time that’s been very important in the solar industry has been the interest of the consumer being heard. And we have very strong advocates from our employees to people who have put solar on their homes, who really believe that this is a really critical part of our infrastructure that needs to be advanced, particularly given the challenges of climate change or jobs-related issues, that are related to the ability of solar to create so many jobs.
So that’s something that’s on my mind. And I’ve been really happy to see how nimble folks have been on using things like Zoom and other technology to communicate. I certainly use it to communicate with my team across the country, still. But for regulators out there, I would say, you know, let’s please make sure we remember the importance of consumers and advocates to participate in your proceeding, so that as these important decisions — whether it’s the future of the grid, net metering, consumer protection, any of those — that we have all the voices at the table and that we use technology to the best of its ability to enable that to happen.
Stone: Anne, thanks very much for talking.
Hoskins: Yeah, thank you.
Stone: And thanks to our listeners to tuning into this episode of Energy Policy Now. Keep up to date on the latest research and blog posts from the Kleinman Center for Energy Policy by subscribing to our Twitter feed, @KleinmanEnergy. Or visit us on our web site. Our address is KleinmanEnergy.upenn.edu. Thanks again for listening to the podcast, and have a great day.