Quick question.  Your state has good sunshine, lots of open rooftops, and the cost of solar energy has been falling by 10% per year.  Do you think it will take 13 years to double the 10 megawatts (MW) of installed solar power?

Yes, if you’re the largest corporate utility in my state, and willfully ignoring the economic trend.  But ‘no’ if you make decisions based on data, because the price of unsubsidized solar electricity will undercut most utility retail electricity prices within a decade, enabling 200 times more solar (4,400 MW) than found in this utility’s plans.

That’s just one utility’s wake up call in a new report from the Institute for Local Self-Reliance (ILSR), Commercial Rooftop Revolution, and it’s far from the only one.  By 2016, over 100,000 MW of unsubsidized rooftop solar will able to match grid electricity on price.  Within 10 years, it will be 300,000 MW, enough to provide 10% of the nation’s electricity.  This affordable solar future presents a stark challenge to traditional utility planning and a clarion call for better electricity policy.

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Some utilities have responded by clinging to the 20th century paradigm of centralized control.  Virginia’s Dominion Power, for example, expressed satisfaction at a recent conference at introducing standby charges on solar producers, ostensibly to help them recover the cost of “backing up” solar power.

On the other hand, many utilities and state regulatory commissions are finding the value in solar and realizing that perceived barriers aren’t as large as they had feared.  Austin Energy, a Texas municipal utility, now pays a non-subsidy premium for solar because it helps them offset expensive peak power purchases.  In Hawaii, utilities who two years ago argued that the distribution grid was at its limit have been managing to accommodate thousands more solar projects on their grid systems.

Regardless of their predisposition toward solar power, utilities, regulators, and policy makers need to recognize that there’s a revolution in electricity systems coming soon.  Solar will become so affordable in the next 5-10 years that as many as 38 million homes and businesses will elect to produce their own power more cheaply from unsubsidized solar rather than buy it from their utility.  That means policies that limit distributed generation will have to change: net metering limits must rise, permitting must be simplified, archaic “15% rules” will have to be driven by data not speculation.

Ultimately, as one Hawaii public utility commissioner has said, the paradigm for the electricity system will flip. Utilities will need to transition from being inflexible to being flexible.  They’ll switch from primarily running slow-response coal and nuclear power plants to finding the right mix of flexible natural gas or energy storage systems that can partner with low-cost wind and solar and advanced demand response to supply reliable electricity.

The forthcoming revolution in solar power promises more change in the next 10 years than utilities have faced in the last 100.  And they had best get ready.