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Amid a pandemic and struggling economy, U.S. rooftop solar promises continued growth and some utilities still want a piece of the action. But new research shows that customers reap few benefits.

As the market moves beyond early adopters, there is some logic in having solar built by utilities with expertise in energy instead of consumers who think AC-DC is a band.

New modeling data shows utility ownership of residential rooftop solar benefits shareholders and can be controlled more effectively by utilities. But the same data also reveal that residential rooftop solar is best left to the private market because utility ownership offers little to no significant customer benefits.

That may explain why utility-led rooftop solar has not advanced following pilots at the Los Angeles Department of Water and Power, Arizona Public Service, Tucson Electric Power, and San Antonio’s CPS Energy. They were enthusiastically initiated between 2015 and 2017.

In addition, non-utility solar installers have been and continue to be unenthusiastic about utilities getting a piece of the rooftop solar pie. The private market is “the best way to achieve cost reduction and innovation,” Sunrun Chief Policy Officer Anne Hoskins said. What the utilities can offer is “enabling network access.”

The private sector has long insisted regulated utilities are enfranchised to serve only where competition does not meet customers’ needs. And private sector advocates have usually won regulatory agreement because residential rooftop solar has is growing impressively.

Residential solar rooftop is a growth industry

Residential solar tied its biggest quarter ever in the first quarter of 2020. It was working toward “a record year” until the pandemic disrupted the economy, according to the June 2020 Q2 market update from the Solar Energy Industries Association.

Though 2020 growth is expected to drop 25% from 2019 due to the virus and economic downturn. A “tepid” 2021 recovery will be followed by growth through 2025 driven by “economic fundamentals,” SEIA reported.

The state is the leading U.S. rooftop solar market, though only LADWP piloted a utility-owned residential rooftop solar program in California.

The Golden State has added about 1 GW of rooftop solar each year for at least three years, California Solar Plus Storage Association Senior Advisor for Regulatory Affairs Scott Murtishaw said. “Though there was a slowdown early this year, there already seems to be some rebound and that suggests the growth trend will return soon.”

New utility-led rooftop solar pilot proposals are pending only in Arkansas and Mississippi, and “many utilities are focusing on community solar instead,” North Carolina Clean Energy Technology Center Senior Manager of Policy Research Autumn Proudlove said.

There have been no new utility-led rooftop proposals in recent quarters, while community solar policy actions went from 32 to 36 in the last quarter, the center’s Q2 policy update reported. Community solar offers utilities many of the same benefits as owning rooftop solar, Proudlove added.

Community solar allows customers to own or lease part of a solar array built and managed by a utility or developer. Though California legislation obstructs it, states with strong enabling legislation, like Colorado and Minnesota, have shown it can provide the same lower-cost environmental and system benefits as utility-led rooftop solar and allow customers without solar suitable roofs to participate.

Shareholders benefit from utility rooftop solar

A utility-owned rooftop solar program “increases shareholder earnings by 2% to 5% over 20 years,” Lawrence Berkeley National Laboratory (LBNL) modeling found . That is good for shareholders compared to the 2% loss of earnings from the same amount of customer-owned or customer-leased rooftop solar.

But the bills of utility customers who don’t own solar go up to 2% when the utility owns solar, LBNL calculated . That is not very different from the 2.2% bill increase to non-participating customers with customer-owned or customer-leased rooftop solar. “Shareholders win but customers only break even in our base case assumptions,” LBNL Research Scientist and study co-author Galen Barbose said.

Shareholder benefits come largely from ratepayer-paid returns for utility capital expenditures and from offsetting diminished kWh sales and paying for privately-owned net metered solar. Those factors and costs from owning and maintaining solar also are why non-solar-owning customer bills increase.

Utility-led rooftop solar could offer “better visibility and control of the solar and siting with lower interconnection costs" or defer system upgrade costs, Barbose said. That “can make it a win for utilities and a marginal win for customers” but only under less certain assumptions.

The role of regulated utilities in private markets “raises thorny policy questions for regulators and stakeholders,” he added.

Utilities that compete against private providers expose shareholders to unnecessary risk and is not the “optimal” utility role, according to a landmark editorial co-written by former Federal Energy Regulatory Commission Chair Jon Wellinghoff and cited by LBNL. Utilities should instead “host” the “grid marketplace” and “allow third parties to bear the risk of selling DER to end customers.”

Sunrun is working with utilities on non-wires alternatives in which the utilities will “play a central role” but will not own DER, said the company’s Hoskins, a former Maryland utility regulator and utility executive.

“The study shows utility ownership is the second-best solution,” said Rabago Energy Principal Karl Rabago, a former Assistant Secretary of Energy and Texas utilities commissioner. “It shows non-participating customer bill increases of only 0.2% can keep this technology away from institutions which typically do things slowly, less innovatively and more expensively than the competitive market.”

Customers should not be limited to what a utility can provide, CalSSA’s Murtishaw agreed. “Giving them the fullest range of provider options is most likely to keep the price lowest.”

Utilities should serve the underserved

APS is methodically testing use cases for its groundbreaking utility-owned rooftop solar programs , its spokesperson Jill Hanks emailed. After concluding rooftop solar has limited peak load reduction value, APS began exploring how adding advanced inverters, AMI infrastructure and grid automation can benefit the grid “while protecting customer economics.”

CPS Energy and Tucson, among the first to win approval for utility-led rooftop solar pilots, are now working on community solar . LADWP is working with Sunrun to develop a virtual power plant in which the utility takes advantage of customer-owned rooftop solar and other DER installed and aggregated by Sunrun to serve the utility’s system.

These and other utilities are doing one other thing Rabago and Hoskins agree is an important utility role.

Serving “underserved or hard to serve markets “is the reason utilities were given monopoly franchises with universal service obligations,” Rabago said. But “utilities given that privilege should be required to hire and educate people in the community and do projects that demonstrate how drivers of hard to serve and underserved markets can be addressed.”

Utility ownership may appeal to other customers who have been allowed to be energy illiterate, Rabago said. But the climate crisis shows “people should be paying attention because they may discover it is not to their advantage to leave it to utilities.” Despite complexities, solar installations are growing, which has a lot to do with price and performance.