Utility Solar Business Models
Emerging Utility Strategies & Innovation
Overview
The project had two primary objectives. The first was to explore business approaches that will enable
utilities to turn what some view as the ‘threat’ of customer-sited solar generation into an opportunity – by
creating new value in the solar value chain; capturing some share of that value for utility stakeholders; and
finding ways to sustain it over time. The second objective was to explore innovative legal and regulatory
strategies to help utilities apply their strengths to advance opportunities for large-scale solar, driven by
increasing resource constraints and climate change concerns.
Successful utility business models must serve the interests of multiple stakeholders with diverse,
sometimes competing interests. The task for SEPA’s Working Groups was to start with solar technology
inputs (i.e., resource, technology, performance and environmental characteristics, and application types);
consider where and how utilities could add distinct value for various target markets; and begin to identify
cost allocation, pricing, regulatory and other mechanisms that can deliver this value to utility owners,
participating and non-participating customers, and society at large, while expanding solar industry and
investment opportunities.
These challenges were distilled into three fundamental questions utilities need to answer to develop
promising solar business models:
1. How will the utility create value in the solar marketplace?
2. How can the utility benefit by capturing some share of that value?
3. How can the utility sustain its solar business over time?
An important goal of this project has been to find utility business approaches that are cost-effective for all
stakeholder groups, i.e., approaches whose net benefits equal or exceed their net costs for each group. In
laymen’s terms, the goal is to find ‘win/win/win’ solutions – outcomes where multiple stakeholders benefit,
and none are harmed. Beyond the customer–shareholder–societal stakeholders normally considered by
utility regulators and management, the Working Groups looked for business approaches that could benefit
the solar industry and investors whose contributions are critical to long-term success.
With this in mind, innovative utilities have begun to explore new approaches with emerging solar models.
Most of them originated or are being considered by the utilities that participated in SEPA’s project working
groups, and this is the first time that much of this information has been available for discussion, comment,
and comparison among utilities, solar providers, and the financial community.
