Abstract for: Rooftop Solar and the Utilities Death Spiral - a system dynamics analysis
U.S. electric utilities are becoming increasingly alarmed by the recent exponential growth in rooftop solar, as they fear that if customers continue to adopt self generation technologies and buy less kWhs from the grid, then the utility will no longer achieve ‘cost recovery’ from these customers. Utilities argue that, to compensate for this, they will have to increase their rates, and that these rate rises will in turn make self-generation technologies such as rooftop solar even more attractive, resulting in a vicious loop whereby rooftop solar adoption results in rate increases, which in turn leads to more rooftop solar adoption. This study uses a system dynamics model to first analyze the validity of this ‘death spiral’ hypothesis and, following this, to evaluate the policy of rooftop solar subsidies, based on their effects on (i) utility rates and (ii) reduction of CO2 emissions. The main finding of this study is that the effect of rooftop solar on both utility rates and CO2 savings seems highly dependent on whether or not utilities receive Renewable Energy Certificates for these privately owned solar panels. As a case study, the model uses data from the Salt River Project, a public owned utility based in Arizona.