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Revamping the electric grid could yield huge cost savings, SolarCity report says

A modern electric grid that incorporates solar, battery storage, energy efficiency and smart technology could save Californians $1.4 billion a year, according to a report released Thursday by rooftop solar giant SolarCity.

In its 28-page report, SolarCity argues that the current utility model works against consumer interests by encouraging utilities to build more power lines, substations and other parts of the electric grid. Utilities typically receive a 10.5% return on the money they spend on projects.

"Utilities have a fundamental financial incentive of 'build more to profit more,' which conflicts with the public interest of building and maintaining an affordable grid," the report states. "This financial incentive model is a vestige of how utilities have always been regulated, a model originally constructed to encourage the expansion of electricity access."

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SolarCity proposes creation of a body that would manage localized electricity generation, such as rooftop solar and battery storage. Utilities would continue to focus on managing the grid with revenue from providing distribution services rather than making money from building more.

The tension between the utility and solar industries has grown more fierce as solar power shows staying power in the marketplace.

The California Public Utilities Commission affirmed the solar industry in its January decision to continue a policy of granting rooftop solar owners a dollar-for-dollar exchange for power they generate versus what they consume from the investor-owned utilities.

Commissioners added some fees to the new rules they approved but largely left the key benefit of the compensation policy intact.

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Utility companies, though, argue that rooftop solar owners do not pay their fair share of maintaining the electric grid, leaving those who can least afford it to cover the systemwide costs.

Pete Rive, SolarCity's chief technology officer, said his company wants to create opportunities for consumers to adopt solar and battery storage so they can be better used by utilities.

But under the current business model, Rive said, "the utilities are opposed to customers adopting these technologies."

Lyndon Rive, SolarCity's chief executive, said if states revamp the utility business model to fit 21st-century technology, they would find the argument that rooftop solar harms the disadvantaged is not true.

"There is no cost shift," Lyndon Rive said. "It’s a trade, and it’s a fair trade. It’s only a cost shift if the utility never values solar and the service that it provides."

For more energy news, follow Ivan Penn on Twitter: @ivanlpenn.

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