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In My View

From the Year 2032

Looking Back at the Solar Industry

I’ve been involved with the solar industry since 1999 and have seen many peaks and valleys throughout the years. Fortunately, each peak has been higher than the last, and each valley never quite as low.

Looking forward, there is no doubt that the industry will continue to see its ups and downs but that the overall trend will be a sharp upward trajectory. Many factors impact exactly how sharp that incline will be, and thus, it’s impossible to forecast exactly what the future will hold. At the same time, I believe there’s value in thinking through various scenarios and what things could happen that might make those scenarios a reality. And so, I share with you one scenario written from the perspective of a CEO of a fictional electric utility from the year 2032. I admit this is one of my more optimistic scenarios, but I’m confident that it is not out of the realm of the possibility. Enjoy the journey!

A Glimpse of the Solar Future

31 December 2032

Dear Shareholders of Tomorrow Power and Light,

Our company, also known as TP&L, has often been described as “average” throughout the years. Compared to our utility peers, our retail rates are average, the energy resources available in our area of the country are average, and our customers’ electricity consumption is average. But I am thrilled to declare that we have become exceptional!

Our company has surpassed several significant milestones this year, including the celebration of our 125th anniversary. The most significant milestone is that TP&L has become the first major utility in the continental United States to have solar power as the top resource in its portfolio, with 30% of our power supplied by solar energy.

Of course, we still have a well-balanced and diversified portfolio—with natural gas, nuclear, wind, and other energy resources—but solar electricity is now at the top of the list.

This year also marks a personal milestone—it is my 20th anniversary with TP&L. When I started with the company in 2012, our portfolio had less than 1% solar, and the idea that we could get 30% of our power from solar seemed inconceivable. As I look back on my 20 years with the utility, it provides some perspective for how we reached this great accomplishment.

Today, we take for granted the role of solar power in our economy, but it wasn’t always that way. When I joined TP&L, solar power wasn’t very high on the list of national priorities and, actually, neither was energy in general. A recession, skyrocketing unemployment rates, national debt, and global security issues far overshadowed energy issues.

h all the changes going on outside the utility world, not much attention was being paid to the changes we were going through within the industry or those that were quickly coming down the road.

Most utilities were just beginning to become aware of the increasing role that solar energy would play in our future. Hindsight is 20/20, but looking back now, we can see that 2012 was a real turning point.

A Look 20 Years in the Past

Let’s take a look at some of the solar developments that happened in 2012.

  • Close to 3.5 GW of solar electricity were added to the grid in the United States that year. This number compared to just over 4 GW that had been installed in the country up to that point.
  • Second, solar was spreading—and spreading fast—moving beyond California, the Southwest, and the Northeast, to places like Texas, Georgia, Indiana, and Utah. It was quickly evolving from a regional energy resource to a truly national one.
  • The smart grid was also moving from concept to reality, with smart meters paving the way for utilities like us to maximize the value of distributed photovoltaics on the grid.
  • Finally, and probably most significantly, the price of solar had come down substantially, with utilities across the country signing purchase power agreements for solar electricity for less than US$.10.

The Years Leading Up to Today

The momentum we saw building in 2012 continued as the next 20 years brought changes that helped us get to where we are today.

Not long after I joined the utility in 2012, we began to focus on the fact that on-site solar wasn’t an option for many of our commercial and residential customers for a variety of reasons, ranging from roof age to shading and many other factors. In fact, many of our largest commercial customers with multiple facilities throughout our service territory had goals of 100% clean power for their operations, but not all of their buildings were suitable for solar.

In response, in 2013, we rolled out a virtual net-metering program, which allowed customers to offset load using solar power plants that were located elsewhere within our service territory. It was a challenge to change our metering and billing systems to accommodate this new configuration, and we had to work out a way with our regulators and customers to make sure that we covered our costs for both the required upgrades and our ongoing grid maintenance expenses. But it was worth the effort because it resulted in significantly improving our customer satisfaction ratings. That change alone in the coming years resulted in a ten-fold increase in the amount of solar electricity in our resource mix.

Then, in 2015, the United States saw its first comprehensive national energy policy with the Energy Policy Act of 2015. This was the biggest driver in our ability to reach the 30% solar we have today at TP&L.

In 2016, as a result of the Energy Policy Act, the national Clean Energy Bank was set up to provide long-term, low-cost project financing for renewable energy projects, which helped to transition solar away from reliance on subsidies. All of TP&L’s commercial and residential customers now had access to low-cost capital to install solar either on their own property or elsewhere in our service territory through our virtual net-metering program.

By 2017, most of the smart grid standards put in place by the Energy Policy Act had taken effect. We were seeing smarter use of energy throughout the electric grid, and customers were using significantly less energy because of both our and their ability to make smarter energy decisions.

By 2018, solar was the lowest-cost resource at the retail level for our customers and was quickly approaching our wholesale costs. Our customers could “go solar” cheaper than we could provide them with electricity. For other utilities in the United States, this point had been reached even earlier.

This development came faster than we expected in our service territory, and, thus, we had to react quickly. In response, in 2019, we acquired the largest solar installation company doing business in our area. We worked closely with the our state’s public utility commission to allow us to adapt our business model to include offering our industrial, commercial, and residential customers the option of buying grid power from us but also of buying solar electricity from us that was generated on the customer’s own property. With this development, the true merger of solar into our utility business was complete.

In 2020, Congress passed the Energy Growth and Security Act of 2020, which, in part, provided incentives for utilities like ours to decouple energy sales from fixed and capital costs. It also incented us to structure rates, grid services, and cost recovery in innovative ways. Today, our sales of kilowatt-hours are half of what they used to be, but our revenue has kept pace with these changes, allowing us to maintain and upgrade the electric grid over time. Our business model has shifted from one based purely on the sale of electricity to one that includes offering and balancing on-site generation.

In 2022, the majority of cars became primarily electric, again, largely as a result of the Energy Policy Act of 2015. This shifted transportation from a petroleum base to our more diverse and domestic electricity portfolio. We adjusted rates to encourage off-peak charging, and we didn’t need significant new generating capacity—the vehicles themselves became distributed power plants we could utilize in conjunction with the smart grid. Charging stations became standard in all public parking lots, and we worked in close collaboration with municipalities, retailers, and others who owned parking lots to create business models to ensure that both we and they were receiving revenue fairly from these charging stations.

By 2025, the price of storage technologies had come down enough that many utilities had more available compressed air and battery storage plants than gas peaking plants, some of it dispatchable from our customers’ electric vehicles, some of it strategically sited on our distribution and transmission grids. Today, we have more than 1 GW of storage that can be dispatched on demand, ensuring a highly reliable grid for our customers despite the fact that we have a significant percentage of variable-generation resources in our mix.

Over the years, the combination of all of these factors has resulted in solar becoming mainstream for both consumers and utilities. It was only a matter of time before solar became our biggest generating resource, which, as I’ve reported, happened this year.

The last 20 years have certainly been full of change in the utility world. At times, it was difficult, but we persevered. The result is a TP&L portfolio that shifted from less than 1% solar in 2012 to one that is over 30% today in 2032.

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