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Global Futures Report 2013 - Box 5

37 In the United States, electric utilities are moving to employ inno- vative new business models for solar PV. Over the past several years, utilities have typically purchased solar power from third- party-owned facilities (through power purchase agreements), either larger ground-mounted systems connected directly to transmission grids, or smaller (less than 2 MW) systems on dis- tribution grids. In fewer cases, utilities have directly owned or financed such facilities. Many new business models are emerging that go beyond such historical patterns. Under one model—tax equity financing of third parties—a utility acts as a tax equity investor, often through an unregulated subsidiary. (One example is the Pacific Venture Capital subsidiary of Pacific Gas and Electric in California.) A sec- ond model is on-bill financing, in which a utility provides loans to its customers for investments in solar that are repaid on monthly utility bills. (Maui Electric in Hawaii is an example.) Equipment leasing is another model, in which a utility leases solar PV systems to its customers. (New Jersey Natural Gas is an example.) Under a “community solar” model, a utility owns and operates a solar PV system serving multiple customers, located either at the point of end-use or on the distribution system, and sells the power from that system at a fixed long-term (i.e., 20-year) “solar rate” to those customers. One variation involves a utility selling power via fixed proportional shares of solar system output. (Examples include the Sacramento Municipal Utility District in California, Salt River Project and Tucson Electric Power in Arizona, and other municipal utilities.) Source: See Endnote 29 for this chapter. Box 5 | Utility Business Models for Solar PV Great Debate 8 | Will Green Power Purchasing Scale Up Like Organic Food Has? In many countries, consumers have a variety of options for purchasing “green” renewable energy—generally in the form of electricity, although in some countries voluntary purchases of “green” biogas, heat, and transport biofuels are also possible. In 2011, green power sales continued to expand in a number of countries as price premiums for green power over conventional energy continued to decline. In the United States, regulations in several states require utilities or electricity suppliers to offer green power products; as a result, more than 850 utilities offer green pricing programs. Experts noted that although green power sales are setting new records, green power is still a tiny fraction of total power sales. Some experts compared the situation to the early years of organic foods, and wondered whether households and companies would dramatically scale up their purchases from green power suppliers. (Experts noted that it also depends on the existence of policies that allow consumer choice of electricity supplier at the retail level, or that mandate utilities to offer green power options.) Experts pointed to corporate purchases of green power as an encouraging trend, noting green power purchases among many leaders in corporate sustainability. “Corporate governance is heading toward climate and sustainability goals,” said one corporate watcher, who believed that green power would increasingly fit those goals. However, some questioned whether other types of corporate models for renewable energy investment would become more significant than green power. Notes and discussion: See Annex 4. 03

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