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80 04 POLICY LANDSCAPE PV and small-scale wind plants; Latvia enacted a net metering policy that entered into force on 1 January 2014; and Ukraine launched a net metering programme that requires utilities, as of 1 January 2014, to connect residential solar PV systems to the grid within five days of project completion and the filing of an interconnection request.66 In Central America, Honduras approved net metering for systems smaller than 250 kW.67 Additionally, the Philippines adopted new interconnection standards, bringing into effect the net metering policy that was legally established in 2008.68 Only two countries revised net metering policies at the national level in 2013: Denmark restricted the availability of payments for self-generation by moving from yearly to hourly net metering and setting an eligibility cap of 20 MW worth of solar PV systems, and the Netherlands removed its 5,000 kW incentive cap, thereby increasing the amount of electricity generation that is eligible to receive support under its net metering scheme.69 At the state level, there were a number of developments in 2013 and early 2014, with four Indian states—Andhra Pradesh, Kerala, Gujarat, and Uttarakhand—all starting net metering programmes for rooftop solar PV systems.70 Uttarakhand introduced net metering for rooftop solar PV at a rate of USD 0.15 / kWh (INR 9.20 / kWh) for installations of 300 W–100 kW with battery backup, and up to 500kW systems without batteries; total installations are limited to 5 MW.71 Tamil Nadu set a cap on its existing net metering scheme for solar PV systems, limiting it to 90% of a consumer’s electricity consumption.72 In the United States, net metering policies remained in 43 states, Washington, D.C., and 4 territories. While no new policies were added in 2013, four states revised existing laws. California extended net metering (it was scheduled to be suspended in 2014), provided clarity on how to calculate the 5% capacity cap, and laid the foundation for the development of a new uncapped net metering scheme.73 New York tripled its solar PV capacity SIDEBAR 7. INNOVATING ENERGY SYSTEMS: TRANSFORMATION OF THE ELECTRIC UTILITY INDUSTRY The rise of a variety of “disruptive” energy technologies (new products or markets that replace existing ones, such as distributed solar PV and wind power) as well as of demand-side efficiency measures is challenging the traditional business model of electric utilities in many liberalised electricity markets. Shifting and disappearing power loads and changing relative costs of various generating technologies undermine the economic viability of some existing generating assets, which may become stranded in a changing market. Competition from new technologies can be disruptive in any industry and is not problematic in itself. Distributed generation, for example, can help reduce the load on the transmission and distribution network during peak demand periods, minimizing both the investment needed in these systems and the potential for outages (in turn reducing associated costs to the distribution utility). Moreover, many utilities faced challenges even before the rapid growth of wind and solar power, due to overinvestment in fossil generating capacity, declining natural gas prices in some countries, sluggish electricity demand growth, and a further slowdown in demand caused by the financial crisis. Europe’s top 20 utilities, for example, have lost more than half of their value since their peak in 2008. Solar and wind power have simply added to the disruption. Rising shares of wind and solar power have reduced electricity prices and the number of kilowatt-hours needed from thermal generation, particularly at times of peak mid-day demand (in the case of PV) when many utilities profit the most from higher market prices. Some wholesale markets have seen significant reductions in power prices (even negative pricing) during periods of high generation and low demand, which has squeezed out of the merit order (relatively) clean and flexible natural gas as well as coal/lignite. In response, many large utilities in Australia, Europe, the United States, and elsewhere are pushing back against renewables, claiming that they are increasing electricity costs and arguing for an end to policy support for renewable power. The dramatic decline in solar PV module prices, in particular, has furthered a shift from conventional electricity models—with a one-way flow of electricity (supply-demand model)—towards a bidirectional model in which power consumers can also become producers. By 2013, more than 3 million EU households produced their own electricity using solar PV, and, by early 2014, 16% of Germany’s businesses were electricity self-sufficient, up 50% from a year earlier. The rapid loss of revenue from ratepayers raises questions such as who will pay for the system reliability and reserve power that utilities have always provided? Who will invest in needed infrastructure improvements? And what share of ancillary services can renewable energy provide? Some say that a new utility business model is needed, and many utilities agree. A recent global survey of utility executives showed expectations of the need to change business models to survive, with the highest anticipation of transformation in Asia. German utility giant EnBW went so far as to declare that its conventional business model could “no longer work.” Some utilities are responding by increasing their investment in renewables. Whereas a decade ago, utilities in Europe accounted for less than 10% of investment in large-scale renewable energy projects, they now make up more than half of the pipeline of future projects. Coal India has begun developing solar PV projects across India. Other utilities are shifting away from traditional centralised power generation and moving into “downstream” activities, or joining forces with renewable energy interests. Some utilities in the United States are creating new business models to profit from solar power: for example, Duke Energy and Edison International have invested in a firm that is financing solar projects, and PSE&G of New Jersey is making loans to solar PV customers. Increasingly, stakeholders contend that the business of meeting energy needs is moving away from a volume-based supply model, underpinned by asset ownership, to a service-based

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