What's the difference between regulated electricity vs. deregulated in the Solar Industry?

Updated: Mar 30, 2021

I've come across this question a lot lately and it's time to put it to rest. A Virtual Solar Consultant is blessed to be able to provide service in multiple markets. However, that blessing couples with the responsibility to know the market you service and the pros and cons of electricity regulation versus deregulation.

What is the difference?

Deregulation has to do with the reduction or elimination of state intervention in a particular industry—usually enacted to create more competition within that industry.

For example, deregulated electricity markets open a competing ground for their wholesale electricity market participants ("generators" other than utility companies) to produce electricity with their own power plants and transmission lines. These "generators" sell the electricity to retail companies who in turn distribute throughout the public.

Transmission companies or utilities still have control, own and operate transmission grids in these areas and are allowed to charge a delivery fee for the use of their grids. Under this arrangement, customers benefit from more competitive rates and electricity generation options, including renewable energy, i.e. solar energy. An independent system operator (ISO) or regional transmission organization (RTO) overlooks this entire market model to:

  1. protect the consumer

  2. keep track of delivery charges

  3. maintain an equitable balance in the supply chain

On the other hand, a “regulated electricity market” contains utilities that own and operate all electricity within that market. In other words, under tight government scrutiny, vertical integrated monopolies control the supply chain of electricity in regulated markets from the generation to the meter—the utility has complete control. These monopolies control the full supply chain of electricity to a community, from sourcing to generation, production and delivery—they have no competition. Customers in regulated areas are pretty much stuck with whatever utility they have and cannot choose an alternative—which means, they are bound to their rules and regulations. If it weren't for the solar alternative, homeowners in these areas would be pretty much sequestered by utilities forever.

As of December 2018, deregulated states were California, Connecticut, the District of Columbia, Delaware, Illinois, Massachusetts, Maryland, Maine, Michigan, Montana, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island and Texas. Now it's important to point out that deregulated states may still have regulated pockets within their markets and either way, renewable energy is still a fundamental asset to the power grid, independently of the market fragmentation.

Diverse Markets

Let's take Texas for example. Texas is a deregulated state, yet still, a diverse state—which simply means that parts of the state have an open electricity retail market (deregulated) whereas other parts of the state remain closed (regulated).

Diverse markets are becoming increasingly more common in the country and thus a common scenario in the solar industry. Therefore, as professional solar consultants we should be familiar with both markets.

One thing I love about deregulated areas in Texas is the ability to access detailed meter data through Smart Meter Texas. Unlike other states, this tool allows for energy providers and solar consultants to have access to accurate historical meter readings, which in turn helps provide accurate energy-consumption-tailored solar proposals for our customers.

Deregulated Benefits for Residential Solar

Some may say, we live in America because we love competition. We love to be able to shop, compare prices and products; find the best options and formulate the best decisions for ourselves and our loved ones. Thus, in my opinion, the biggest bennefit we get by electricity deregulation is the power of [choice]. We can choose any given day from an ocean of energy suppliers who innovate and strive to earn our business. The opposite is obvious—we have no choice on regulated areas.

The second benefit is that generators and retailers will always come up with new ways to inch on markets and hence improve buyer conditions. We have a whole new display of offers to pick from an new choices to make every single month.

The third benefit is that electricity retailers are prone to purchase our excess solar production at a higher price than wholesalers and hence provide a better ROI for our solar systems.

Regulated Benefits for Residential Solar

Regulated areas are very straight forward. The benefit is that there's pretty much no surprises. Not every home is good for solar and hence we can scroll down the list and weed out unqualified properties faster and easier. Normally their stipulations are well documented and publicized. When you are familiar with your market, you will know the interconnection agreement, which makes target screening a lot easier too.

Wrap Up

All in all, there is enough room for fair solar competition in both markets, (although I have to admit I prefer deregulated markets over regulated). My best advise is, always study your markets and your value proposition, so you come prepared to the negotiating table and know exactly what is the best option for your customer, yourself and your company.

MANOLO BARDEGUEZ - Welcome to my Blog. I hope the articles on this site inspire you and I encourage you to discover the benefits of going solar for yourself by clicking Go Solar. By clicking Join you can also learn how you can join our movement to connect the world to sustainable technologies and get paid handsomely by the fastest growing solar company in America. If you have any questions, contact me directly at ManoloBard@SunbrightNet.com or call me by clicking the phone icon above.

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