The U.S. shale boom has exerted downward pressure on natural gas prices nationally, widened oil‐to‐gas price spreads, and accelerated coal‐to‐gas fuel substitution. One concern is the impact of the rising production of shale gas on further development of a domestic solar photovoltaic (PV) market. Specifically, will lower natural gas prices slow or even reverse the current rapid growth in the solar market? Using the Phillips–Sul convergence test, this paper investigates whether the levelized cost of energy (LCOE) of solar PV and natural gas electricity generation in the United States have converged. Using weekly Henry Hub‐linked natural gas spot prices and utility PV system prices from 2010 to 2015, empirical tests for convergence are applied to examine the extent of spot market integration and the speed with which market forces move the two energy prices toward equilibrium. The paper also assesses the link between the MAC Solar Energy Index (SUNIDX) and the S&P GSCI natural gas index spot prices for evidence of market integration during 2007–2015. We conclude that PV and natural gas prices are not converging, and the two markets are not integrated nationally, but some level of integration could exist at regional and state levels that will need to be tested in future research. We also conclude that complementary use of the technologies is likely; while price convergence is not likely to occur soon, distinctive complementary benefits of each resource compared to each other (e.g., fast‐start capabilities for gas and low price volatility for PV) will offer opportunities that expand market demand for both. WIREs Energy Environ 2017, 6:e238. doi: 10.1002/wene.238
This article is categorized under:
Photovoltaics > Economics and Policy
Energy Systems Economics > Systems and Infrastructure
Electric utility business models are changing to integrate new technologies and distributed energy resources (DER). Diversifying energy mix and customer choices are both novel and useful in understanding key drivers of this transformation, including distribution system planning and customer-service options. Practical implementation of these solutions, however, shows that without proper planning, energy diversification could come at very high social and economic costs. For example, regulators have been slow in implementing policy, regulatory, and business model constructs that promote customer choice to animate high levels of grid reliability and resiliency. Equally important is how viable existing utility business models are to navigating transformation processes, including strategic resource management, revenue model, customer interface, and value propositions. This chapter discusses our use of the Hamel business model to offer strategic analysis of Reforming the Energy Vision (REV), which is aimed at decarbonizing New York's energy sector and increasing customer choice and control. Specifically, we build from existing literature to argue that implementing distribution management systems (DMS) in which customer choice and DERs are prominent requires a shared or 'polycentric,' networked businessmodel innovations that build on competitive and comparative advantages of existing institutions to meet the growing demand for electricity services and utility strategic goals.
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Electric utility business models are changing to integrate new technologies and distributed energy resources (DER). Diversifying energy mix and customer choices are both novel and useful in understanding key drivers of this transformation, including distribution system planning and customer-service options. Practical implementation of these solutions, however, shows that without proper planning, energy diversification could come at very high social and economic costs. For example, regulators have been slow in implementing policy, regulatory, and business model constructs that promote customer choice to animate high levels of grid reliability and resiliency. Equally important is how viable existing utility business models are to navigating transformation processes, including strategic resource management, revenue model, customer interface, and value propositions. This chapter discusses our use of the Hamel business model to offer strategic analysis of Reforming the Energy Vision (REV), which is aimed at decarbonizing New York's energy sector and increasing customer choice and control. Specifically, we build from existing literature to argue that implementing distribution management systems (DMS) in which customer choice and DERs are prominent requires a shared or 'polycentric,' networked businessmodel innovations that build on competitive and comparative advantages of existing institutions to meet the growing demand for electricity services and utility strategic goals.
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