A national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

National Renewable Energy Laboratory 

Innovation for Our Energy Future 

Future of Grid-Tied PV Business 

Models: What Will Happen When 

PV Penetration on the 

Distribution Grid is Significant? 

Preprint 

Shannon Graham, Ryan Katofsky, Lisa Frantzis, 

and Haley Sawyer 

Navigant Consulting Inc. 

Robert Margolis 

National Renewable Energy Laboratory

Presented at SOLAR 2008 - American Solar Energy Society (ASES) 

San Diego, California 

May 3–8, 2008

Conference Paper 

NREL/CP-670-42985 

May 2008 

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FUTURE OF GRID-TIED PV BUSINESS MODELS: WHAT WILL HAPPEN WHEN PV 

PENETRATION ON THE DISTRIBUTION GRID IS SIGNIFICANT?
 

Shannon Graham Ryan Katofsky 

Navigant Consulting, Inc. Navigant Consulting, Inc. 

One Market, Suite 1200 77 South Bedford Street, Suite 400 

San Francisco, CA 80301 Burlington, MA 01803-5154 

SGraham@navigantconsulting.com RKatofsky@navigantconsulting.com 

Lisa Frantzis Haley Sawyer 

Navigant Consulting, Inc. Navigant Consulting, Inc. 

77 South Bedford Street, Suite 400 1801 K Street, NW, Suite 500 

Burlington, MA 01803-5154 Washington, DC 20006-1301 

sgraham@navigantconsulting.com HSawyer@navigantconsulting.com 

Robert Margolis
 

National Renewable Energy Laboratory
 

901 D Street, S.W., Suite 930 

Washington, D.C. 20024-2157 

robert_margolis@nrel.gov
 

ABSTRACT This report is a first structured, comprehensive and public 

attempt to answer that question. Our investigation identified 

Eventually, distributed PV will become a more significant several key findings: 

part of the generation mix. When this happens, it is expected  The question is dynamic, and has broad implications for that utilities will have to take on a more active role in the a wide array of stakeholders – most notably utilities. placement, operation and control of these systems. There are 

operational complexities and concerns of revenue erosion  While the number of installed distributed PV systems 

that will drive utilities into greater involvement of will eventually become a material and operational 

distributed PV and will create new business models. This concern – or opportunity – for utilities, the full benefits 

report summarizes work done by Navigant Consulting Inc. of an extensive distributed PV resource are not likely to 

for the National Renewable Energy Laboratory as part of the be realized without some degree of utility control and 

Department of Energy’s work on Renewable System possibly ownership. 

Integration. The objective of the work was to better  Who owns and controls the PV facilities and the related understand the structure of these future business models and flows of cash and other benefits is key to determining the research, development and demonstration (RD&D) the potential viability of any PV business model. required to support their deployment. This report describes 

potential future PV business models in terms of  It appears that key industry stakeholders have 

combinations of utility ownership and control of the PV considered changes to current models of ownership and 

assets, and the various relationships between end-users and control, but few have moved forward, indicating that 

third-party owners. barriers, such as the current regulatory structure, 

insufficient scale, and other priorities, impede optimum 

1. KEY FINDINGS development. 

 Smart-grid technologies are expected to be very As photovoltaics (PV) demonstrate the potential to important for the emerging PV business models. While significantly penetrate the electric generation market, a this report does not focus on specific recommendations, question arises: how might government action encourage it is clear that the ongoing RD&D in this area, both business models that promote the development of PV? public and private, will be critical for distributed PV. 

1
 
 

 

 

 

 

 

 

 

 

 

 

Similarly, distributed PV may become an important 

enabler for deployment of these technologies, as higher 

levels of PV market penetration necessitate their use. 

	 Each potential future business model identified in this 

report has several permutations, and it is not yet clear 

which is likely to be the most successful, how multiple 

business models could co-exist, or if one may evolve 

into another over time. Attempting to pilot any 

particular one at this time appears to be premature. 

	 The scale of a potential pilot program involving utilities 

feeds back into the advisability of delaying the 

implementation of a pilot until a greater level of 

stakeholder engagement is achieved in the preliminary 

assessment. 

	 It appears to be a question of when, and not if, there 

will be a need for new PV business models, in order to 

accommodate and facilitate widespread adoption of 

distributed PV. 

2. BACKGROUND 

Current PV business models principally revolve around the 

ownership of PV systems by individuals and increasingly by 

third parties, rather than by utilities. At today’s low levels of 

market penetration, distributed, grid-connected PV is not a 

central concern nor even of great interest to most utilities. 

However, as PV market penetration accelerates, utilities will 

become critical stakeholders, driven primarily by concerns 

about grid operation, safety, and revenue erosion. 

Until now, utilities have mainly responded to regulators, 

who asked of them nothing more than to help customers 

who wanted to purchase or acquire a PV system. In the 

process, some utilities have removed key barriers to PV 

deployment to a limited extent, mainly by providing net 

metering and adopting simplified, standardized 

interconnection standards and agreements. In addition, 

regulators have sometimes obligated utilities to purchase 

renewable energy certificates (RECs) generated by PV 

owners, particularly in states with specific mandates for 

solar energy. 

On the whole, however, the utility’s role in the PV market 

has been passive. PV has not been a core utility business 

endeavor nor a concern, primarily because (1) the cost of 

PV has exceeded that of other energy delivery options, and 

(2) utilities have seen, up to the present, no clear 

business/regulatory model that will allow them to recover 

high distributed PV costs. 

The basic premise explored in this report is that large 

amounts of distributed PV create a new paradigm that has 

the potential to radically alter a utility’s business model. Of 

all stakeholders involved, it is the utility that will have its 

existing business model most disrupted as the PV market 

expands. However, it is also the utility that has the potential 

to best utilize the unique, quantifiable benefits of the 

electricity generated by a PV system. 

3. OVERVIEW OF PV BUSINESS MODEL 

EVOLUTION 

The PV industry is moving away from the early approach in 

which the customer not only owned and financed the PV 

system, but also managed most aspects of installation. This 

approach is referred to as the Zero Generation PV business 

model; its attractiveness was limited to a relatively small 

group of so-called pioneers who were committed to PV’s 

environmental, energy security, and self-generation benefits. 

The PV industry has evolved to 1st Generation PV business 

models, in which the product is more attractive to a broader 

market, moving into the so-called early adopter customer 

category. (See Attachment 1) 

2nd Generation business models have yet to emerge, but 

will emphasize greater integration of the PV systems into 

the grid because emerging technologies and regulatory 

initiatives are likely to make such integration more viable 

and valuable. 2nd Generation business models are the focus 

of the future business models explored in this report, as they 

are expected to become increasingly important to various 

stakeholders. 

Although the utility has, to date, been generally reactive to 

state requirements (e.g. net metering, standardized 

interconnection), it is expected to become proactive in the 

distributed PV market as it is pushed to key stakeholder 

status. Once PV reaches significant market penetration 

(perhaps 10-15% of a utility’s peak load), utility 

involvement will be driven by concerns for grid 

infrastructure, safety, and of course, revenue erosion. An 

appropriate business model can promote and accelerate the 

utility’s willing promulgation of PV and help unlock its full 

value. 

4. CONTEXT FOR FUTURE PV BUSINESS MODELS 

At the same time that the PV industry is making great 

strides in the deployment of PV using 0 and 1st Generation 

approaches, significant activities are also occurring outside 

of the PV industry that have clear implications for long-term 

PV market penetration. In particular, changes in policy, 

technology and utility regulation may hold the potential to 

not only create opportunities to unlock additional value 

from PV systems, but may simultaneously create more 

demand for it (see Attachment 2). 

2
 
 

 

 

 

 

 

 

 

 

     

     

           

               

 

Technology developments underway to manage the 

distribution grid more effectively will have many benefits 

for distributed generation, including PV. In particular, the 

development of distribution system automation, the 

transition to “smart grids,” and the deployment of customerand utility-controlled demand response are all likely to help 

utilities and others unlock additional value from distributed 

PV systems. 

Policy trends that create a market for renewable energy, 

such as Renewable Portfolio Standards or RPS (especially 

those with solar set-asides) and greenhouse gas emission 

caps, are gaining momentum at the state and local levels, 

and may ultimately culminate in much higher average state 

targets and, eventually, a Federal-level policy. 

Finally, regulatory changes in some states are altering the 

way a utility perceives its business. Beyond net metering 

and interconnection issues, performance-based ratemaking 

(in which incentive benchmarks, rather than budgets, 

determine cost recovery) and revenue decoupling 

mechanisms (in which rates are determined as a function of 

service delivery rather than as a strict return on hard assets) 

are being implemented to encourage energy efficiency, 

conservation, and renewable energy. Given these types of 

changes, the ability of a utility to realize revenue from rates 

that are based in part on reconfiguring its grid and altering 

its customer support to integrate PV will have obvious 

benefits for the further increase of distributed PV. In 

addition, some utilities have experimented with tariff 

structures to encourage desired consumer behaviors and the 

deployment of new technologies. For example, variations of 

time-of-use pricing can be very beneficial to PV economics. 

Also, adoption of transmission congestion pricing should 

have a beneficial impact on distributed PV, as the market 

value of distributed generation will be made plain by the 

congestion prices. These regulatory actions are increasingly 

being driven by the desire to encourage conservation or 

greenhouse gas reductions. 

Looking forward 10 to 20 years, there is a strong case to be 

made that PV in distributed applications, primarily 

customer-sited, will become an inevitable and significant 

component of the electricity sector, and especially if 

forecasted PV cost reductions materialize. In the long-term 

vision presented in this report, PV will pass a “tipping 

point” beyond which it is competitive with retail power 

supplied by the grid. The point of wide-scale 

competitiveness with grid power may come sooner as a 

result of specific breakthroughs in technology, or later as a 

result of the steady march down the cost curve. In either 

case, this vision depends on the PV supply chain being able 

to ramp up capacity to meet market demand. 

When PV achieves a high degree of market penetration, 

there will be significant implications for key stakeholders, 

especially for the utility. PV will eventually be an 

operational problem for the utility if it is not strategically 

managed. Additionally, as the cost of PV comes down, 

distributed PV generation could become a competitive threat 

to central-station generation. 

Of all the stakeholders involved, it is the utility that will 

have its existing business model disrupted the most, and 

must therefore adapt to protect and enhance its business. 

Thus, greater utility involvement is seen as the key to future 

PV business models. In contemplating PV system 

ownership and control on the distribution grid, a utility can 

leverage what it already does well, including asset 

management and investment, customer service and system 

operations (see Attachment 3). 

For the utility, PV could simply become another rate-based 

asset to own, manage, and operate to provide equal or 

higher quality of service than what it provides today. In 

addition, PV may allow a utility to take maximum 

advantage of the capabilities that distribution automation 

and smart grid technologies will provide. In fact, PV 

arguably has the potential to be one of the most significant 

distributed resources managed by these technologies. 

5. FUTURE BUSINESS MODELS 

Three basic types of business models were identified in this 

report, as illustrated in Figure 1. The main distinctions 

among them lie in who owns and controls the PV system. 

(A fourth option, in which the PV system is owned by the 

utility but not controlled by it, is not viewed as being a 

viable business model because the utility is unlikely to cede 

control of an asset that it owns.) As will be discussed in 

more detail below, the success of any of these business 

models will be tightly linked to ongoing technology and 

market developments in distribution automation and 

demand response, and may also require significant 

regulatory changes. In the full report variations of each 

basic type of business models are discussed. 

New PV Business

Models

Utility Controlled 3rdparty or Customer

Controlled

3rdparty or Customer

Owned

3rdparty or Customer

Owned Utility Owned

Increasing level of utility involvement and complexity/time to implementation

1 2 3

Figure 1: New PV Business Models Focused on System 

Ownership and Control 

3
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.1 Third Party/Customer Controlled and Owned PV 

Business Model 

In this business model, the customer or a third party controls 

the PV system as well as owns it. (There is also the 

possibility of customer ownership combined with thirdparty control.) This business model is primarily an 

extrapolation of current business models and trends (See 

attachment 4). The key difference is that additional sources 

of revenue are captured by the owner, based on various 

changes to the regulatory and policy regimes and on the 

deployment of “smart grid” technologies and energy storage 

that is integrated with PV system operation. In this model, 

the utility role remains mainly one of facilitation, primarily 

driven by regulatory or policy changes. The utility pays for 

value-added products and services obtained from the PV 

system and are then allowed to recover these costs through 

traditional rate-making proceedings. 

This business model is considered the most likely to become 

established in the absence of outside influence, as various 

pieces of current regulation and policy are already in place 

to enable it in some jurisdictions. 

If the customer/third-party controlled and owned business 

model becomes widespread, the distribution grid must be reengineered to be highly responsive to changes in PV 

operating profiles (e.g., extremely localized power 

fluctuations), either due to transient changes in sunlight 

availability or to decisions taken by the owners, because the 

utility will not control the PV systems. An issue that will 

arise is the degree to which owners will be “free to choose” 

how to operate their systems. For example, if a customer 

chooses to participate in a demand response program, they 

might be obligated to respond to utility signals. 

5.2 Utility Controlled, But Third Party or Customer Owned 

PV Business Model 

This business model is somewhat similar to the one 

described above, in that it seeks to achieve similar 

objectives (Figure ES 1 7). The key difference is that greater 

utility involvement in the operation and control of the 

systems is contemplated as a way to increase the value of 

the assets. Like the customer controlled business model 

described above, regulatory and policy regimes will need to 

change, though more significantly here, to allow the utility 

to reach behind the meter where the PV system will reside. 

In this case, the customer will not respond to price signals 

because the utility is controlling the PV system, at least to 

some extent. 

This business model may work best where aggressive 

demand response or other similar programs are being 

pursued or where high penetration of PV systems may pose 

serious grid control and operations issues. Under those 

circumstances, direct utility control—for example, to allow 

the utility to curtail PV system operation to maintain grid 

stability—instead of a complicated market for such services, 

may be preferable because the utility is assured response as 

it controls the asset as opposed to relying on optional 

response to price signals. 

In this model, the utility would still pay for value-added 

products and services from PV systems and then be allowed 

to recover these costs through traditional rate-making 

proceedings. To the extent that PV systems a provide 

service and create value (e.g. avoid costs) for the utility, this 

would be factored into the cost of recovery calculation 

This business model is expected to evolve more slowly 

given the additional regulatory changes required to permit 

utility control behind the meter. Additionally, distributed 

PV needs to exist at a significant scale in order for a utility 

to find value in controlling it. For example, the distributed 

PV installation would have value to the utility proportional 

to its capacity to substitute for generation, capacity, and 

transmission and distribution (T&D) investments. 

The requirements for the utility controlled, customer/thirdparty owned business model are largely the same as for 

customer/third-party controlled model. The key difference is 

the regulatory regime, which would enable utility to control 

significant assets on the customer side of meter. To the 

extent that utility control is not just for grid benefits but also 

to enable the utility to offer other services to the end user, 

these regulatory changes will need to address the rules 

governing competition for providing these services. The 

main competitive issue is that the utility, as a monopoly, has 

an unfair advantage in its access to the customer. If the 

utility is allowed to access assets behind the meter for the 

benefit of the grid, but then is also allowed to leverage this 

access to offer customer-based services like backup power 

or energy management, other companies without such 

access might see this as unfair. To the extent that utilities 

were allowed to use the PV assets to provide value-added 

services to those customers who own them, the structure and 

pricing of these services must be determined in a transparent 

and equitable manner. 

5.3 Utility Controlled and Owned PV Business Model 

This business model represents the greatest departure from 

today, as the utility reaches unequivocally behind the meter 

to own assets and provide a range of services to customers 

(Figure ES 1 8). This model seeks to unlock greater 

distributed PV value by involving the utility directly in both 

ownership and control of the asset, and in monetization of 

the asset’s value. This arrangement fits well with utility core 

competencies of asset ownership and operation. Given that 

4
 
 

 

 

 

 

 

 

 

 

 

PV is a capital-intensive asset, there is merit in putting such 

utility-owned assets in the rate-base. 

By allowing the utility the greatest control over the 

placement and subsequent operation of the asset, this model 

should generate the greatest overall value for the utility. 

Moreover, in this model, the utility can readily incorporate 

the grid benefits into its basic cost of service, as well as sell 

value-added services to the end-user. Of the three groups of 

business models, this one is the easiest model for the utility 

to incorporate deployment of PV into their capital planning, 

as the ultimate decision to install is in their control. 

However, the issue of competition will be a complication as 

the utility could have unfair advantage in providing valueadded customer-oriented (vs. grid oriented) services that a 

third party may want to provide. 

Like the other business models described above, regulatory 

and policy regimes will need to be changed significantly to 

allow the utility to reach so overtly behind the meter. To 

mitigate the potential scope of such regulatory and policy 

changes, the PV systems could be located on customer 

premises but placed on the utility side of the meter. In the 

past, states have prohibited utilities from owning and 

operating distributed energy resources (DER) because of 

concerns regarding market power. This concern will need to 

be addressed if and when PV systems become very 

inexpensive or otherwise attractive to utilities. 

This business model is expected to evolve more slowly than 

the others, given the additional regulatory changes required 

to permit utility control and ownership. In addition, in order 

for utility control to have significant value to the utility, 

distributed PV has to exist on a sufficient scale to have 

material impact on key values such as ability to offset 

generation, capacity, and T&D investments. 

In a business model in which the PV assets are both 

controlled and owned by the utility, the structure of the 

system-wide control architecture would be different than in 

models in which the customer or a third party either controls 

or owns the assets. There would be no need to be able to 

send or other signals to a large number of owners. Instead, 

the control of the PV assets would be integrated into the 

utility’s overall distribution network. Moreover, the 

deployment and use of PV systems would be more readily 

integrated into the utility’s planning processes; PV systems 

would become extensions of the distribution grid. Thus, as 

PV is continually added, the utility would have the 

opportunity to make sure that the grid configuration remains 

optimal. This business model would also likely make it 

easier for utilities to justify investments required for grid 

reconfiguration, as this becomes necessary. 

6. CONCLUSIONS 

Currently, PV business models revolve around access to 

lower-cost financing, increasing the efficiency of the supply 

chain, and reducing hassles and complexity for the 

customer. These types of incremental improvements will 

occur naturally as 0 and 1st Generation business models 

continue to evolve. 

Up until this point, there has been little reason to address 

system control or consider PV aggregation as an explicit 

policy matter, given the limited number of PV systems 

installed on the distribution grid. However, a time will 

come—in some areas of the country much sooner than 

others—when the sheer number of installed distributed PV 

systems becomes a material and operational concern—or 

opportunity—for utilities. Policy and regulatory 

considerations will then be paramount. 

The most significant finding in this study to date is that the 

full benefits of an extensive distributed PV resource are not 

likely to be realized without some degree of utility control 

and ownership. The need to have active management and 

control of an increasingly large number of distributed PV 

systems implies that utilities will most likely become more 

involved in one way or another. As market penetration 

increases, distributed generation will reach a scale (i.e. 

generally greater than 100 MW) that could translate to 

significant value. For example, utility involvement could 

help optimize distributed PV assets by incorporating them 

into grid and generation planning. This is likely to reduce 

new peaking power requirements, distribution substation 

upgrades, and other system investments, thus unlocking 

latent value in the electric grid as a whole. 

The results of recent analyses performed on the value of PV 

show that the real value of PV lies in its potential to offset 

generation, capacity and T&D investment.1

 Such value 

greatly outweighs the value PV has for providing ancillary 

services on the distribution grid. Therefore business model 

development will not be driven by the potential for ancillary 

grid services. It is the possibility that a large quantity of 

distributed PV systems will be installed that provides the 

greatest potential benefit to the nation’s energy 

infrastructure, as these systems in aggregate could actually 

offset significant investment requirements in new 

generation, transmission, and distribution capacity. 

Aside from the technological changes that will be required 

to accommodate a large capacity of PV on the grid, the 

organizational structure of today’s utilities does not 

facilitate the adoption of the new business models discussed 

in this report. For example, current grid planning and 

operation practices do not explicitly take into account the 

potential value from PV, and these functions are largely 

separate within utility organizations, which hampers 

5
 
 

 

 

 

 

inclusion of PV and other distributed resources in system 

planning. 

7. ACKNOWLEDGMENTS 

The authors at Navigant Consulting Inc. would like to thank 

the Department of Energy and the National Renewable 

Energy Laboratory for supporting our work on this topic. 

We would also like to thank our colleagues at Navigant 

Consulting Inc. that provided valuable input, including 

Craig McDonald and Stan Blazewicz. 

In addition, we would like to acknowledge that in our 

informal conversations with industry on the topic of future 

business models we confronted a great spectrum of opinions 

regarding how things will unfold; in particular this was true 

for utility involvement. Some industry leaders felt that 

utility involvement in distributed PV will remain limited, 

while others view utility involvement, including control and 

ownership, as inevitable. This report examines the spectrum 

of options for the future. 

8. REFERENCES 

1. J.L. Contreras, L. Frantzis, S. Blazewicz, D. Pinault, and 

H. Sawyer (Navigant Consulting Inc.), Photovoltaics Value 

Analysis, February 2008. 

6 
   

       

     

     

     

       

       

   

       

       

       

   

       

   

     

     

   

   

   

         

       

   

         

           

     

       

   

       

       

       

       

   

 

   

     

     

         

     

     

Regulatory

   

     

     

         

     

     

•Development and

deployment of distribution

automation technologies

•Transition to “smart grids”

•Continued development and

deployment of other

distributed generation

technologies

•Development and

deployment of plug in hybrid

vehicles (implications for grid

operations, load growth and

battery technology

development)

Technology

   

   

     

   

     

   

   

       

     

       

   

•Further development of

Renewable portfolio

standards (increasingly with

solar set asides)

•Greenhouse gas emission cap

& trade programs and other

climate change initiatives

•State level economic

development initiatives

•Growth of state solar energy

initiatives and system

benefits charge funds

Policy

   

   

   

   

       

         

   

   

         

     

   

Attachment 1: Evolution of PV Business Models 

Evolution of PV Business Models

PV System Supply

0 Generation

Third‐Party Ownership &

Operation Full Integration

1st Generation 2nd Generation

• Business models focus on

manufacturing, supply and

installation of PV systems

• End‐user is the owner

• Utility is largely passive,

providing net metering and

standard/simplified

interconnection, but

otherwise, unaffected.

• Business models driven by

third parties which develop

projects and own PV

systems, resulting in:

−	 Reduction of hassle &

complexity for end‐user

− Better access to financing

−	 Leveraging of current

incentives structure

(especially for

commercial building

applications)

• Utility gradually takes on a

facilitation role as PV

market share grows

• Business models allow PV to

become an integral part of the

electricity supply and

distribution infrastructure

• Business models emerge with

variation of system:

– Ownership

– Operation

– Control

• Utility becomes more deeply

involved, as PV becomes

major consideration

• PV product supply chain

becomes “commoditized”

Attachment 2: External Factors with Implications for PV Market Development 

‐

•Development and

deployment of distribution

automation technologies

•Transition to “smart grids”

•Continued development and

deployment of other

distributed generation

technologies

•Development and

deployment of plug‐in hybrid

vehicles (implications for grid

operations, load growth and

battery technology

development)

Technology

‐

•Further development of

Renewable portfolio

standards (increasingly with

solar set asides)

•Greenhouse gas emission cap

& trade programs and other

climate change initiatives

•State‐level economic

development initiatives

•Growth of state solar energy

initiatives and system

benefits charge funds

Policy Regulatory

•Performance‐based

ratemaking

•Revenue decoupling to

encourage energy efficiency

and conservation

•Tariff structures optimized

for PV and other distributed

generation

•Demand response programs

(customer and utility

controlled)

7
 
 

 

 

Attachment 3: Implications of Widespread Distributed PV Deployment on Key Stakeholders 

Stakeholder Implications 

End-User 

PV system: 

• Is cost-effective alternative to the grid 

• Provides improved reliability (over grid) 

• Helps meet environmental desires of consumers 

• Generates a range of value streams (driven in part by environmental and climate 

change policy) 

• Is part of a bundle of new technologies to improve energy service at end use and 

reduce cost as cost drops (low-cost energy storage, distribution system 

automation, “smart homes”, plug-in hybrid vehicles) 

System Owner 

• PV system output has multiple value streams that can make it competitive in the 

market relative to grid power 

• Owner needs to be able to identify and capture multiple PV value streams 

Distribution 

Utility and 

Vertically 

Integrated Utility 

• High degree of PV market penetration creates: 

o Reduced throughput leading to revenue loss under traditional tariff 

structures 

o Need for control of PV systems and/or new distribution system 

architectures to ensure safety, operational integrity and reliability of the 

distribution grid 

• In addition, new technologies used in conjunction with PV could radically 

change utility operations and product/service offerings to customers (low-cost 

energy storage, distribution system automation, “smart homes”, plug-in hybrid 

vehicles) 

Wholesale 

Generator • High degree of PV market penetration could provide competition in the 

wholesale market to more expensive generating assets 

Regulator • Emergence of cost-effective PV and other complementary technologies creates 

need for major transformation of how utility industry is regulated 

Transmission 

Company • High degree of PV market penetration could impact the demand for transmission 

services 

8
 
 

             

     

   

  

   

   

  

       

   

   

   

   

   

   

   

     

   

     

     

   

  

   

  

   

   

   

   

   

   

   

     

             

   

     

     

 

Attachment 4: Third Party/Customer Controlled and Owned Value Network1 

Financier

(e.g. bank or

investor)

Utility

Regulator

Local

Government

(e.g. city)

State &

Federal

Government

Interconnection,

net metering

Interconnection and

net metering

standards

Building codes

influence PV

system design

Attribute

Aggregator/

Marketer

Attributes

* (e.g.,

RECs)

Attributes

(e.g.,

RECs)

Payment

Payment

Debt &

Equity

Payment

Installation

permit &

inspection

3rd Party System

Owner

Financial

and tax

incentives*

Operation &

Maintenance

Provider

Monitoring

Provider

Distributor/

Integrator

System

Installer/

EPC

Upstream

Supply

Chain

Payment

PV System

& Other

Services

Policies

End‐User

kWh

Payment

Ancillary Services*

Payment for A/S

Services*

New tariffs &

programs

Payment

Supply chain Ownership & Operation

Services Other key value providers

* Requires communications and control, including for performance‐based incentives.

Attachment 5: Utility Controlled but Third-Party/Customer Owned Value Network1 

Financier

(e.g. bank or

investor)

Utility

Regulator

Local

Government

(e.g. city)

State &

Federal

Government

Interconnection,

net metering

Interconnection

and net

metering

standards Building codes

influence PV

system design

Attribute

Aggregator/

Marketer

Payment

Attributes*

(e.g., RECs)

Attributes

(e.g.,

RECs)

Payment

Payment

Debt &

Equity

Payment

Installation

permit &

inspection

3rd Party System

Owner

Financial

and tax

incentives*

Operation &

Maintenance

Provider

Monitoring

Provider

Distributor/

Integrator

System

Installer/

EPC

Upstream

Supply

Chain

Payment

PV

System

& Other

Services

Policies

End‐User

kWh

Payment

Ancillary Services*

Payment for A/S

Services*

New tariffs &

programs

Payment

for svcs

Supply chain Ownership & Operation Represents change from today

Services Other key value providers

* Requires communications and control, including for performance‐based incentives.

1

 As an example of this business model, we selected the 3rd party owned variant, although the end-use owned variant would 

illustrate the issues as well. In addition, this diagram represents all of the major functions as separate, even though there may 

integration of some functions as the industry grows and matures. 

9
 
     

   

  

   

   

  

   

   

   

‐

   

   

   

   

     

     

             

   

     

     

 

Attachment 6: Utility Controlled and Owned Value Network2 

Financier

(e.g. bank or

investor)

Utility

(owner)

Regulator

Local

Government

(e.g. city)

State &

Federal

Government

Interconnection,

net metering

Interconnection and

net metering standards

Building codes

influence PV

system design

Attribute

Aggregator/

Marketer

Attributes* (e.g., RECs)

Payment

Debt &

Equity

Payment

Installation

permit &

inspection

End User

Financial

and tax

incentives*

Operation &

Maintenance

Provider

Monitoring

Provider

Distributor/

Integrator

System

Installer/

EPC

Upstream

Supply

Chain

Payment

PV

System

& Other

Services

Policies

Ancillary Services*

Payment for A/S

Onsite Services*

New tariffs &

programs

Payment for onsite services

Attributes

(e.g.,

RECs)

Payment

Supply chain Ownership & Operation Represents change from today

Services Other key value providers

* Requires communications and control, including for performance‐based incentives.

2

 This diagram represents all of the major functions as separate, even though there may integration of some functions as the 

industry grows and matures. 

10
 
F1146-E(12/2004) 

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PLEASE DO NOT RETURN YOUR FORM TO THE ABOVE ORGANIZATION.

1. REPORT DATE (DD-MM-YYYY)

May 2008 

2. REPORT TYPE

Technical Report 

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5a. CONTRACT NUMBER

DE-AC36-99-GO10337 

5b. GRANT NUMBER

4. TITLE AND SUBTITLE

Future of Grid-Tied PV Business Models: What Will Happen When 

PV Penetration on the Distribution Grid is Significant? Preprint 

5c. PROGRAM ELEMENT NUMBER

5d. PROJECT NUMBER

NREL/CP-670-42985 

5e. TASK NUMBER

PVB7.6403 

6. AUTHOR(S)

S. Graham, R. Katofsky, L. Frantzis, and H. Sawyer (Navigant); 

R. Margolis (NREL) 

5f. WORK UNIT NUMBER

7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES)

National Renewable Energy Laboratory 

1617 Cole Blvd. 

Golden, CO 80401-3393 

8. PERFORMING ORGANIZATION 

REPORT NUMBER

NREL/CP-670-42985 

10. SPONSOR/MONITOR'S ACRONYM(S)

NREL 

9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES)

11. SPONSORING/MONITORING 

AGENCY REPORT NUMBER

12. DISTRIBUTION AVAILABILITY STATEMENT

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13. SUPPLEMENTARY NOTES

14. ABSTRACT (Maximum 200 Words)

Eventually, distributed PV will become a more significant part of the generation mix. When this happens, it is expected 

that utilities will have to take on a more active role in the placement, operation and control of these systems. There are 

operational complexities and concerns of revenue erosion that will drive utilities into greater involvement of distributed 

PV and will create new business models. This report summarizes work done by Navigant Consulting Inc. for the National 

Renewable Energy Laboratory as part of the Department of Energy’s work on Renewable System Integration. The 

objective of the work was to better understand the structure of these future business models and the research, 

development and demonstration (RD&D) required to support their deployment. This report describes potential future PV 

business models in terms of combinations of utility ownership and control of the PV assets, and the various relationships 

between end-users and third-party owners. 

15. SUBJECT TERMS

NREL; Robert Margolis; Navigant Consulting; solar photovoltaics; PV; distributed PV; renewable system integration; 

PV business models; utilities; energy mix; electricity distribution grid 

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