Regulation, Innovation, and Experimentation : The Case of Residential Rooftop Solar

Recent innovations in smart grid and distributed energy technologies, innovations in solar industry financial and business models, and utility concerns about their financial viability in the face of such innovations, motivate our analysis of the regulatory institutions and their features that may be conducive to lower barriers to innovation in electricity. We analyze residential rooftop solar as a case study that should, with subsequent research and analysis, continue to shed light on the burdens and opportunities facing technologists, entrepreneurs, policymakers, and regulators attempting to orchestrate more efficient, dynamic, resilient, and clean electricity markets. We analyze electricity regulation, state policies, solar business models, and solar financing as various strata of experimentation, and how these various strata or layers intersect to influence the success or failure of distributed energy resources, in residential rooftop solar in California. We then present a framework for analyzing how these factors relate to either reduce or strengthen barriers to entry into the renewable electricity industry to firms or potential solar customers. Policies that enable market experimentation are most conducive to the innovation process that can create electricity that is simultaneously economic and cleaner. Such policies reduce barriers to market entry, enable retail competition, and are by definition technology-agnostic