US Utilities Fear Obsolescence as Off-Grid Solar Power Rises

by , 04/11/13

solar power, edison electrical institute, eei, fossil fuels, us utilitiesPhoto via Shutterstock

There’s a common belief that even as solar power takes off, utility companies will retain their hold on energy markets as the need for standard electrical grids remain. But a report from the Edison Electrical Institute (EEI), a trade group of US utilities, doesn’t have a particularly optimistic outlook for their own long-established business model. They predict solar-based off-grid power usage to take off, which could cause rates for conventional utilities to skyrocket. Ostensibly, they fear the demise of their industry.

solar power, edison electrical institute, eei, fossil fuels, us utilitiesPhoto via Shutterstock

The report, written about in Grist, outlines the “disruptive challenges” facing US utilities, including several major impacts that solar power could have on their business model, and straight-forwardly their ability to sell power. At present, as Grist outlines, solar already has a notable effect on conventional power—with solar panels at their most effective around noon (obviously), even those solar users who are still on the grid, are not using utility-based power during peak hours, and these are the hours during which utilities charge the most for their power.

Furthermore, the report states that “[w]hile we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent.” The fossil-fuel dependent utilities really do believe in renewables, and they see part of the attraction to solar and wind coming from rate increases that will result from the gradual adoption of rewnewable energy.

As revenues decline—as people use solar during peak hours or go completely off grid—then “[i]ncreased uncertainty and risk will not be welcomed by investors, who will seek a higher return on investment and force defensive-minded investors to reduce exposure to the sector. These competitive and financial risks would likely erode credit quality. The decline in credit quality will lead to a higher cost of capital, putting further pressure on customer rates.” And as these rates go up, demand for solar could increase, pushing the cost of solar down.

It’s certainly refreshing to see this level of frankness—or well-phrased panic, depending on ones interpretation—from the EEI, and there does appears to be a small trend of increasing awareness among some utilities of the need to adapt. New Jersey-based NRG Energy has substantially bolstered it’s solar projects (including some very high-profile ones) while continuing to provide conventional fossil fuel-derived power. NRG’s CEO David Crane has become a vocal proponent for renewables from an environmental standpoint, and a business survival one. Jim Rogers, CEO of Duke Energy has been very frank about the threat that alternative energy poses to his industry, and similarly encourages investments in solar and wind. These two are, admittedly, among all-too few, but the EEI report suggests that maybe soon we might just see more adaption from US utilities in coming years.

+ EEI Report [PDF]

Via Grist

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  1. CauseOptics April 14, 2013 at 2:31 pm

    We already know there isn’t enough support from banks for residential installations and that people have not enough disposable income to afford systems. The Sun Shot initiative, still in its infancy, may well impact per kW pricing, however since the target has so far been soft costs, pricing for systems will likely be dependent on adoption rates. The strata in mature markets indicates current financial and professional scale levels off with solar farms beginning with 125 kW arrays and then as popularity increases, a quantum leap to 10 MW replicas of same. Utilities have nothing to fear. It’s the people who don’t take advantage of installing solar who will ultimately pay the price. And, if they can’t pay that price now to purchase and install a systems which covers even half of their own usage, they’ll pay extra later for electricity. All of this works to the advantage of utilities in under-serviced areas because as service splitting based cost increases and pooled tax resource infrastructure improvement programs in cities designed to help utilities and fossil fuel distributors upgrade, improve quality and automate take root, the wave of cost disruption to rural areas makes rural the best and most advantageous market to go off grid — for individuals and utilities. They won’t otherwise be able to afford to live rural without increasing population and diversifying resource based economies to accept total dominance of retail.

  2. msyin April 12, 2013 at 7:15 pm

    This report only states what was their future from the very beginning and the solution to their fear of losing power and income is to get on board of environmental and technological advancement if they wish to be part of the future. Having said that I am happy to look forward to a future without utility companies or at least clean, green energy that is not centralized, inadequate, inefficient, redundant and expensive to the cost of the people, industry and planet.

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