WSJ: Solar a “Mortal Threat” to Utilities

March 25, 2013

Three weeks ago, I had my 5 minutes at a local “listening session” on energy, put on by the Governor of my fair state.

My main message was that a technological sea change is coming in energy production – and if regulatory and utility policy do not anticipate the further build out of wind, solar, and distributed energy, the transition is going to be ugly.  Traditional energy producers who think they can hold back the tide will be like typewriter makers trying to bad-mouth word processors. They are going to go away.

I had coffee last week with a well-informed friend, who agreed with me that this is an oncoming freight train. He pointed me to some new survey results from Ernst & Young.

Renewable Energy World:

We conducted a telephone survey of executives involved in corporate energy strategy at 100 companies with revenues of US$1 billion or more. Questions focused on energy spend, types of energy used, energy strategy, and outlook.

The companies were those in energy-intensive sectors with a balanced global distribution. 72% have revenues exceeding US$1 billion, and 28% revenues of US$10 billion or more.

41% of respondents report generating some form of renewable energy with company-owned or controlled resources. Most of these generate power with photovoltaic solar (25%), followed by biomass/biogas generation (20%) and the use of biofuels in company-owned fleets (19%). Wind and geothermal have 7% uptake.

Renewable energy still makes up a relatively small proportion of company generation though. Only 11% of respondents say it accounts for more than 5% of their total energy production.

This looks set to change though:

  • 51% of respondents say company-owned renewable generation would increase over the next five years
  • 16% expect it to increase significantly

As photovoltaic solar hits grid parity at more and more regions of the country, big customers are going to make investments in producing their own power. Many of them will still be connected to the grid as a back-up, but will expect to be able to sell their excess power generation onto the grid. They will make those desires known to their political allies.

Electric utilities will see their revenues drop, and will be forced to raise rates on remaining customers, further encouraging those customers to explore their own generation options as technology improves.

This is the making of a classic utility death spiral – and it is coming on like a tidal wave that will be as irresistible as  the internet, and just as disruptive.

Today, more confirmation from Wall Street Journal:

Traditional transmission and distribution utilities will have to deal with distributed solar power, and it won’t be a pretty fight, according to David Crane, president and chief executive of NRG Energy, a large independent power producer.

Utilities “do realize that distributed solar is a mortal threat to their business,” said Mr. Crane, speaking at The Wall Street Journal’s ECO:nomics conference on Thursday in Santa Barbara, Calif.

“They can’t cut costs, so they will try to distribute costs over fewer and fewer customers.” This, he said, will increase costs for the customers, and will drive more of them toward distributed solar.

Lyndon Rive, co-founder and chief executive of SolarCity, said that “a super-majority of utilities will do whatever they can” to stop companies like his from increasing their market share. “They will create fear tactics,” he said.

Look for stories about “Solar Cell Syndrome” to hit the denial circuit.

19 Responses to “WSJ: Solar a “Mortal Threat” to Utilities”


  1. Lyndon Rive, co-founder and chief executive of SolarCity, said that “a super-majority of utilities will do whatever they can” to stop companies like his from increasing their market share. “They will create fear tactics,” he said.

    An eloquent argument for why utilities should not be private or for-profit, but should be publicly-owned. The nature of capitalism is inimical to the survival of our species, here at the beginning of our endgame.

    • rayduray Says:

      Roger,

      I completely agree with you. The privately owned utility model is horribly broken. When the utes figured they had more labor costs in T&D (transmission and distribution) they simply dumped it into subsidiaries or otherwise abandoned T&D, leaving America about 25 years behind where it should be grid wise.

      The profit center for private utes over the past 30 years has been in building massively expensive central power stations and reaping profits on raw energy sales. This is short-sighted in many different ways.

      In order to make this massively dysfunctional profit seeking behavior work, the utes have had to fight tooth and nail against rational co-generation schemes with industry.

      It’s all rather pathetic, when you look at the inefficiency and waste created for the sake of high levels of profitability for a tiny handful of players, while 99.9% of the population are poorly served by our irrational system.

      Capitalism is idiocy for society, though I can see the point of it for crackpot oligarchs.

  2. Bruce Miller Says:

    “”Traditional energy producers who think they can hold back the tide will be like typewriter makers trying to bad-mouth word processors. They are going to go away.””
    Love this!
    Germany the leader in decentralized energy, spread the capital investment, risk, and profits to the individual peons to make a strong base for the whole society, grew it to co-ops, and from the ground upwards. Very unlikely to occur in the U.S. Corpocracy we face today. America without meters? Too Socialist for certain?
    Seek information on energy storage systems – nano carbon super capacitors – with Energy Density approaching even exceeding gasoline – for vehicles. planes, and acting as efficiency upgrading ballast for Solar, Wind, Wave, Hydro, Tidal, Geothermal, Biological, Thorium energy systems – even absorbing below peak demand outputs, over peak outputs, leveling the systems even yielding power on demand for humanity?
    Google the Chreos – read a few of the articles there, Examine the “comments” for an education in human understanding of matters “energy”. Google nano carbon super capacitors – do better schemes exist? Inform. We need to know, to at least prevent Oil Wars in the world? See u-tube on China’s Thorium Energy technologies.
    America so preoccupied with war and oil?
    my favorite cut and paste from the net:
    “Had the $4 Trillions+ spent on Iraq, been spent even only on conventional Solar/Thermal development of South Western U.S.A. – Today, Americans would receive a huge ROI ( “Return On Investment”)( Cash!) in cheap electricity, in place of horrendous tax rates to service unpayable war debt to China. Americans would be gainfully working, using this renewable, perpetual, eternal, clean, radiation free, radioactive waste free, domestic, electricity source – to compete in world markets with well priced products, to irrigate dry lands, to heat and cool homes, and much less foreign oil would have be imported, fewer “Parasite Nations” supported. Less foreign money borrowed. This is the lost “opportunity cost” for having Saddam’s scrotum on the Bushes mantlepiece? Shiite eh!”
    P.S., (Oil, gas, wells do go dry, not really sourced from an eternal pipe up &Allah’s-ass, as some believe – But, the Sun never stops shining, Wind blows forever)


  3. A progressive, albeit bureaucratic, publicly owned utility in a growing market has a different outlook. Austin pays the solar customer for the power the utility does not have to generate and transmit, in addition to factoring in the reduced environmental impact.

    “For each billing month the customer shall receive a non-refundable credit equal to the metered kWh output of the customer’s photovoltaic system, times the current Value-of-Solar Factor plus any carry-over credit from the previous billing month. The Value-of-Solar Factor shall initially be $0.128 per kWh, and shall be administratively adjusted annually, beginning with each year’s January billing month, based upon the marginal cost of displaced energy, avoided capital costs, line loss savings, and environmental benefits. Any amount of solar credit in excess of the customer’s total charges for electric service under the residential rate schedule shall be carried forward and applied to the customer’s next electric bill. The customer’s carry-over credit, if any, shall be reset to zero in the first billing month of each calendar year.”

    Click to access Residential.pdf

    Purchasing Renewable Energy (paying to build state wide wind farms) is competitive with conventional energy, especially for high usage and peak time of day customers.

    • rayduray Says:

      Thanks for introducing me to the Austin solar rules. They seem refreshingly un-American. 🙂

      When I say un-American, I am reflecting on the way that American greed and corporate rent-seeking took the U.S. from being the #1 Internet cost/bandwidth provider on a national average in 1996 to being about #40 globally today. This was the deliberate ruining of America’s potential by our corrupt corporate owners and managers.

      Similarly, the electrical utility industry seems to be run by a pack of pirates who would rather plunder the public than to provide a service.

  4. neilrieck Says:

    As I understand it, solar cells are following a variant of Moore’s law. Just as we saw with microprocessors, solar cells will get cheaper every year while also getting more efficient. It you can’t afford them now you soon will.

    Meanwhile, the price of fossil fuels is continually climbing. In the 1860’s when oil just oozed out of the ground, the industry only required the energy associated with one barrel of oil to produce 100 (ROI = 100/1). Today many oil rigs drill are drilling really deep (Deepwater Horizon had a maximum drill depth of 9 km (30,000 ft)) so it seems that the industry is required to invest much more energy to keep up with demand. This extract energy drives up the cost and many people estimate that this type of drilling requires one barrel of oil to return 17-20 barrels. Once the price of a barrel is over $60 then even oil from the Alberta Oil Sands looks attractive even thought it has an ROI of 4-6. This has caused other companies to drill really deep to access natural gas trapped between layers of shale which is really the equivalent of squeezing energy from stone.

    So the price of fossil fuel will continually rise will the price of solar will continually fall. Anybody remember that Demand-Supply curve from Economics 101? It is not that we will ever run out of fossil fuels. It just that someday soon it will be no longer economical to produce it.


  5. […] I posted about urgent warnings to traditional electrical generators. Disruptive change is […]

  6. andrewfez Says:

    Darn it. I’ve been off and on watching the stock price of Solar City. It fell pretty good after its IPO, so i thought, I’ll wait for the price to stabilize and put a few dollars in. Then I forgot about it. Then it went up 40% from the IPO and stabilized. Then I thought, it’ll come back down, a 40% upswing in a few months is pretty severe – day traders use these stocks as short term money makers. Then it didn’t go back down. Now, after all this recent news, it went up again. 6% just today. It’s almost doubled its IPO price.

    Usually these hardcore investors are big renewable energy skeptics. But here we have a case where a company that hasn’t even turned a net profit is being driven up, faster than 99% of the equities out there. It probably helps that when you go to Home Depot, you see the big Solar City display, where you can get cheaper electricity for ‘no money down’.

    Me, I’m waiting for the market to mature to the point that a home system is only 6k, like in Germany. I think my electric bill is only 600 bucks a year anyway, and that’s with Los Angele’s or CA’s new feed in tariff.


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