Published on November 30th, 2016 | by Steve Hanley0
Motley Fool Predicts Utility Companies Are Becoming Irrelevant.
Most people don’t spend a lot of time thinking about the early days of electrical energy. In the late 1800’s, Thomas Edison and George Westinghouse fought titanic battles about how to bring electric power to American cities. Edison was a proponent of using direct current otherwise known as DC. Westinghouse advocated for using alternating current or AC. Ultimately AC won out, which is why we have AC current in our homes and offices today.
Regardless of the arguments for and against AC and DC, it quickly became apparent to city planners that it was inefficient to have two or more electricity suppliers putting up utility poles and stringing wires. It made a lot more sense to pick one company and give it a monopoly subject to oversight from state or local regulators. The monopoly model was adopted throughout America and is now the standard in most of the world.
Building generating plants and grids takes a lot of money, however. In order to encourage investors to lend money to utility companies, the utilities are guaranteed a legally prescribed rate of return. Over the past century, that stability has become an article of faith for utility companies. So when somebody comes along and threatens to shatter that model, it sends shockwaves throughout the world of utilities and electrical power distribution.
Something similar is happening in the automobile industry where car dealers are distraught to learn that companies like Tesla want to bypass them completely and sell direct to customers. Suddenly, all those dealers can see the handwriting on the wall and realize it spells the end of the enormous profits they have been raking in year after year. Nobody likes to see the apple cart get upset, especially if they own it. Tesla counters that its cars are more like smartphones with wheels. They think they should be able to sell them direct just the way Apple sells i Phones direct.
Residential solar systems threaten traditional utility companies. They think they have the exclusive right to provide electrons for our homes. Just this fall, utilities in Florida spent over $20 million of money they got from their customers to promote an amendment to the Florida constitution that would have restricted the ability of private citizens to install photovoltaic systems on their roofs. Nothing says desperation like trying to outlaw the competition. Fortunately, the ballot initiative failed.
In Nevada, Arizona, and Utah, utility companies are lobbying regulators for permission to impose substantial fees on rooftop solar customers. The utilities couch their requests in terms that make it seem like those with solar power are costing other utility customers money but that is just a charade. It’s a dog and pony show trotted out to make the ridiculous seem sensible.
It’s not that utility companies don’t see the value of solar power; they do. They are adding solar systems of their own just as fast as possible. Solar is now price competitve with natural gas and cheaper than nuclear or coal. It makes economic sense to build solar facilities. It’s just that they want to control every element of the electricity business just as they always have.
Voters and courts have dealt the utility companies several setbacks lately. In Nevada, Warren Buffet’s NV Energy browbeat the state’s public utilities commission into adding big fees to the monthly bills of rooftop solar customers. While the Sage of Omaha was sitting back counting his shekels, Nevada solar energy advocates added a ballot initiative that passed handily and requires NV Energy to be broken up to promote competition. Pay back stings, doesn’t it, Mr. Buffet?
Courts in Wisconsin have rejected such fees on customers in the Badger State. The Motley Fool says, “There’s an important trend here for utilities and solar companies: When solar energy goes on the ballot or to the court, it wins. That should have every utility in the country frightened because that gives millions of customers choice regarding their energy needs.”
Until now, the electrical grid has acted as a battery for customers with rooftop solar. Those systems send excess power back to the grid during the day. Later, homeowners withdraw power from the grip at night when the need it. But that is about to change in a big way. Tesla and other companies are selling home storage batteries that will make every home its own microgrid in the future. In Africa where 70% of the population has no access to the electrical grid, Elon Musk of Tesla wants to use microgrids to completely bypass the grid model. When that happens, utility companies will become irrelevant.
The Motley Fool sums things up this way, “Utilities are in a tough position, having incentives to apply policies that protect short-term profits but which may undermine long-term competitiveness. It’s clear that when push comes to shove, voters are willing to overturn utility policies, voting for solar energy across the country. That has to be a concern for utilities, and it shows that the future is getting brighter for solar energy companies providing the solutions customers want.”
Source: The Motley Fool Photo Credit: Environment Maryland