Will Solar Panels Destroy Electric Utilities' Business Model? Yes, They Say

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Solar Panels by Flickr user Chandra Marsono

Solar Panels by Flickr user Chandra Marsono

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Technology can be a real drag. CDs killed cassettes. MP3s killed CDs. Video killed the radio star. Bummer.

Now, a new threat looms in the dark pit we call progress: solar power. According to Grist, utilities are worried that wiring up photovoltaic cells to human ingenuity will soon upset the delicate monopoly that those companies have maintained for the past 100 years. 

The article details a report from the Edison Electric Institute (PDF), which paints a bleak picture of the utility sector's future. In addition to rate hikes that make energy more expensive and tax incentives that encourage consumers to make their homes more energy efficient, the industry is also witnessing a rapid drop in the cost of solar energy hardware. Between 2008 and 2012, the price of photovoltaic panels fell from $3.80/watt to $0.86/watt -- and hold onto your hats, because it could go lower. 

Adding to these dark burdens are improvements in energy storage technology. Every week, it seems like someone or other develops a new battery that can hold more power and do so longer than those on the market today. Pair those batteries with a solar setup, and you give customers something terrifying: access to 24-hour power.

Analysts at EEI worry that all these factors may encourage more customers to switch to solar. As they do, they'll begin using the grid as mere backup, in much the same way that cellphone owners hold onto their rarely used landlines -- putatively as a backup, but really, just for nostalgia's sake. 

That, in turn, will lead to a drop in profit at utility companies, which will force upper management to scale back on their consumption of gold-plated golf tees and also reduce the dollars they spend maintaining the grid. That will cause the grid to become even less reliable than it is today, forcing even more customers into the bright, shiny embrace of solar energy. 

In common parlance, that's called a vicious circle, but the technical term is "Oh crap, we've reached the tipping point."

At the moment, solar makes up less than 1% of the U.S. energy mix, but the article cites Bloomberg Energy Finance, which predicts 22% annual growth in photovoltaic sales for the coming years. By 2020, such expansion could begin drying out some utility companies' swimming pools full of cash and Franklin Mint collectibles.

So what are the utilities to do? Judging by the wrap-up on page 19 of the EEI report, it appears as if they're going to do what they've always done: charge customers more while begging states and municipalities for breaks so they can remain profitable. Oh, and maybe identify a few as-yet-unknown business models to keep themselves afloat.

This is terrible. These people aren't used to innovation -- certainly not on the scale of folks in other industries like telecommunications and automobiles. They're in deep trouble, and all because of that stupid ball of hydrogen sitting at the center of our solar system, giving away its energy for free. 

Really, something must be done. 


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