A January 2013 report by the Edison Electric Institute predicts that solar energy could be the undoing of the electric utility industry. Largely unnoticed in the media, this report has broad ranging implications. Increasing distributed energy generating resources coupled with demand side management programs result in decreased revenues for the electric utility industry, reduced earnings and so on. David Roberts of Grist wrote a couple of good articles on the issue. One of them is here.
Change is not always a bad thing, and in the case of the electric utility industry it’s actually a good thing. The electric utility industry has relied on the same business model for over half a century. Centralized generating capacity is more efficient when you have an unlimited supply of fossil fuel resources to burn. Obviously they present their own set of problems though, and fossil fuels (oil, natural gas and coal) are becoming more difficult and expensive to find and extract; especially in the case of oil.
People in Industrialized countries, to a large extent, take energy for granted because it’s always been so convenient and readily available (until there’s a black-out then the phones at the utility company start ringing). Utilities make money by selling electricity and historically prices have been low because fossil fuels were cheap. But now we’re discovering they’re not as cheap as first thought, because of the externalized costs of health concerns and climate change.
Energy democracy means people have a say in how their energy is produced and what resources are used. It means they have more control of their energy destiny, because energy is an integral part of a civilized society. It may sound like touchy-feely mumbo-jumbo; but personal liberty is a very broad concept not fully appreciated by many; except during a black-out when people develop a much greater appreciation for energy, if only until the lights come back on.
Investor owned electric utilities have become rather comfortable operating as regulated monopolies since the passage of the Federal Power Act in 1935. They are guaranteed a profit, and as a result they have less motivation to innovate and develop new technologies. Renewables contribute less than 1% of our total energy mix, but that has to increase dramatically as fossil fuels continue their inexorable decline. Looming scarcity of fossil fuels means higher energy prices for everyone.
The utilities don’t make money by implementing demand side management programs or distributed energy generating technology. These don’t contribute to the bottom line and as corporations, the bottom line is the primary concern of the investor owned utilities. Utilities serve an important function as part of our society, but if the utilities are unable, or unwilling to facilitate the transition to renewable energy technology, they will become dinosaurs. We all know what happened to the dinosaurs.
Thanks for reading.