A Utility Self Assessment

Edison Electric Institute released a report last year that was remarkably honest in its assessment of the future of utilities. Utilities have a product; they sell electric power that they generate from expensive sources. (coal fire plants, turbines) They spread the cost of these expensive sources across the huge user base. Power demands vary over the day and week but power at the peak times of the day and week is the most expensive. Solar power is beginning to emerge as a real alternative and its use is highest during peak hours. This is cutting into the high billing period of utilities. As the cost and efficiencies of solar panels--and batteries--continue, more people are turning to them. This is decreasing the returns of the utilities which must, in turn, raise the cost of power to those remaining on their grid. This rise pushes more people away from their power as solar power becomes a more cost effective alternative. This creates a spiral of decreasing utility returns as they serve fewer people during peak hours and more during down hours. This makes them less rewarding and predictable an investment and requires them to raise the returns they can provide their investors, again raising their costs.

Duke Energy CEO Jim Rogers said, “If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using [the grid] for backup.” If a lot of customers start generating their own power and using the grid merely as backup, the EEI report warns of “irreparable damages to revenues and growth prospects” of utilities.

Bloomberg Energy Finance forecasts 22 percent compound annual growth in all solar PV, which means that by 2020 distributed solar (which will account for about 15 percent of total PV) could reach up to 10 percent of load in certain areas. If that happens rates will increase 20%. ( PV is "photovoltaic," electrical energy from solar radiation.)