Edison Electric Institute Envisioning the Destruction of Power Companies by Distributed Power Generation

David Roberts has a great article over at Grist about a new report by the electrical industry lobbying group the Edison Electric Institute.  The EEI report predicts the end of electric companies as we know them, mainly through new distributed solar and wind generation and the increasing efficiency of electrical use.

If you are a regular reader of The Power Line, you will immediately understand what Roberts is saying as he explains the logic of the EEI report.  That’s because it is exactly what I have been reporting about for the last four years.  Now the electric utility industry as figured out that its days are numbered.

Here’s what Roberts says:

First, the power generated by solar panels on residential or commercial roofs is not utility-owned or utility-purchased. From the utility’s point of view, every kilowatt-hour of rooftop solar looks like a kilowatt-hour of reduced demand for the utility’s product. Not something any business enjoys. (This is the same reason utilities are instinctively hostile to energy efficiency and demand response programs, and why they must be compelled by regulations or subsidies to create them. Utilities don’t like reduced demand!)

It’s worse than that, though. Solar power peaks at midday, which means it is strongest close to the point of highest electricity use — “peak load.” Problem is, providing power to meet peak load is where utilities make a huge chunk of their money. Peak power is the most expensive power. So when solar panels provide peak power, they aren’t just reducing demand, they’re reducing demand for the utilities’ most valuable product.

But wait. Renewables are limited by the fact they are intermittent, right? “The sun doesn’t always shine,” etc. Customers will still have to rely on grid power for the most part. Right?

This is a widely held article of faith, but EEI (of all places!) puts it to rest. (In this and all quotes that follow, “DER” means distributed energy resources, which for the most part means solar PV.)

Due to the variable nature of renewable DER, there is a perception that customers will always need to remain on the grid. While we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically “cut the cord?” [Emphasis mine.]

Indeed! Just the other day, 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.” What happens if a whole bunch 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.

Get ready, because it’s coming sooner than you think.  Note the EEI’s reference to the telephone business.  All it took was ten years.  Solar panels and batteries?  I have them at my house already.

5 thoughts on “Edison Electric Institute Envisioning the Destruction of Power Companies by Distributed Power Generation

  1. But here in WV, the legislature just ended the $2000 tax credit for solar, and invented a new tax break for coal.

  2. But Mary, if you are willing to take the $2K hit, you can still switch to solar and tell your utility company to buzz off.

    I only wish I had the financial means to make the change RIGHT NOW. But I’m working on it …

  3. Okay… so most folks are “working on it” but don’t want to make the huge financial commitment, especially in WV where there is little reward but personal satisfaction. So, what EEI is saying is that a smart utility would see this as an opportunity and branch out to get their claws (oops, I guess “foothold” would be a nicer word) in this revenue stream by leasing company owned solar to residential and small business customers.

    But, WV’s utilities aren’t smart. They live in a state of denial.

  4. Utilities as monopolies are and should be regulated. This is basic economics. It keeps them from using their monopoly power in the market place to put the screws to their customers for a service that everyone MUST have. This usually applies to services such as electricity, power, water and sewer. In return, the utilities are given a set rate of return. It is not a huge return but is constant and regulated so that the pricing structure is overseen and rational, all of which serves to furnish a win-win situation for the businesses and customers alike.

    Remember that the customers include local and state governments, police departments, and all manner of services these entities provide and that are paid for by YOUR tax dollars. Everyone has a stake in the costs paid to the monopolies.

    Over at least the last decade or more, we have seen the rise of electric utilities dumping the regulated side of their businesses – generation, and moving into the non-regulated space using holding companies for the different parts of the business. This usually means transmission companies who ‘wheel’ electrons from generators to power grid distribution customers. They are able to get large rates of return for the investments, usually paid by bond-holders, that far exceed the regulated sides of the business that all serve to make this a more attractive venture. Rates go up, returns are up and oversight is minimal. Witness Enron, however, and the effect they had on markets through market power and rate rigging.

    Now comes on-site local generation of electricity to throw a wrench into the regulated market. Do they care about customer concerns on costs? No. They are only interested in what they can nail the customer for each and every hour of the day. This is what it means to force the utilities to play nice: net metering, little or no fees for remaining hooked to the local infrastructure, and a fair rate of return for the local customer who sells excess generation back to the local utility for resale to non-generating customers during peak periods.

    Utilities will NOT want to play. They want to continue to operated as monopolies without regard for negative trends in future power demands. This is why it takes a political groundswell from customers (voters/taxpayers) to tell their legislators that the oversight bodies MUST make the utilities play nice. They will have to force the issue many times against the tide of utility politics and their money but it can be done. Only YOU can make this happen, because the utilities and their captive overseers won’t do it unless forced to.

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