Barclays downgraded the entire electric sector this week. The bank's reasoning? Traditional electric utilities are on their way out.
As I've been pointing out for the last two years, and joined by electric sycophant Edison Electric Institute last year, consumers are remaking the electric industry by becoming producers.
Investment houses are getting nervous, and making reference to other industries that went the way of the dinosaur in the face of a technical revolution that they chose to ignore.
As I've been pointing out for the last two years, and joined by electric sycophant Edison Electric Institute last year, consumers are remaking the electric industry by becoming producers.
Investment houses are getting nervous, and making reference to other industries that went the way of the dinosaur in the face of a technical revolution that they chose to ignore.
Electric utilities… are seen by many investors as a sturdy and defensive subset of the investment grade universe. Over the next few years, however, we believe that a confluence of declining cost trends in distributed solar photovoltaic (PV) power generation and residential-scale power storage is likely to disrupt the status quo. Based on our analysis, the cost of solar + storage for residential consumers of electricity is already competitive with the price of utility grid power in Hawaii. Of the other major markets, California could follow in 2017, New York and Arizona in 2018, and many other states soon after.
We believe that solar + storage could reconfigure the organization and regulation of the electric power business over the coming decade.
We believe that sector spreads should be wider to compensate for the potential risk of regulator missteps and/or a permanent change in the utility business model.
Whether because of biases or analytical complexity, the market (and its constituent prognosticators) has tended to be late in pricing technology-driven shifts, particularly in industries that have had stable operating models (such as telcos and airlines).
It's high time for traditional electric utilities to get over their fear of the future and embrace the brave new world by making themselves relevant in this new paradigm. Regulatory campaigns to secure a revenue stream for stranded investment will only be successful if they are based on reason and fairness, and if the utility makes an honest transition. Building more centralized infrastructure in the face of today's reality shouldn't be supported.
Likewise, distributed energy producers also need to base their regulatory arguments on reason and fairness. If your generator is going to be connected to the grid, you need to pay for it. Pretending that your net metering arrangement that may add up over time to net zero means that you shouldn't pay any of a utility's costs to maintain its infrastructure is unreasonable.
The real challenge here is putting the brakes on continued investment in centralized generation and transmission, and successful negotiation of a fair transition plan. Entrenchment and pitched battles over cost responsibility is just a waste of time. Let's get with it people... the future is here!
Likewise, distributed energy producers also need to base their regulatory arguments on reason and fairness. If your generator is going to be connected to the grid, you need to pay for it. Pretending that your net metering arrangement that may add up over time to net zero means that you shouldn't pay any of a utility's costs to maintain its infrastructure is unreasonable.
The real challenge here is putting the brakes on continued investment in centralized generation and transmission, and successful negotiation of a fair transition plan. Entrenchment and pitched battles over cost responsibility is just a waste of time. Let's get with it people... the future is here!
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