The theme today seems to be the disruptive effects on traditional systems, especially large monopoly-like organizations, of new technologies.  Here’s another example that just came in, from David Roberts at Grist:

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Rooftop solar is just the beginning; utilities must innovate or go extinct

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After nearly a century spent in a zone of limited-to-no competition, utilities are entering a zone of disruptive competition, in which customers can reduce or even eliminate their dependence on utility power and grid services …
By now, most people are aware that solar power — particularly distributed solar power, in the form of rooftop panels — poses a threat to power utilities. And utilities are fighting back, attempting to impose additional fees and restrictions on solar customers. These skirmishes generally center on “net metering,” whereby utilities (forced by state legislation) pay customers with solar panels full retail price for the power they produce, which can often cancel out the customer’s bill entirely. That’s lost revenue for the utility.
… as I explained last year, a utility “makes money not primarily by selling electricity, but by making investments and receiving returns on them. If it builds more power plants and power lines, it makes more money.” All those investments are made on the basis of demand projections. If demand declines unexpectedly, if distributed energy helps consumers become more independent — generate some of their own electricity, store some of it, manage it more intelligently through sensors and automation — then utilities risk having those investments “stranded,” to the detriment of shareholders.
If you think about the situation a little, you will note that it is insane. Socially and environmentally, we want more distributed, clean power; we want more efficiency and lower demand; we want more grid resilience and intelligence; we want to avoid huge, expensive infrastructure investments if possible. But the way the utility business model is set up, all that stuff slashes utility profits. Our power utilities are structured to oppose our social and environmental goals. That is the real problem at the core of all these discussions. …
The longer utilities try to hold back the wave with legal or regulatory roadblocks, the harder it will hit them when it finally comes. Recent history provides an analogue: (the music industry and, historically, the street railways).
… streetcar ridership peaked in 1920, as riders began defecting to alternatives (buses and cars). By the 1930s and ’40s, the utility had entered a period of disruptive competition. It tried to defend itself through cost recovery…
… the case went all the way to the Supreme Court, which ruled decisively that even regulated monopolies have no constitutional right to protection from competitors. Meanwhile, Market Street Railway went bankrupt and all those streetcars became “stranded assets.” This is the “death spiral” utilities fear. …
The utility sector is still an old boy’s network, especially in some parts of the country, so one rather despairs in turning to utilities for innovation. But nothing focuses the mind like the threat of bankruptcy.

Comments

  1. One approach would be for the utilities (strictly speaking, the electricity retailers) to charge their customers a base amount regardless of use, and a second amount proportional to electricity use, subject to net metering. Whether one has rooftop solar panels or not, the electricity retailer does provide a value (and incur costs) to be ready to supply electricity when called upon.
    Personally, I can’t wait for each house to have a battery bank (whether in a car or not) and become a mini electricity trader. Now that will really be disruptive to the system.

  2. True in sunny climates .. not so true where it is not so sunny or not always sunny ..
    Useful would be a summary of what each Canadian province does in terms of feed-in-tariff i.e. charges it levies on net energy producers or what they pay per kw/h consumed vs. produced !

    1. It’s only a matter of time until what is true today in sunnier climes (California, Texas, much of Southern Europe, etc.) becomes true in climates such as ours. In sharp contrast to traditional sources of electricity generation (whether coal, nuclear, big hydro or natural gas), solar panel costs have experienced an inexorable decline, from $300/Watt in 1956, to $30/Watt in 1980 and now under $1/Watt. Projections point to a price point below $0.5/Watt by 2016. Only the innovation-killing efforts of large utilities will slow solar’s incredible growth:
      http://rameznaam.com/2014/10/05/solar-wind-plunging-below-fossil-fuel-prices/

      1. Even if solar panels were free there is the cost of installing them, permitting, lines to the basement and the battery costs.
        I used to have a solar thermal system on my roof in Canmore, AB when we used to live there. Green. Cool. Effective (free 60 degree water even at -20 outside when sunny). But financially viable ? Hardly.
        Last time I checked it is pretty grey in the winter in BC. So it may not make sense here, certainly not year round.
        Hydro is the way to go in BC as base plus augment with solar. Tough to beat 6-8 cents per kwh though ALL IN (battery + cables + permits + installation + maintenance) !!
        What is the true cost per kwh in CA, HI, AZ or other sunny states of a typical solar panel ?

        1. “Even if solar panels were free there is the cost of installing them, permitting, lines to the basement and the battery costs.”
          What’s your point? The Levelised Cost of Electricity discussed in the link I posted above takes into account all those costs. The LCOE for solar in 2014 (7.2 cents per kWh) is well below US peak prices (18-19 cents per kWh), and already within striking distance of US baseload power prices (6-7 cents per kWh).
          Grey in the winter in BC? Have you been to Germany? This may surprise you, but solar PV panels continue to produce electricity even on cloudy days. In any case, the average annual daily insolation rate for Germany is 3.01 kWh/m2/day. Vancouver’s is 3.34, so we actually get more sun than Germany’s average.

  3. These days declaring bankruptcy is a legitimate business strategy. The risk is borne by the 99% of us who hold suddenly worthless common stock through our pension and retirement plans. Meanwhile dinosaur industries that a real free market would condemn to death are instead bailed out by neo-liberal governments extolling the virtues of the free market. So of course the power producers expect the system to work for them and protect them from harm.

  4. Solar PV makes little sense here in BC, mostly because our electricity (which is pretty green anyways) is so cheap. BCHydro has net metering (they’ll buy back your power if you generate enough and if you have the right equipment to hook up to the grid) but the reason nobody does this is because the time it takes to pay back your panels is longer than the lifespan of the equipment. If you want solar PV here, be prepared to triple your electricity costs. It exists in Germany because electricity there costs 35 cents per kWh.
    What DOES make sense here is solar hot water (preheat the water in your hot water tank) – that will pay back in a reasonable time.
    BC’s electricity supplier is essentially owned by the public (the sole shareholder is the BC gov’t) and its business model is under government control (BC Utilities Commission and acts of the legislature). I would be very cautious about generalizations regarding the business models of US utilities, which do not operate in the same framework.

    1. The only reason our electricity is so cheap is that, as you point out, BC Hydro’s business model is under government control. BC governments, both the NDP and Liberals, kept our electricity rates artificially low from the mid-90s until the last year or so. It’s one of the reasons we have some of the lowest electricity rates in North America, and by extension, the world. We’ll see a significant jump (30%) in rates over the next 5 years, at the same time as solar costs continue to decline.
      The suggestion that we would need electricity costs to triple in order to make solar PV competitive is complete and utter nonsense. Unsubsidized solar electricity in a climate like Germany’s (practically identical to ours in terms of annual insolation) is already around 16-18 cents per kWh for a small Single Family Home-sized installation. By the time BC Hydro’s rate increase is complete in 2017-18, we’ll be paying around 11-12 cents per kWh, and it’s quite likely that solar will have continued its cost decline to be within striking distance of that rate, without subsidies.

      1. Interesting. Can you post some links to the 16-18 cent per kwh solution in Germany, please [ok if in German].

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