The Edison Electric Institute (EEI) recently published a report titled “Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business”. Peter Kind, Executive Director of Energy Infrastructure Advocates (an investor lead initiative to educate and advocate public policy that is supportive of infrastructure development) and Senior Advisor to Macquarie Capital’s U.S. Utilities and Power industry group authored the report. In it, Mr. Kind predicts dire consequences for retail utilities and their investors from “distributed energy resources” (DER) and demand-side management (DSM).
Mr. Kind sounds the alarm from, predominantly, the utility’s point of view, drawing on investor behavior. His analysis of the likely outcomes matches what I have been writing, as do many of his recommendations. Perhaps his focus on the financial aspect will light a fire under utility CFOs to do something.
In an interesting interview with Bloomberg, NRG President David Crane finally has put his company’s actions behind his thinking. They have the NRG Residential Solar Solutions unit. Mr. Crane obviously wants to grow that and add more than solar.
“Crane wants to provide customers with fuel cells and microturbines, which produce electricity from gas. “The individual homeowner should be able to tie a machine to their natural gas line and tie that with solar on the roof and suddenly they can say to the transmission-distribution company, ‘Disconnect that line.’ ” Crane said.”
I do note that Crane has a problem. “NRG, which acquired GenOn Energy Inc. for $2.2 billion in December and Texas Genco for $5.8 billion in 2006, has stakes in 94 power plants, with all except about 1.5 percent of the generating capacity driven by fossil fuels.” If solar is as successful as Crane thinks, he will be losing money on those investments.
Duke, too, recognizes the problem. Continue reading
- A photovoltaic (solar) panel is seen next to solar battery memory system ‘IBC SolStore 6.3 Li’ in the IBC Solar headquarters in Bad Staffelstein
(Reuters) – Every new solar panel installed on European rooftops chips away at power utilities’ centralized production model. Unless they reinvent themselves soon, these giants risk becoming the dinosaurs of the energy market.
The industry faces drastic change as renewable energy turns consumers into producers and hollows out the dominance of utilities. With their stocks at decade lows and a millstone of debt around their necks, Europe’s utilities have little margin for error.
It is no longer just renewables sites like CleanTechnica that are talking about renewables’ effect on the current electric industry paradigm. The Reuters piece talks about the growth of renewables and documents utilities’ complete failure in dealing with it. And, of course, the results are in the utility share prices, down 65% since 2008 for a eurozone-only utilities index.
We all know how hard it is for an organization to change its focus and its culture; the larger the organization, the harder it is to change. German utilities, especially, can be forgiven for not understanding the nature of what they were facing. This will be less true for U.S. utilities that not only have the German experience to refer to, but the Australian and Hawaiian ones as well. (Not to mention the newspaper industry: Clay Christensen, newspapers and the cliff of despair.)