The Motley Fool Examines Three Utilities’ Approaches to Dealing with the Distributed Energy Revolution

Landscapes & NatureThe Motley Fool provides investment advice that is read by millions, and it frequently covers the clean energy sector, so it’s definitely worth following. One recent column jumped out at us for its insights on a crucially important subject facing the clean energy industry: namely, how the distributed energy revolution is being received by utilities.  In this article, Motley Fool analyst Traivs Hoium examines three different utilities taking three differrent approaches.

  1. Hawaiian Electric Industries: With expensive grid-supplied electricity in Hawaii, with lots of sunshine, and with “one in nine homes” already with a solar power system on its roof, Hawaiian Electric is “threatened” by distributed power and is attempting to slow its penetration. However, “In Hawaii at least, regulators are going to force the utility to adapt to renewable and distributed electricity generation (rooftop solar) and that’s something to watch very closely no matter how you’re invested in energy. “
  2. Arizona Public Service (APS):  Like Hawaiian Electric, APS “is trying to fight customers creating their own energy, a threat they saw take hold quickly in Hawaii, by building rate structures to kill the industry before it gets started.” Unlike in Hawaii, however, APS may succeed in slowing distributed solar penetration, by pushing for “minimum charges or access charges” and thereby reducing “the return on investment for solar systems” to individuals and companies like Solar City.  The dangerous thing here is that APS “is laying the groundwork for how to fight solar in the 49 other states,” with other utilities “sure to copy APS’s strategy if it’s successful in slowing the solar boom.” Which is one big reason why the solar industry needs to make sure that APS is not successful in its strategy.
  3. Xcel Energy: According to The Motley Fool, Xcel “has gotten out ahead of the curve is in utility solar and wind, where it’s been one of the most supportive utilities when it comes to renewable energy.” The big questoin here is “how Xcel Energy transitions to dictating terms of renewable energy deals to working with customers to make their rooftop solar systems work with the grid.”

In the end, all of these utilities are responding to the same dynamics David Roberts discussed in his superb piece, Rooftop solar is just the beginning; utilities must innovate or go extinct. As Roberts noted, utilities’ business model  is based on building “more power plants and power lines,” which as Roberts points out is both “insane” (in that it’s not just diametrically opposed to “our social and environmental goals”), but also the polar opposite of where power markets are headed — towards more distributed power and more consumer autonomy.

The question is what utilities will do about this situation: a) take a short-term defensive approach – ultimately a losing strategy – of trying to recover their costs by raising rates, fees, etc. to consumers; or b) adapt to the distributed solar power revolution, and fast, for instance by viewing “ratepayers’ as “customers” and offering them “products and services that satisfy their evolving preferences.”  Clearly, utilities should go for option “b” if they’re smart. But perhaps they have been coddled so long as regulated, protected monopolies that they won’t be able to adapt, in which case they risk entering a “death spiral.” Either way, the next few years are likely to be determinitive, and clean energy advocates would be wise to make their preferences known.