((3BL Media/Justmeans) - We ran a piece a week ago about Barclayâs downgrade of the utility industry. The move cited fears of rooftop solar undermining the industry profitability the way that internet downloading has disrupted the music business. Once people have solar on their rooftops, they will buy considerably less electricity from their utilities, using it only as a dynamic storage mechanism, providing power when none is available from the sun. Solar panels are most effective at mid-day when air conditioning needs are highest, which is also the time that utilities can charge the highest rates to their commercial customers.
As the cost of battery storage system continues to fall, more customers will disconnect from the grid altogether, a phenomenon known as âgrid defection.â Some analysts have raised the specter of a âdeath spiralâ for the industry, where, as more customers defect from the grid, utilities will be forced to raise prices, encouraging even more customers to defect.
But according to Leia Guccione of Rocky Mountain Institute, You donât want to defect because the greatest value comes from staying connected. When youâre off the grid, you need to invest in redundancy and into oversizing the system, so you end up taking a penalty that ranges from 10 to 50 percent of the cost of the system.â
However Guccione writes in her blog, âBecause grid parity arrives within the 30-year economic life of typical utility power assets, the days are numbered for traditional utility business models.â
A new report entitled The Future of the Utility Industry and the Role of Energy Efficiency by the American Council for an Energy Efficient Economy (ACEEE) also puts these concerns into perspective. The study âestimates future electric sales under several scenarios, concluding that in the coming two decades sales will either be level, increase modestly or decrease modestly.â
Â The authors find, after reviewing more than 50 papers and other studies, that a death spiral is unlikely, even under the most extreme example. The most optimistic scenario (from the industry perspective) shows a growth rate in electricity sales of about 0.7% per year through year 2040. Worst case is an annual decline of about 0.39% over the same period. That works out to an overall drop in electricity sales of about 10%. While that is hardly good news for the industry, it hardly signals its demise, either.