Solar Power a Threat to Electric Utilities

Solar power makes up .4% of electricity generated in the US. Why is this a threat to utilities?

More and more Americans are putting panels on their homes and buildings. These buildings are buying less and less electricity from the grid, but the utilities still have to manage the costs of hooking them up to the grid. “A new study from Lawrence Berkeley National Laboratory argues that this could soon put utilities in dire straits. If rooftop solar were to grab 10 percent of the market over the next decade, utility earnings could decline as much as 41 percent.”

Therefore in response, utilities will eventually have to raise rates to cover these costs. And these higher electricity rates may trigger even more people to install their own solar rooftop panels to save money.. a vicious cycle.

“Distributed solar now makes up nearly 2 percent of retail sales in some areas. If solar penetration reaches just 2.5 percent, shareholder earnings for some utilities could fall an estimated 4 percent. (Electricity prices, meanwhile, would rise just 0.1 to 0.2 percent.)

That’s just the beginning. If the penetration of distributed solar reached as high as 10 percent — an admittedly aggressive scenario — a typical utility in the Southwest could see its earnings drop 5 percent to 13 percent, while a typical utility in the Northeast could see its earnings decline 6 percent to 41 percent. This is similar to the situation in Germany, where distributed solar has halved the market value of some utilities.”

Check out the full article below for continued discussion on legislative and regulatory effects of such solar growth.

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