Someday your seemingly-stable utility could become utterly disrupted by emerging technology changes. It could occur in much the same way that once huge brands like Kodak, Blockbuster, and Borders slowly — and then all-of-a-sudden rapidly — fell at the sword of the digital technology revolution.
It’s not a new idea, but it’s one that is gaining prominence even in the mainstream media. This weekend the New York Times penned an article On Rooftops, a Rival for Utilities, bringing attention to the emerging threat that solar panels are already starting to have on slow-moving utilities across the U.S.
The article quotes a fellow at the non-profit arm of the utility industry, the Electric Power Research Institute, as saying “We did not get in front of this disruption. It may be too late.” EPRI put out a report earlier this year that soberly stated:
The timing of such transformative changes is unclear, but with the potential for technological innovation (e.g., solar photovoltaic or PV) becoming economically viable due to this confluence of forces, the industry and its stakeholders must proactively assess the impacts and alternatives available to address disruptive challenges in a timely manner.
Essentially, get moving or you’re fracked.
Solar panels — on the rooftops of both homes and company buildings — are one of the leading weapons in this disruption. That’s because solar panel prices have plummeted in recent years, and upstarts like SolarCity (s SCTY), Sungevity, OneRoof Energy, Sunrun and Clean Power Finance have emerged with new business models to make buying solar panels cheaper and more convenient. Larger companies like NRG Energy are aggressively getting into the centralized utility-scale solar project building business, too.
The New York Times notes that because of “net metering” — which is a system that pays solar panel owners for how much access solar power they put back into the grid — California utilities could lose $1.4 billion a year to solar customers. If that trend continues, their argument down the road could be, why do we have to maintain the grid for everyone to use at the same time that we’re losing revenue?
It’s a similar argument to the one that telcos and cable companies have used for years about building and maintaining data networks and then having device and app makers come in and reap the benefits. Telcos in particular have long been called “dumb pipes,” as they moved away from application innovation and relied on maintaining the network connection. It took Google and Apple to really crack the mobile phone logjam that such thinking had created.
But for utilities, it’s not just solar panels. It’s actually all forms of distributed, cleaner power generation, digital network technology and even energy storage technology. Grid energy is undergoing a fundamental transformation where it won’t just be cleaner, but it’ll be managed in a much more digital way, and will be able to be stored much more readily on the grid. As Grist’s David Roberts wrote earlier this year in What’s Threatening Utilities: Innovation at the Edge of the Grid: “utilities shouldn’t be opposing or hampering this stuff. They should be enabling it.”
There are a variety of differences between the utility industry and telcos, as well as other tech sectors that have been disrupted — utilities are mostly highly regulated, many aren’t incentivized to be more efficient, sell cleaner power or use energy storage, and the grid itself is highly complex. Which makes the situation of utilities in the U.S. highly unique, and perhaps could lead to one of the greatest, and most painful, sector disruptions in recent history.