Utilities are fighting for their lives as solar energy gets more prevalent each day with falling costs and support from customers and the government. Not only is solar power clean, but the cost is also fixed for 25 years unlike other sources where volatility is high. Utilities have had a very safe and secure existence selling at regulated prices in most places in the world. They have a captive market with pretty stable demand where the return on their investments is guaranteed by electricity regulators. However, the comfortable monopoly position of utilities is coming under attack in almost every region as distributed solar energy systems become affordable. Solar energy demand is growing at a furious pace and will exceed 35 GW this year. Much of the demand is coming from DG and not only huge solar farms.

Utilities are finding their captive demand reducing almost every month and governments are forcing them to buy solar electricity through net metering. Some energy generators such as NRG Energy have embraced green energy and are not fighting this transition to be easy. But heavy fossil fuel users such as Southern Company in the USA are fighting the move towards solar energy. The utilities have petitioned the state regulators to put an annual charge on solar system owners to pay their share of the maintenance of the power grid. Solar energy users used the grid as energy storage, supplying power to the grid during sunny hours while using electricity from the grid during night. With governments mandating that the utilities buy all the energy from solar owners, utilities are finding this hard. They want to reduce the solar rate of adoption. Arizona was faced with such a petition. The electricity regulator has imposed a small token fee on solar system owners which means a defeat for the utility. On the other hand, it is not a complete victory for solar energy industry either. I think the fight will get more intense as solar energy becomes cheaper and more widely adopted. The utility think tanks have already sounded the danger to the industry’s existence. I think that the utility industry is not a great investment for the long term and the current 15 plus P/E multiples do not make sense to me when big tech companies such as Intel etc. trade for 10-12 P/Es.

Source PV Tech.