Solar Power is Disrupting the Utilities Industry

As solar power gains a foothold with investors and the general public, the utilities industry faces a long and uncertain battle to maintain its market dominance. A technology that was once regarded by some as niche and unviable may now unhinge the industry's existing business model. High costs, unstable technology, and limited availability used to be limiting factors for renewable energy. Now, solar power technology has resolved many of these concerns, making this alternative energy source a realistic option for customers and a real threat to utility companies.

Solar power experienced a significant boost in 2013, when a set of rooftop panels was installed every four minutes and the number of completely new installations totaled 90,000. By the end of that year, 300,000 buildings were equipped with solar systems. While impressive, these stats seem like merely a minor setback for the utilities industry, which collectively brings in $360 billion in yearly energy sales. So why are utility companies feeling the pinch? While solar power's impact is nominal for now, a PricewaterhouseCoopers report revealed that utility companies could experience a "major disruption" in a few decades time if they fail to evolve and respond to the threat of decentralized generation.

Both homeowners and businesses are taking the plunge. The cost of solar panels has declined dramatically over the past five years, and the number of solar units in use has grown by nearly 50 percent since 2011. In 2007, large companies invested around $1 billion in solar energy. By 2013, that number had ballooned to $13 billion, with renewable energy having drawn the attention of corporations, government agencies, and even the utility companies themselves. Google, the search engine giant, funneled over $100 million into a solar farm dedicated to bringing renewable energy to San Diego homes. Solar power has experienced explosive growth in recent years, forcing the utilities industry to fight harder or embrace it in order to survive. How your company reacts may determine its future in utility provision.

Utility companies also need to contend with a number of immediate issues as solar power becomes more widespread. One major issue is net metering, which the industry claims disadvantages nonsolar users who pay high retail prices but are ineligible for excess energy credits to offset large bills. Net metering also represents a loss of revenue for utility companies. In California, this could be as much as $1.4 billion. Power companies have responded by imploring local governments to impose fees on, and cut financial incentives for, solar users. Other disruptions to power companies include a higher volume of paperwork and the burden of adapting their existing infrastructures to support the needs of customers using solar power.

While some utility companies have resolved to stem the tide of solar power, others are more accepting, developing monetization schemes such as acquiring solar panels to lease to current customers. Whatever direction your company takes, knowing what to expect and how to adapt your skills to future demands could help ensure survival in a changing market.

(Photo courtesy of freedigitalphotos.net)