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Utilities Face Billions In Losses From Distributed Renewables

Posted by Soulskill on from the reacting-slowly-to-new-technology-is-not-a-business-plan dept.

Lucas123 writes: Over the next 10 years, adoption of distributed power in the form of renewables such as solar power has the potential to reduce revenues to grid utilities by as much as $48 billion in the U.S. and by $75 billion in Europe, according to a new study. The study, by Accenture, revealed that utility executives are more nervous (PDF) about the impact of distributed — or locally generated renewable power — than ever before. 61% of those surveyed this year indicated they expect significant or moderate revenue reductions compared to only 43% last year. The cost of rooftop solar-powered electricity will be on par with prices for common coal or oil-powered generation in two years, and the technology to produce it will only get cheaper, according to a recent report from Deutsche Bank. New technologies, such as more efficient solar cells, are also threatening to increase efficiencies and drive adoption.

46 of 280 comments (clear)

  1. The study... by hcs_$reboot · · Score: 5, Insightful

    ...by Accenture

    Stopped there.

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    1. Re:The study... by golodh · · Score: 2
      @ hcs_$reboot

      ...by Accenture

      Stopped there.

      Any specific reason for that?

  2. Reduced revenues != lost profit by BarbaraHudson · · Score: 3, Informative

    reduce revenues to grid utilities

    And there are costs associated with generating those revenues (pun intended). Will it tip the utilities into loss? Certainly not to the extent the summary implies.

    --
    "Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
    1. Re:Reduced revenues != lost profit by jythie · · Score: 4, Insightful

      Keep in mind that while they might reduce their costs in terms of fuel, the infrastructure they are responsible for maintaining will keep growing. When this topic comes up people often forget about that rather massive recurring cost and most consumers just sorta take it for granted that someone will fix/upgrade things.

    2. Re:Reduced revenues != lost profit by BarbaraHudson · · Score: 2

      That's why most utility bills have a "minimum charge for being connected to the grid", and then a consumption component.

      --
      "Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
    3. Re:Reduced revenues != lost profit by rahvin112 · · Score: 4, Informative

      Utilities are regulated monopolies when selling to residential consumers. They are forced to sell at fixed power rates that don't vary with demand. Business power though is mostly unregulated. Companies pay for power at different rates every hour. Night time is very cheap but daytime power can be very expensive for a company. Utilities make the bulk of their profit on business power. Solar is going to be pushing power into the grid at peak amounts when peak commercial use is on. This is going to drive down peak power pricing dramatically and may actually flip it to nighttime. So rather than charging a business .30 kwh from 2-5pm with their 10% margin on top is going to get reduced significantly and could even go negative which will wipe out commercial profits almost entirely.

      That's what they fear more than anything. If they end up as a company that only makes money on the grid maintenance and not power they won't be worth 10% of what they are today.

    4. Re:Reduced revenues != lost profit by fluffy99 · · Score: 3, Informative

      The graphs in the study are not scaled properly and are misleading. The middle US case, which even has some dubious assumptions, only represents a 5% drop in total demand. It doesn't include important things such as costs to increase capacity if demand actually continues to rise. Most predictions show a continued overall energy demand far greater than predicted to be generated by wind or solar. Status quo of a non-increasing demand is actually good for their profits as they just need to maintain what they have. Solar power which produces during the peak energy hours helps them as well since the peak surges are covered using gas turbines which are very expensive to run (hence the reason for tiered pricing based on time of usage)

    5. Re:Reduced revenues != lost profit by Facegarden · · Score: 4, Interesting

      Well, they're kind of in a losing position - raise rates to pay for losses, and people just move to renewables sooner.

      It seems pretty clear that generating electricity from free sunlight is going to be cheaper than mining and transporting fossil fuels to a complex facility to burn them. Solar has it's own "moore's law" equivalent that says the price of the panels goes down by 50% every time we double installed capacity. We're currently only powering less than 1% of the world from solar, so there is a lot more room for doubling. You can find a study that goes either way, but supposedly solar is already at parity with coal power in certain regions, and fossil fuels only get more expensive, not less.

      Regulated or not, if you're selling the horse and buggy and someone else is selling the automobile, your industry will die.

      --
      Worldwide Military budgets: $2100 billion. Worldwide Space Exploration budgets: $38 billion. Really, world? Really?
    6. Re:Reduced revenues != lost profit by K.+S.+Kyosuke · · Score: 3, Informative

      20%. Not 50%. 50% cost reduction for twice the installed capacity would mean a solar panel singularity or something like that. :-)

      --
      Ezekiel 23:20
    7. Re:Reduced revenues != lost profit by K.+S.+Kyosuke · · Score: 3, Informative

      2. Another big cost is base load generating capacity. Base load is priced assuming it will run 24/7. But if solar can supply 100% of power on a sunny day, then the base load generator will be sitting idle.

      Assuming there will be many base load generators at that point in time... Much has been made of the fact the Germans started building new coal plants like crazy, but what gets ignored by conservatives (in the general meaning of the word) is that these are "flex-load" plants, with the old base-load coal plants are being closed down.

      --
      Ezekiel 23:20
    8. Re:Reduced revenues != lost profit by Facegarden · · Score: 2

      Ah, my mistake.

      https://en.wikipedia.org/wiki/...

      Costs do halve roughly every ten years at present rates.

      --
      Worldwide Military budgets: $2100 billion. Worldwide Space Exploration budgets: $38 billion. Really, world? Really?
    9. Re:Reduced revenues != lost profit by Wycliffe · · Score: 4, Insightful

      Well, they're kind of in a losing position - raise rates to pay for losses, and people just move to renewables sooner.

      It seems pretty clear that generating electricity from free sunlight is going to be cheaper than mining and transporting fossil fuels to a complex facility to burn them.

      Even IF green energy becomes cheaper, this doesn't mean distributed power is going away anytime soon,
      it just means that large power companies will have to move to green energy sooner.
      Economy of scale still applies to solar energy. It's still going to be cheaper for a utility company to set up hundreds
      of solar panels and sell the electricity to consumers than it will be for everyone to buy/maintain their own system.
      There is a potential saving by being able to eliminate distribution costs so it's possible that local generation could
      bet out economy of scale if distribution costs are a significant part. So the question really becomes
      what percentage of your electricity price is generation and what percentage is distribution?
      The other way that local generation wins is if people start installing solar for reasons other that cost of generation.

    10. Re:Reduced revenues != lost profit by tshawkins · · Score: 2

      3, assumes there is no storage capability at the renewable end, new storage technologies are comming online every day, largely driven by the EV industry. If the solar system could store 24 hours worth of energy, then that problem goes away. True it will drive up costs and that may change the break even point, but storage costs are on the same downward trajectory as the renewable generation costs.

    11. Re:Reduced revenues != lost profit by currently_awake · · Score: 2

      If people install solar panels without the batteries they will use the panels during the day and the grid at night. The utilities will have the full cost of infrastructure and generators but without the revenue from all that daytime use.

    12. Re:Reduced revenues != lost profit by amiga3D · · Score: 2

      With enough votes you can fix the city governments.

    13. Re:Reduced revenues != lost profit by amiga3D · · Score: 2

      I've noticed a lot of companies are starting to generate their own power. The local Frito-Lay operation burns their used oil to generate power for their plant.

    14. Re: Reduced revenues != lost profit by danbert8 · · Score: 2

      Good thing nobody has electric heat in the winter or an electric water heater... Oh wait. The grid is not going away. Batteries can't power stuff like that.

      --
      Yes it's an anecdote! Were you expecting original research in a Slashdot comment?
    15. Re:Reduced revenues != lost profit by Moridineas · · Score: 2

      and fossil fuels only get more expensive, not less.

      Tell that to the price of oil (plunging, as we speak).

    16. Re: Reduced revenues != lost profit by jklovanc · · Score: 3, Informative

      Do you watch use your computer after dark? There is 400 watts. Watch TV? Do laundry? cook? Run your refrigerator? Have a shower? You numbers are very far off.

    17. Re:Reduced revenues != lost profit by jklovanc · · Score: 3, Insightful

      Twenty four hours may not be enough. During a big storm solar will be degraded for much longer than that. Also at higher latitudes winter solar output can be as little as 1-% of summer output. One can either massively over produce in summer or rely on grid power in the winter. If one is relying on winter grid power then the equipment generating that power will only be used a fraction of the year.

      but storage costs are on the same downward trajectory as the renewable generation costs.

      The problem with local storage is that it is mainly batteries. Batteries are not environmentally friendly.

    18. Re:Reduced revenues != lost profit by Dahamma · · Score: 2

      Actually, many homeowners putting up solar panels these days are just allowing solar power companies to put them up and then leasing back the power from them. That model is becoming more and more popular. Imagine if a traditional power company bought one of those solar lease companies - they'd now own the solar panels on your roof...

    19. Re: Reduced revenues != lost profit by afidel · · Score: 2

      Do you watch use your computer after dark? There is 400 watts.
      LOL, on slashdot that's funny. My VMWare hosts which are dual 10 core Xeon's with 384GB of ram, multiple network cards and fiber channel HBA's peak just over 300W:
      Last Week-
      average 183 W | 625 BTU/hr
      peak 301 W | 1027 BTU/hr

      Unless you're running dual GPU with a 60" display there's no way you're using 400W.

      --
      There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
  3. Re:No change in the discussion I'm sure by rahvin112 · · Score: 2

    Wall street is running a LOT of articles on it right now because it's a tremendous change in the status quo that will affect investors pretty massively. The Motley Fool runs a couple articles a week on all the changes. And yes there are that many changes and developments going on.

  4. They have good reason to be nervous by DerekLyons · · Score: 4, Insightful

    They have good reason to be nervous... They'll still be on the hook to provide full power when solar is producing less than peak capability or isn't producing at all, but there's little chance they'll be allowed to significantly raise their rates. This works out to being required to maintain full generating and transmission capacity with sharply reduced revenue.
     
    Not to mention that very few people installing subsidized and/or cheap solar panels will spend the money to install unsubsidized and expensive battery capacity. That's long been a deep flaw in the thinking of solar power supporters - that they can have their cake and eat it too, the unspoken assumption that the utilities will always be there and will always have the capacity to make up any lack. You get what you pay for folks, TANSTAAFL.

    1. Re:They have good reason to be nervous by LordLucless · · Score: 3, Insightful

      It is like the owner of corner grocery charging everyone a dollar extra because he was robbed the previous evening.

      Pretty sure grocery stores do pay for repairs/stock loss/insurance through increasing the price of their goods. How else would they do it?

      --
      Just because you're paranoid doesn't mean there isn't an invisible demon about to eat your face
  5. Uh, no. by goodmanj · · Score: 2, Informative

    Guys, "lost revenue" is not the same as "loss". If I buy widgets for 99 cents and sell them for a buck, and my customers start buying fewer widgets, I'm not losing $1 for each widget they fail to buy from me, but that's exactly what the paper is suggesting.

    Now, if my customers can make their own widgets and force me to buy them for $1 (as some states require utilities to do), I can claim that I'm losing money on that deal. But my losses are a penny a widget, not a buck.

    1. Re:Uh, no. by thegarbz · · Score: 2

      Guys, "lost revenue" is not the same as "loss". If I buy widgets for 99 cents and sell them for a buck, and my customers start buying fewer widgets, I'm not losing $1 for each widget they fail to buy from me, but that's exactly what the paper is suggesting.

      That's because you don't understand the difference between fixed costs and variable costs. The cost of the plastic used to make the widget, that's a variable cost. Every widget you buy has this cost built in. Every widget you don't buy saves you this cost.
      The cost to pay yourself and your marketing staff, that's a fixed cost. It doesn't matter if you buy zero widgets, or 10000 widgets, you get paid the same, the rent gets paid, the phone bill gets paid, the company computer equipment is amortised.

      If you buy 100 widgets for 99 cents and sell them for a buck, and then have to cover 50cents for the cost of electricity in your warehouse in the first place then you're making 50c profit out of $100 revenue. If you now are only able to sell 50 widgets you're breaking even $0 profit off $50 revenue. If you sell 1 widget you're now making a 49c loss out of $1 of revenue.

      You can try justify and sugar coat it all you want, but the reality is there are already plants running at a loss and shutting down turbines and cutting staff in an attempt to stay viable.

  6. I thought power companies were happy to shed load? by ZorinLynx · · Score: 2

    We have a load control transponder here which allows the power company to temporarily shut off the air conditioner and/or water heater, basically creating a "rolling blackout" of just those devices when demand for power exceeds supply.

    The fact that they deploy such devices suggests utilities would be happy to shed some load, especially during the brightest time of day when solar works best and air conditioners are working hardest.

    So what's the deal? They want us to use more power after all?

  7. The problem with short term thinking by Dunbal · · Score: 2

    Those utilities are not envisioning the fact that all that power savings that is "eating into their profits" today is energy they can sell to tomorrow's customers. Why? Because populations grow over time, and they grow quite quickly. Instead of bitching about the paper loss they think they are seeing, they should be celebrating the fact that they don't have to build more power-plants and infrastructure for 10-20 years and will be able to serve a much larger base with the same infrastructure. So that 2% increase to the electric bill they apply for in 2024 will mean much, much more actual revenue for them - for exactly the same fixed cost.

    But no. Greed. Let's bilk people today because they dare try to do something to save money and stretch current resources by diminishing consumption.

    --
    Seven puppies were harmed during the making of this post.
    1. Re:The problem with short term thinking by Barsteward · · Score: 2

      If all new housing was built close to passive house standards, i.e. properly insulated, heat/air recovery system etc then the demand on the utility will be a lot lower. There are houses here in the UK built to this german standard and they effectively get free heating/lighting because they have a solar system to generate power. Here are a couple of examples how 2 places in Europe have been clever about their power generation. http://cleantechnica.com/2014/... and http://cleantechnica.com/2014/...

      --
      "The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
  8. Don't forget batteries for storage by koan · · Score: 3, Insightful

    http://disinfo.com/2014/12/elo...

    Yet Musk’s so-called gigafactory may soon become an existential threat to the 100-year-old utility business model. The facility will also churn out stationary battery packs that can be paired with rooftop solar panels to store power. Already, a second company led by Musk, SolarCity Corp. (SCTY), is packaging solar panels and batteries to power California homes and companies including Wal-Mart Stores Inc. (WMT) - See more at: http://disinfo.com/2014/12/elo...

    --
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    1. Re:Don't forget batteries for storage by Nethead · · Score: 2

      Off-topic side note about WalMart. I've done data cable work at more than a few and found that they do one really neat trick when they build: For their main electrical room they haul in a 40' container (before the walls are up) and set it in the back of the store. All the electrical mains come in there through a wall. All the main breakers and the telco demarcation point is in there so if they catch fire the rest of the store has a chance. Off-topic but kind of cool if you're into that thing, which I am.

      --
      -- I have a private email server in my basement.
  9. Re:Predictions by Anonymous Coward · · Score: 5, Funny

    A LOT will happen in 10 years; especially in renewable energy.

    Is that a prediction?

  10. I LMFAO at utilitys by wulfmans · · Score: 2

    I built a house 1 mile away from the overhead power lines. They told me it would cost me 60K USD to run power to my house. FUCK THAT. I installed 6KW of solar panels a nice inverter a decent battery bank and a 30kw diesel genset for 20k. These leaches need to die a horrible death.

  11. Re:That day by Waffle+Iron · · Score: 3

    You may like living in the stone age, but most of us would rather be comfortable.

    One o the best ways to stay comfortable is to not get your home destroyed by the crazy weather created by your cheap electricity rates.

  12. Re: Predictions by Anonymous Coward · · Score: 5, Insightful

    It should not matter anyways. Utilities such as these should be there to serve the people. They should only worry about covering costs, not making a profit.

  13. Demand Is Falling Hard by JimSadler · · Score: 2

    Germany and other European nations are quickly eliminating fossil fuels and nuclear. In the US we are behind in applying solar, wind and water energy both in a collective and individual way. But the handwriting is on the wall. Big energy will do every corrupt trick in the book to keep sucking at your wallet. As homes and businesses go off grid we will see much higher rates for homes still on the grid. This is Future Shock. It is rather like Uber threatening to eliminate the taxi industry. It is quite like Tesla threatening to cripple gasoline and diesel producers and the cars and trucks that use gas and diesel. And it is like robots replacing fast food workers. It is all happening at a very high speed and some social chaos will follow.

  14. the cascade of stories by argStyopa · · Score: 2

    ....smells suspicious - all the meme-generating about "utilities are terrified of renewables" from multiple sources and multiple directions makes me think that someone's laying the ground work to fight the eventual effort of "Ah, so, now that renewables are so fearsome, I guess we need to pull their subsidies".*

    *to be clear, I would love to see the subsidies pulled from ALL power generation, conventional, nuclear, and renewable, and let's actually see which wins out in the marketplace as the cheapest (or, if not precisely cheapest, the best compromise for the bulk of the populace between cheap, sustainable, and clean). But that's a Pollyanna belief; I know there's too much money/power in power for it not to be gamed by every side simultaneously.

    --
    -Styopa
  15. Re:Predictions by Darinbob · · Score: 4, Funny

    I predict that consulting companies face billions in losses as the markets continue to lose faith in their predictions.

  16. Re:Predictions by techno-vampire · · Score: 2

    Nobody can predict the future...

    I beg to differ. Anybody can predict the future, and millions of people do it every day, when they buy a lottery ticket, bet on a horse, play the stock market or put money into a retirement plan. What I think you mean is that nobody can accurately or reliably predict the future.

    --
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  17. Big utilities faces losses! Oh my! by fustakrakich · · Score: 2

    So, what are we supposed to do? Is there some call to protect their interests? Are we supposed to shun solar now because somebody might not make their projected profits? Are we being told that our economic system abhors self sufficiency? For capitalism that appears to be so.

    --
    “He’s not deformed, he’s just drunk!”
  18. Re: Predictions by Dahamma · · Score: 2

    It should not matter anyways. Utilities such as these should be there to serve the people. They should only worry about covering costs, not making a profit.

    I mostly agree, though unfortunately that almost by definition means they may need to be nationalized... ie. the one thing that could be done to make them lose even *more* money...

  19. Re: Predictions by khallow · · Score: 2

    Utilities such as these should be there to serve the people. They should only worry about covering costs, not making a profit.

    A profitable utility is a utility which is covering its costs.

  20. Re: Predictions by dinfinity · · Score: 5, Insightful

    Why the hell is that unfortunate? Utilities should be nationalized. Their existence and proper functioning is essential to society and shouldn't be subject to the whims of shareholders and career tigers or 'operating at a profit'. Even though I believe nationalized industries do not necessarily have to be less 'efficient' than private ones (the efforts to make them efficient have been meager and successes underreported), I'd rather have inefficient organizations operating at a net loss than ones that will fuck me over left and right to extract every penny they can and don't give a flying fuck about the service they should be there to provide.

    This 'socialism bad, free market good'-crap really needs to stop.

  21. Re: Predictions by macpacheco · · Score: 2

    Ohhh so stupid... There is NO enterprise without PROFIT.
    Communism doesn't work. Efficient people are greedy, regulated capitalism exploit greed to benefit the people. Without profit there's no capitalism.
    At the same time... Electricity distribution will continue, it will just use a different electricity flow profile, it will be more focused on transporting electricity between consumers instead of from large generating assets to consumers.

  22. Re: Predictions by Code+Herder · · Score: 5, Informative

    That's amusing, I assume you don't know much about your marxist neighbor in the north, that is Canada. For example Hydro Quebec, which has been nationalized since 1944 has been a great success: http://en.wikipedia.org/wiki/H.... We have some of the cheapest residential power in North America AND we're making a tidy profit selling our fairly important over capacity to our neighbors in the states: http://www.hydroquebec.com/pub...

    On behalf of Canada, I apologize for destroying all your capitalists wet dreams with our mixed economy. Sorry, sorry!