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Published on March 29th, 2013 | by Giles Parkinson

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Why Consumers Won’t Need The Power Industry Any More

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March 29th, 2013 by
 
Reposted from RenewEconomy:

Image Credit: Thomas/CleanTechnica

Image Credit: Thomas/CleanTechnica

The head of America’s biggest fossil fuel generator says the sharp falls in technology costs from rooftop solar and other micro generation means consumers will soon go after the option of disconnecting from the local utility and “won’t need the power industry any more.”

David Crane, the CEO of NRG Energy, the largest provider of energy to US utilities, with investments in gas, coal, nuclear, biomass and renewables, says the industry is being turned on its head by the declining costs of distributed generation, and believes there is not a lot that utilities can do about it.

Crane has long had a progressive view of what’s happening in the energy industry, which is to say that he hasn’t had his head either in the sand or buried in a sea of self interest.

At the MIT Energy Conference in Massachusetts earlier this month, Crane suggested that the falls in the cost of technologies such as rooftop solar and other micro generation meant that consumers could bypass the electricity grid and were perfectly entitled to tell their energy provider to “disconnect that line.”

“Consumers are realising they don’t need the power industry at all,” Crane, said in an interview reported by Bloomberg. “That is ultimately where big parts of the country will go.”

NRG currently supplies all but 1.5 per cent of its energy via fossil fuels, but it has also recognised the potential of the solar revolution, as Crane describes it, and has been offering rooftop solar PV systems directly to customers.

Bloomberg says that NRG is the first operator of traditional, large-scale power plants to branch into running mini-generation systems that run a single building – a move that, as Bloomberg notes, is striking at the core business of utilities that have earned money from making and delivering electricity ever since Thomas Edison flipped the switch on the first investor-owned power plant in Manhattan in 1882.

Crane’s company has been one of the biggest investors in large-scale solar in the US, but it has also bought a distributed solar company and wants to expand that product. He says his company is looking at offering solar leasing products that require no deposit for rooftop systems installed by customers.

Crane also wants to take advantage of the growing underground network of pipes that delivers gas to about half the homes in the country, and proposes providing customers with micro turbines and fuel cells that use gas.

In effect, Crane wants to help customers bypass the local electricity utilities, and disconnect from the network.

“The individual homeowner should be able to tie a machine to their natural gas line and tie that with solar on the roof and suddenly they can say to the transmission-distribution company, ‘Disconnect that line.’” Crane said.

And he said that the shift to distributed generation will have more of an impact on utilities than on customers. So much so that utilities now realised that distributed solar is a “mortal threat” to their business.

“They can’t cut costs, so they will try to distribute costs over fewer and fewer customers,” he said in separate comments reported by the Wall Street Journal – an issue highlighted in our report on the pricing forecasts by the Australian Energy Market Commission. This, Crane said, will have a snowball effect because it will increase costs for customers, and will drive more of them toward distributed solar.

Jim Rogers, the head of Duke Energy, the largest utility in the US, says utilities are aware that generating power at customer sites will disrupt their business.

Rogers pointed to the huge deployment of rooftop on solar on homes, commercial buildings and industrial facilities. “All of this is leading to a disintermediation of us from our customers,” he said.

“If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup,” he said, adding that other independent power producers may be evaluating the merits of distributed generation, building many small systems at customer sites instead of a few large ones.

So I have one simple question. Why don’t Australian utilities and generators talk like this? We’ve got more sun! Or is it they simply have the power to protect their vested interests?

NRG Energy itself has been developing numerous solar projects, most of them large utility-scale installations. The company acquired a distributed solar project developer in 2011.

The comments are interesting because the US has installed less solar on rooftops than Australia – in 2012 it amounts to 488MW, exactly half the installations in Australia.

In Australia, however, utilities owners are pretending that it’s not having much impact on their business – just on other customers because of so-called cross-subsidies. In this, they have the implicit support of the pricing regulators.

Still, Lyndon Rive, co-founder and chief executive of SolarCity, one of the leading providers of solar leasing products that accounts for most of the installations in the US, said that most utilities will do “whatever they can” to stop companies like his from increasing their market share.

“They will create fear tactics,” he said. (And we’ve seen plenty of that in Australia). For utilities, said Rive, it’s very hard to get a customer back after losing the customer to a competitor, like his own company.

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About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.



  • Michael MacLean

    The energy world is changing rapidly. Although many utilities are reluctant to adapt, some forward-thinking utilities such as Gainesville, FL, Sacramento, CA, and Los Angeles, CA are embracing Distributed Generation (DG) of renewable energy and Intelligent Grid (IG) solutions to prepare for the future.

    Integrating IG solutions with large volumes of DG will result in a far more efficient and reliable electrical system. Local energy production will mitigate the impact of any single power station or transmission line failure. Intelligent grid solutions — such as demand response, advanced inverters, and energy storage — will significantly increase grid reliability by enabling local balancing of supply and demand for energy.

    Ultimately, the combination of DG+IG will allow for the creation of micro-grids that can function as standalone energy “islands” to provide continuous power for essential services during widespread grid failures. This will enhance grid resilience and fortify energy security, significantly benefitting local communities. Therefore, utilities that curtail their dependence on fossil fuels and embrace DG+IG solutions will be well staged for the future.

  • science guru

    I quote from the article: “Crane says his company is looking at offering solar leasing products that require no deposit for rooftop systems installed by customers.”
    Just like Solar City leasing; Crane’s Solar leasing is nothing less than a SCAM! What part of just shifting energy cost from the utility to the leasing company don’t people understand? Get smart, do the math, just buy the system and stop getting ripped off by all of them!
    Crane’s other idea “shift your electric utility to your gas utility” is just as insane as a solar energy lease.
    Otherwise a great article spelling out the eventually demise of the electric utilities and they see it coming.

  • jlmur

    Hooray!!! But don’t forget how quickly the Main Stream Media can deceive the public. News like this can restore the promise of Democracy, but I also can’t ignore how deceitful major Media outlets can be when their interests are threatened.

    • CaptD

      I’m betting MSM is now mostly owned by the same folks that own the big Utilities!

    • http://zacharyshahan.com/ Zachary Shahan

      Very true. It’s a struggle. So much misinformation published or broadcast there every day. We do our best to counter that.

  • CaptD

    A little off topic but solar COOL:

    Solar Bottle “Light”

    Great FREE Solar Bottle light for the Third World and beyond!

    http://wimp.com/lightenup/

  • CaptD

    How to increase Solar usage nation wide in the shortest amount of time:

    What is holding America Back?

    http://www.grist.org/solar-power/2011-08-08-clever-accounting-lets-utilities-cash-in-when-you-go-solar

    The Utilities want to maximize the profits for the shareholders and so they donate to Candidates to get them to support traditional Energy Production, which does not include anything but a token amount of Solar… We are being “forced” to accept their Energy “mix”, instead of using our own and being fairly paid for the Energy we produce and push INTO the grid!!

    When The Energy Utilities pay each of us for the energy we put into the grid, at the same rate that the Utility charges for that same energy someone else uses at that exact time, then you will see Solar being installed Nation wide!

    Because Solar is generated during the daytime, it is the most valuable since the Utilities charge the most for daytime usage (where they have SMART metering)! Everyone pays an additional amount to support the infrastructure (The Grid) so that when the Energy Utilities begin to pay the same as what they charge (no pun intended), then it will make adding Solar panels a no brainer, since the payback period will be much shorter. Another benefit for all of us is that during a power outage, all the small solar panel producers can he

  • CaptD

    The Germans are leading the world and here is what they say:

    The Future of Nuclear and fossil fuels: Only for Back-up for renewables

    http://wp.me/p26pKF-2Ff

    snip

    The two largest electricity utilities in Germany – E.ON and RWE – have declared they will build no more fossil fuel generation plants because they are not needed, challenging a widespread belief that the phasing out of nuclear in Europe’s most industrialized economy will require more coal-fired generation to be built.

    Both E.ON and RWE say the rapid expansion of renewable energy, particularly solar but also wind, would make up for the loss of capacity from nuclear. “We won’t be building any more gas and coal power generation plants in western Europe, because the market does not need them,” a spokesman for E.ON told reporters at a briefing at the group’s headquarters on Friday. RWE made a similar statement a week earlier. A third major operator, Vattenfall, agreed that the market in Western Europe is oversupplied but said some limited capacity may be needed in the southern part of Germany.

  • Bob_Wallace

    Giles, I’ve got huge respect for you but you should have called BS on this one.

    In the best case what the gas boys are saying is that you could cast off the electric line and be dependent on their gas lines. In my book the natural gas companies are in the “power” business.

    Only half of all houses have access to gas. Going to run gas to the rest?

    How long will that gas last? At 2010 burn rates the US probably has no more than a 20 year supply. As we crank up the use rate we lower the years to empty.

    Where does wind (our cheapest carbon free energy source) fit it? Going to toss away the connection to wind and hook up to gas? Going to pay the cost of installing a gas generator of some sort, and watch as wind gets cheaper and gas more expensive?

    • http://soltesza.wordpress.com/ sola

      Also, the utility companies can easily block solar in unregulated markets.

      They can stop billing only after consumption and introduce fixed fees and consumption packages.

      Of course that alone will not save them in the long run but it can hurt solar badly if regulators put up with that (which they may if their campaign financing miraculously improve).

      • Bob_Wallace

        Utility things are going to be in a turmoil for the next few years. I don’t anyone expected solar to be disruptive in the way it is being. Wind is also disruptive, it’s killing “always on” generation such as coal and nuclear. But solar is disruptive in a different manner, it brings new non-utility company providers into the market.

        Solar is likely to be installed in very large amounts on end-users roofs because it competes with the retail price of electricity while other generation competes against existing wholesale prices. Also, with end-user solar there are no real estate costs, none of the monitoring/security costs that a utility company installation will incur.

        Our utility systems are going to have to adjust to this reality. Pure and simple.

        The majority of people are not likely to install solar. Think of all the people who rent, who move frequently, those who simply can’t get their “stuff” together.

        If the people who do install solar install enough to generate their 24/365 needs it will take only one out of five (rough number) to fill the sunny hour grid with solar-produced electricity.

        The utility companies are going to broker those extra solar kW hours. They’re going to store some (although wind is likely to remain cheaper). And they’re going to fill the grid with non-solar electricity during the non-sunny times.

        This is going to really mess with their financial models. They will fight to make the transition at the lowest possible cost to them.

        The utility companies that own things like coal and nuclear plants are likely to be facing some losses on those investments.

        I don’t view the utility companies as “the enemy”. They’re businesses and overall have done a good job of keeping the lights on and keeping the cost of electricity reasonable.

        We’re going to have to give them some time and room to adjust.

    • Ronald Brakels

      To a small extent it’s already happening in Australia. Not with gas, but with gasoline. It’s a side effect of how people are charged for electricity. I think a change in how people are charged would be sensible, but it’s come to my attention that we don’t always do things sensibly here.

    • arne-nl

      You said exactly what I was thinking. Gas is still a fossil fuel (I don’t think we can make enough gas from cow poo or something to replace a worthwile portion of the fossil gas we’re using).

      My ‘master plan’ for my household is exactly the opposite: ditch the pipe and keep the wire. The wire brings me clean electricity from wind or hydro or solar or biomass. The pipe just sends my money to Putin.

      • science guru

        Agreed 100%

  • anderlan

    HOORAY that someone with some skin is pushing utilities and states forward. We definitely need to allow more systems that can disconnect at the customer’s grid interface during outages, so that the customer remains with power (at least during the heat of the day) while also keeping linemen safe.

    Does this get complicated? Perhaps. How does the “home-grid” itself know to shut off and avoid appliance damage because the power is not enough to support all of the drawing appliances? Can it be done gracefully? But we must work this out. We must build an open, standardized intergrid. And I’m glad a large company with interest in these problems is working on them.

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