June 4, 2014
JUST SPEEDING UP EVOLUTION:
Obama Isn't Killing Power Plants. The Sun Is. (Carl Pope, 6/04/14, Bloomberg View)
The U.S. has barely begun to deploy solar panels for electricity. Even California gets only 1.3 percent of its electrons from the sun. Yet that modest start has upended the fundamental driver of utility profits -- the demand curve.A note by Bernstein Associates said that among utility executives who spoke at a recent industry conference, "the issue of whether solar is going to ramp in the U.S. was not raised. Instead, the discussion from utilities themselves went directly to the issue of how to reach an accommodation with this rapidly expanding and disruptive technology."Deregulated electricity generators make most of their profits on hot summer afternoons, when air conditioners and offices force grid operators to call up their most expensive electricity: natural gas "peaker" plants. Cheap to build but expensive to operate, these plants are essentially jet engines, producing power on demand for a few hours at a time. However, the entire industry benefits when peaker plants kick in, because every other generator, including the cheapest hydropower operator, receives the same top dollar during those peak hours.Solar panels -- whether utility scale or residential rooftop -- generate maximum power on exactly those hot afternoons when demand peaks. What's more, they do so at no marginal cost; the sun is free. This reduces reliance on peakers, causing prices to fall across the board, including for customers without solar power.This is what terrifies power companies.
Posted by Orrin Judd at June 4, 2014 1:53 PM