The business model that keeps electric utilities operating could be disrupted as Americans look for ways to wean themselves off of grid power.
In a recent Wall Street Journal article, industry experts shared their fears of a “death spiral” for electric companies as consumers turn to solar energy sources and invest in money-saving devices. If the utilities respond to declining sales volume by raising rates, it may push customers even more toward energy-pinching lifestyles.
U.S. electricity sales have been essentially stagnant for about seven years, despite overall housing growth and Americans’ taste for large houses and electronics. Relatively milder weather, increased efficiency of appliances and HVAC systems, and improved insulation of homes are some of the trends resulting in decreased electric consumption per household. Households and businesses switching to solar and other renewable energy sources also is playing a role.
Some utilities are responding through diversification. NRG Energy Inc., for example, generates electricity primarily through fossil-fuel powered plants, but is aggressively adding solar and wind power to its portfolio. The company recently acquired the Northeast sales and operations teams of Verengo Solar, an installer of solar systems. Despite the general doom and gloom in the marketplace, NRG is set on doubling its revenues to $6.6 billion by 2022.
Utilities are also hoping to find a sympathetic ear among state regulators, who appreciate the need to strengthen the country’s electrical grid infrastructure. Utilities have sought to increase their rates, or set rate structures with fixed monthly fees, with mixed success.
In an interview with the Wall Street Journal, Tom Farrell, chief executive of Dominion Resources, Inc., a power provider based in Richmond, Va., expressed doubts that regulators and industry players will let the national grid deteriorate. “You can’t run a country on solar panels,” he said
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