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Huffington Post: 5 Reasons Utility Companies Hate Renewables

http://www.huffingtonpost.com/rf-hemphill/5-reasons-utility-compani_b_7215976.html

Posted:

imgresAs noted in part one of this topic (6 Facts About the Impending Renewable Energy Revolution), solar and other renewables have become more and more competitive with traditional ways of generating electricity. And these cost advantages can be easily translated to the customer level. Now you can use these technologies to take control of your own electric supply, regardless of what your local electric distribution company does.

As previously mentioned, I am a former senior policy official at the Department of Energy and Deputy Manager of Power at the Tennessee Valley Authority and I spent the better part of three decades flying 4 million miles on United as I developed a startup global electric power and distribution company into a company with $18 billion a year in annual revenue and power plants now in 21 countries.

That being said, here are 5 reasons why utility companies hate renewables:

1. Bigger used to be better. Utilities have thrived over the last sixty five years by building bigger and bigger power plants, based on the reasonable principle that there are economies of scale in bigness, and fuel costs were trivial. You couldn’t build a power plant in your back yard at any reasonable cost, never mind how mad your neighbors would be. But all of that has changed. Solar especially is a technology where scale doesn’t matter, or at least it doesn’t matter nearly as much as in other technologies. Photovoltaic panels are small, stand alone power plants that can be installed anywhere that there’s enough sun to make them effective. Small wind machines are also moving down the cost curve, although they have more challenges for installation at the residential level.

2. It’s cheaper to run wind and solar plants than it is to run traditional sources of generation, even at the residential level. The absence of fuel costs is obvious, but the operating and maintenance requirements are much lower as well. You can put a small natural gas fired generating set in your basement, but you’ll need engineering and maintenance and careful attention to ventilation, and other complications. Solar panels on your roof have no such requirement, and this is a very attractive feature.

3. The solar industry has matured. There are lots of solar installers around to offer their services. This is no longer an experimental technology, or one only for the environmental nuts, or something you do just to impress your neighbors. It’s here, it works, and it’s getting cheaper and cheaper. The same cannot be said for the electricity from your local supplier.

4. You are pretty likely to save money if you make your own power. The price your utility charges you for energy is always complicated, and not more than two or three customers out of a hundred understand their applicable “rate schedule.” Before the Arabs started the energy crisis and the Mideast became an unending headache, your kilowatt-hour price came down per unit as you used more electricity–think volume discount. This mimicked the utilities’ costs. But that cost structure hasn’t been true for a long time, and rates have been adjusted so that you pay MORE per unit as your consumption goes up. In San Diego, for example, there are four price levels, from 17, 20, 37 and 39 cents, which increase as more electricity is used. This clearly encourages customers to use less rather than more.

5. All this creates a real night mare for the industry. Utilities fundamentally are in business to sell electricity. Having pricing that discourages consumption of your only product is bad enough. Now having a technology that is available and attractive to customers,
t article: 4 Ways Smart Utility Can Join the Renewable Revolution Rather than Opposing it and Ending Up as Road Kill.

RF Hemphill is a former CEO of a multi-billion dollar global electric power and distribution company and is the author of Dust Tea, Dingoes & Dragons: Adventures in Culture, Cuisine & Commerce from a Globe-Trekking Executive.

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