How Much Longer Until Solar Eliminates the Utilities?

SolarIf you’re thinking of packing up the kids and moving to Hawaii, you better consider this one drawback: energy is crazy expensive there!  A few months ago, Bloomberg covered a story about how a family living in a neighborhood on the island of Oahu was paying 37 cents per kilowatt-hour (as opposed to the 12 cent national average).  Since Hawaii must pay to import expensive oil to power its electric grid, customers are left paying more than normal.  Most are turning to rooftop solar as a way to alleviate the financial burden.

While energy customers living within the continental US are not experiencing such drastic utility bills, many are still adopting this Hawaiian approach.  And utilities are not happy about it.

Where is solar headed?

As with almost any product, the longer it’s been on the market, the cheaper it gets.  While solar technology continues to improve, we see manufacturing costs drop.  According to Business Insider, between 2006 and 2013, the price for photovoltaic panels dropped nearly 70 percent.

We’ve all learned about the effects of supply and demand in our high school economics class.  When supply increases, prices drop and demand tends to soar…and that’s exactly what’s happening.  In places like Hawaii, where typical electricity from the grid costs an astronomical amount, residents are turning toward rooftop solar to generate their own electricity and separate themselves from the utilities.

Why do utilities care?

The first thing to realize is that the utility does not own commercial or residential solar panels, or the energy they produce.  So in the eyes of a local utility, every kilowatt-hour of solar energy that is produced is like taking a kilowatt-hour off the grid.  And when the utility experiences lower demand for electricity, it won’t have as much money going into its pockets.

Furthermore, rooftop solar arrangements produce the most energy during the afternoon, which is what utilities refer to as “peak hours.”  Utilities typically earn the most profit during these peak hours, but if customers don’t need to rely on them anymore, they could bite the dust sooner than predicted.

But they are certainly not planning on giving up that easily.  Bloomberg states, “In California, where solar already powers the equivalent of 626,000 homes, utilities continue to aggressively push for grid fees that would add about $120 a year to rooftop users’ bills and, solar advocates say, slow down solar adoptions.”

But can solar completely replace utilities?

In most cases, solar does not produce 100 percent of the energy required of its residents…yet!  Solar power is an intermittent resource, meaning it only generates electricity when the sun is shining.  Though some may view solar as useless at night, several tech companies are working to reverse this problem.

Tesla Motors is currently working on a battery pack that can be used in conjunction with solar panels, allowing customers to store the electricity they generate when the sun is out, and use it when needed.  For this concept to catch on, Tesla must continue to lower the price of a battery to an affordable level for consumers.  Business Insider reports that “Tesla has single-handedly brought down the cost of batteries over the past few years, from about $1,000/kWh in 2009 to $300/kWh in early 2014. If the company’s gigafactory successfully ramps up, costs could plummet.”

Utilities appear to be safe for the time being, but some are beginning to realize their fate may be in the hands of consumers.  What do you think?  Will solar power slowly eradicate the utilities we’ve been relying on for centuries?  Or will utilities stand their ground and force customer to find other ways to lower their energy bills?

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