For years we’ve likened the energy sector to the computing world, holding up Moore’s law as a guiding example proving that renewables will achieve grid parity.
Today, as panel costs have dropped 90 percent and adoption is at an all-time high, the analogy between the two seems even more fitting. Just like the massive mainframe disruption spawned by personal computing, distributed generation has already begun to challenge the centralized solar model favored by utilities, with no end in sight.
At an industry level, the evidence of a new distributed era is all around us. Fuel cells like Bloom Energy’s are enabling the C&I transformation to self-made energy. Combined natural gas power plants are on the rise, and microgrids are popping up in states across the nation.
The change may feel sudden, but for most of us, it’s been a long time coming. 2009 marked the beginning of utility-scale’s heyday. Investors interested in deploying capital looked at smaller 1-megawatt to 3-megawatt projects and realized that utility-scale solar had the same diligence cost. Investors promptly abandoned the C&I segment in favor of big projects. Though a good decision at the time, the situation has changed. The number of utility projects have dwindled and the shift from the centralized utility model has taken root and is forcing utilities -- for the first time in their existence -- to figure out how to compete.
There’s no doubt now that utilities will ultimately have to change their business models. In a recent discussion with a well-known utility, top executives admitted that not only had solar utility segment plateaued, but that “utility is dead.” It sounded dramatic, but the sentiment has been the topic of discussion for the last twelve months, both in the media and in more hushed tones in closed meetings. So, how will utilities adapt?