Environment & Energy
Related: About this forumThe Massive Storm Facing Californian Utilities
http://beta.fool.com/mrcanadian1/2013/04/19/even-utilities-are-warning-investors-about-solar/31975/?source=eogyholnk0000001(Cross-posted in GD)
Recently, the Edison Electric Institute published a report about the far-reaching impact of distributed solar generation. Distributed solar allows individuals to produce their own electricity, and net metering programs let individuals sell that electricity to utilities. California's utilities will face increased competition from millions of producers sick of high prices, and eventually the utilities' bottom lines will feel the impact.
Which Utilities Will be the First to Suffer?
Edison International (NYSE: EIX) will feel the pain with its Southern California Edison subsidiary. It serves nearly 14 million customers in one of America's most expensive states. A large portion of the firm's capital expenditure (capex) is directed toward distribution and transmission projects. In the 2013 to 2014 period, 88% of capex will be used for transmission and distribution projects. In the long-run this is risky, as homeowners selling electricity to utilities will greatly benefit from a stronger grid, but Edison International will have more producers to compete with.
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Are There Utilities in a Better Position?
Wisconsin Energy (NYSE: WEC) is in a better position than its Californian peers. Wisconsin isn't as sunny as California, but its centrally produced electricity is cheaper than California's. The state is close to cheap supplies of coal in Wyoming, natural gas pipelines and strong wind sources. Also, the firm's natural gas business provides some diversification from the electricity business.
wtmusic
(39,166 posts)"While the regulatory process is expected to allow for recovery of lost revenues in future rate cases, tariff structures in most states call for non-DER (Distributed Energy Resources) customers to pay for (or absorb) lost revenues. As DER penetration increases, this is a cost-recovery structure that will lead to political pressure to undo these cross subsidies and may result in utility stranded cost exposure.
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As a result, the future cost and availability of capital for the electric utility industry would be adversely impacted. This would lead to increasing customer rate pressures."
There's a very anti-utility segment among solar supporters, which amounts to shooting themselves in the feet. The utilities maintain the infrastructure and balance the load, which are essential. DER contributors are going to have to start paying those costs - which is probably long overdue.