Posted by: crudbasher | April 15, 2013

The Disaggregation Of Energy

Our current society is organized and structured based on physical location. We live near our jobs, the shops locate near where we live, schools are distributed based on population, and there are powerplants near by. It all makes sense but it is changing. My Theory of Disaggregation states that the Internet is changing the organization of society to one based on information, not physical location. I am watching for this to happen to Education and it is slowly. You can however see it in other parts of society. A friend of mine (Thanks Shawn!) passed along this interesting article about the power generation industry. Boy are they in trouble. (H/T grist.org)

Solar Panels could destroy U.S. Utilities, according to U.S. Utilities

The article discusses a report by a trade group for US power companies called Edison Electric Institute. In this report they talk about how solar power will destroy the US power industry. Wow that sounds crazy right? I mean, these companies have been around for over a century. In many markets they are legal monopolies with no competition. How can they possible be destroyed?

To sum up the report here’s how it will work. Solar panels are dropping in price and increasing in efficiency. When I mean solar by the way I mean mounting panels on your house in order power your house and “get off the grid”. The current business model for power companies has them selling you power based on usage. Right now the power they sell you is cheaper than what you can get from solar but that will change fairly soon (5-10 years). Once solar installations become close in cost per kilowatt-hour many people will switch. Each person who does switch is lost revenue to the power company.

(cc) Captain KimoNow here is where it gets bad for the power companies. Once subscribers start dropping out, the overhead costs have to be spread over a smaller customer base; thus the price for everyone else must rise. As the price for traditional power rises, it become increasingly unattractive vs solar (which will drop faster as more people buy in) and the process of customer loss accelerates. Along the way, as it becomes obvious that the industry is in trouble, investors will demand more return therefore the cost of capital also will increase just when the industry will need to be making major capital investments in more efficient systems. The process speeds up and BOOM!

Wow.

You have to understand you are dealing with an industry that really hasn’t changed much in 100 years. Since it is a monopoly it has never had real competition, much less had to face a disruptive innovation like this.

Now, go back and read this post again but think of the parallels with the US public education system. A few years ago I would have had trouble directly equating one to the other but I have now realized they all are based on economics. Everything is really and that is why technology is disrupting so many sectors. I am in no way a green person but I would put solar panels on my house if it made economic sense. This Stormfront of change is going to remake our society on the same scale as the Industrial Revolution but much, much faster.

 

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Responses

  1. […] and does not required things like large wind turbines (wind is a very big dead end I think). (see The Disaggregation Of Energy […]


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