Thematic Report

Utilities confront clean-tech disruption

by Rajesh Panjwani / May 23, 2016

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Short of an energy-storage miracle, the cost of going completely off-grid will far outweighs buying electricity from the grid for many years, limiting the disruptive onslaught of solar and storage. Nearly all solar customers will need services of the grid, and tariff structures will evolve to ensure that they pay their fair share.

Given their scale, utilities are also adding far more renewable capacity, and at a much lower cost than rooftop solar. Even with rapid expansion, we expect solar to contribute only 10% to the power mix in 2030. But it won’t be a cakewalk for utilities as unregulated fossil-fuelled power plants could be hit hard and regulated utilities must also tighten their belts. However, efficiently run regulated players, especially those in transmission and distribution, will adapt and thrive.

Exaggerated claims do a disservice to the fight against climate change. As ever-cheaper solar panels end up on more rooftops, the owners of those buildings buy less power from the grid. This has led to claims that we are entering a vicious cycle, dubbed the utility death spiral, triggering rising tariffs and grid defections. Taking this to the extreme, clean-tech advocate Tony Seba’s claim of 100% solar energy by 2030 suggests that we have found a solution to global warming. Such hype not only contains serious exaggerations, but also introduces a sense of complacency in the fight against climate change when we are, in fact, far from a viable solution. Utilities have also been portrayed as obstacles to change as they resist rapid expansion of rooftop solar, but we do not entirely agree with this view.

Short of an energy miracle, solar will contribute only 10% to the power mix in 2030. We believe solar power will continue to grow rapidly and expect it to expand 10 times by 2030 to contribute 10% of global power generation. The value-factor of solar power declines sharply as penetration rises, forging an anchor to its growth. This also means that unlike what some solar companies and experts such as Tony Seba claim, we are far from finding a solution to the world’s energy problems and climate change. We agree with Bill Gates that we need some moon-shots to resolve these issues and it will require a substantial increase in R&D on energy and maybe even some shift from renewable subsidies to R&D.