Utility death knell? Investors grow wary of utility stocks

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By: SGN Staff

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Quick Take: Smart Grid News has been warning of the coming challenges to the utility business model for many years. And then in February, 2012, we created a whole series of articles on the issue under the rubric "Electronomics."

 

Now the outside world has noticed these same trends. Back in March, 2013, Reuters warned that renewable energy is turning utilities into dinosaurs. In July, the New York Times warned that rooftop solar could become a rival for centralized utilities. And last week, the insider investment site Seeking Alpha asked if the lights are going out for electric utilities. See the summary below, or click the link to read the full article.- By Jesse Berst

 

Electric power utilities may suffer death by a thousand cuts. Things do not bode well for the public monopolistic utilities because of a little-known revolution, as the Seeking Alpha article put it.

 

Solar installations are surging. Walmart wants to get as much power as possible from renewable sources, while Google, Apple, Walgreen, IKEA and other trend-setters are rapidly expanding their on-site power generation. The cost of solar panels has fallen 75% in three years. Solar is even proliferating in cloudy states like Ohio.

 

All over the world the need for centralized power is dropping thanks to renewables, LED lighting and energy storage. LEDs use as little as 10% of the energy of incandescent bulbs and last over 40 times longer. Meanwhile, both lead-acid and lithium-ion energy storage technologies continue to evolve.

 

So what does it all mean for the electric companies and their investors? Probably nothing good. It's just a matter of time before grid parity is reached and utilities lose their quasi-monopolistic status.

 

The power grid will not disappear overnight, but do look for it to shrink and change. Investors need to be aware of these changes. Much like hundreds of millions of cars displaced passenger trains and horse and buggies, on-site power generation will likely displace or greatly diminish monopolistic electric utilities. Utilities will no longer be conservative, income generating investments fit for widows and orphans.

 

Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.

 

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