It wasn't too long ago when energy consumers -- from homeowners to large industrial firms -- didn't usually have a lot of choices when it came to utilities. Sure, there were some who could take advantage of "inefficient bypass" options which would offer a lower price to customers who might otherwise find an alternative supplier or generate energy in-house, but it definitely wasn't the norm. This gave utilities a lot of control when it came to setting and approving rates based upon the energy usage of its customers. Fortunately for enterprises and other consumers, the times are a-changin'.
Why this sudden shift? There are a few reasons, including:
- Solar Power -- The increased demand for renewable energy sources and self-generation is turning the tables, and the customers are coming out on top. Rooftop solar panels are, by far, the top bypass mechanism for businesses. As long as the retail price of kilowatt-hours that are crowded out by the solar generation equal out to more than the cost of solar electricity, rooftop panels will continue to make a lot of economic sense for users. In other words, they are highly efficient when they are able to bring down the overall cost of supplying electricity to the grid.
- Natural Gas Prices -- We're seeing a point in time when natural gas prices are extremely low. This means that combined heat and power installations have the ability to lower energy bills.
- Fuel Cell Technology - This tech just keeps on advancing and is pushing ever closer to the retail cost of electricity.
- Batteries - Batteries have emerged that possess the ability to store power both from the grid and from onsite generation. The costs associated with this are going down. Batteries also give customers more power over deciding when they want to rely on the grid, if at all.
This all means trouble for utilities. As consumers and businesses are able to rely less upon the grid and take advantage of bypass mechanisms, utility providers will be left with a serious revenue shortfall. When this happens, you can expect utilities to raise their prices. Of course, this will only create additional incentive for enterprises and other customers to push towards more bypass options, culminating in a cycle that is now being referred to as "the utility death spiral."
Sounds exciting, right? At first glance, you might be thinking that the "death" of the utility company is a great thing. After all, aren't they just manipulating the system and overcharging businesses like your own? Before you get too jazzed, though, it's important to take a closer look at the underlying issue. Despite the fact that there are several bypass mechanisms to choose from, there's still no technology available that will convince more than a small fraction of the consumer market to fully transition away from the grid. This means that we'll still be reliant upon the utility -- even if just a little.
Unfortunately, "the utility death spiral" really refers to the death of the ability of regulators and utilities to adjust revenue collection without customers pushing back. Ultimately, this will do nothing but continue to keep grid prices high and to undermine the efficiency of the system as a whole. Ultimately what we're saying is that today's technology makes it simpler for consumers to respond to prices, as well as to arbitrage between pricing differences. This can be good as long as prices reflect costs, but when they don't, the system will become inefficient. It's definitely something that we'll be keeping an eye on, and we encourage you to do the same.
To learn more about your enterprise's energy usage and how it can be better maintained, contact the professionals at NuEnergen.