Elon Musk: Companies Will Remain Committed to their Utilities

Image: Heisenberg Media
Image: Heisenberg Media

Elon Musk is the guy who wants to see solar on all roofs and batteries to store power in every garage. He’s also the guy who wants to electrify the automobile business. And he’s the same guy who just said that the traditional utilities will be more valuable than ever before — because they will still be needed to supply a lot of that electricity.

At issue is just how the centrally-designed generation and transmission network will change in the coming decades. With newfound pressures to be cleaner, more efficient and more reliable, customers are looking to onsite generation that can be supported by energy storage and microgrids. While those dynamics are not about to replace the existing infrastructure, they will shake things up – and give access to new market participants, which could either partner with the utilities or try to totally supplant their market positioning.

“Sometimes the solar roof is positioned as sort of a competitor to utilities, but we’re actually going to need utility power to increase and we’re going to need local power generation,” Musk said during a speech unveiling a new product line for battery storage systems. “Because if you transition all energy to electric, that roughly triples the amount of electricity that is needed. The future is bright for utilities and for local power generation.”

A story appearing in Power Magazine says that Musk suggested that a third of the electricity would be used for transportation, a third for heating and a third for what is now being feed into the grid. While utilities are destined to lose electricity sales because of locally-generated power such as rooftop solar panels, they will make that up in sales to supply electric vehicles. It’s also working directly with Southern California Edison to provide battery storage at one of its substations.

Solar installations in the United States have jumped by 43 percent in the second quarter of this year, reports the Solar Energy Industries Association. More than 2,000 megawatts solar were installed.

To be clear, that is utility-scaled PV, which generates solar power that feeds into the grid. It is different from rooftop solar that generate power for homeowners and businesses. Earlier this year, the nation recorded its 1 millionth residential rooftop installation — a market has grown by 29 percent a year in the last few years. It is expected to hit 2 million in two years, the solar association adds.

“We’re seeing the beginning of an unprecedented wave of growth that will occur throughout the remainder of 2016, specifically within the utility PV segment,” says Cory Honeyman, GTM Research associate director of U.S. solar research.

Of course, utilities have every right to be concerned about their market positions and about the maintenance of the vast grid on which most people will still depend. The utility industry says that it collectively spends $25 billion a year upgrading or expanding infrastructure. If accounts “drop off,” then there needs to be a fair way to allocate the cost of upkeep, especially if utilities must still procure enough energy to serve those customers when the sun isn’t shining.

But even the the industry’s representative, the Edison Electric Institute, says that its members will continue to prosper in this changing environment. That’s because utilities have core competencies such as building, designing and operating grids — things that are vital when it comes to developing microgrids that deliver power within a confined space such as a campus.

“As much as we hear people say that they want to be off the grid, it not economical,” says Raiford Smith, vice president of corporate planning for San Antonio, Texas-based CPS Energy. However, “if you are not responsible to your customer, someone else will be. If our customers want it, we should find a way to deliver it.”

Hence, Elon Musk is both a friend and a foe to the utility industry — a disruptive force, if you will.

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