In December 2013, a Wall Street Journal reporter referred to the traditional utility business model as a “death spiral.” The term has been used repeatedly ever since, especially when discussing roof-top solar and whether the technology is speeding utilities’ demise.
Now, Former Energy Secretary Steven Chu has come up with the solution for utilities: Get into the distributed solar business yourselves!
Utilities are in danger of being FedExed, “like the Post Office got FedExed,” Chu told an audience at the University of Chicago, as reported by Forbes.
More than a year ago, the Edison Electric Institute released a report “Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business.” The report spawned news stories pointing out that solar installations are eating away at utilities’ business, and the incumbents are almost unable to respond to a quickly-changing competitive landscape.
To date, some utilities have responded by trying to change the pricing structure of net-metering, making it less financially desirable for solar owners.
Chu laid out a model, reported by Forbes, where utilities would use solar and battery storage to profit from distributed solar installations. He told the Chicago audience he has spoken to several utilities about his business model and gotten three types of responses:
- “Tell us what to do.”
- “Deer in the headlights.”
- “We’re going to fight this.”
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