The Davis City Council has reopened the question of a Davis-owned municipal electric utility at a time when the relevance of traditional investor-owned utility is being questioned throughout the country.
PG&E and almost all other investor-owned utilities are working from a business plan that is more than a century old, dating back to Edison. The industry is resisting the need to come up with a business model that works with the new world of climate change and emerging low-cost clean energy technology. The fundamentals of the industry are being questioned. Is there any need for huge remote power generation stations that require long leaky transmission lines that are difficult to permit? Even when these big facilities capture solar or wind energy, they are environmentally controversial and hard to sell to regulators and the public
Investor-owned utilities have scarcely started to resolve these issues. In the meantime, public power provided by locally owned utilities accounts for more than 20% of California’s electric power, generally at lower rates that those of private utilities. Some, like the Sacramento Municipal Utility District, are innovative and advanced in their planning for a grid that accommodates renewable energy and efficiency and distributed, local sources of power.
A new report from the Rocky Mountain Institute energy think tank (download at http://www.rmi.org) sees the demise of the traditional utility model around the corner:
“Distributed electricity generation, especially solar PV, is rapidly spreading and getting much cheaper. Distributed electricity storage is doing the same, thanks largely to mass production of batteries for electric vehicles. Solar power is already starting to erode some utilities’ sales and revenues.
“But what happens when solar and battery technologies are brought together? Together they can make the electric grid optional for many customers—without compromising reliability and increasingly at prices cheaper than utility retail electricity. Equipped with a solar-plus-battery system, customers can take or leave traditional utility service with what amounts to a utility in a box.
“This utility in a box represents a fundamentally different challenge for utilities. Whereas other technologies, including solar PV and other distributed resources without storage, net metering, and energy efficiency still require some degree of grid dependence, solar-plus-batteries enable customers to cut the cord to their utility entirely.
“Notably, the point at which solar-plus-battery systems reach grid parity—already here in some areas and imminent in many others for millions of U.S. customers—is well within the 30-year planned economic life of central power plants and transmission infrastructure. Such parity and the customer defections it could trigger would strand those costly utility assets. Even before mass defection, a growing number of early adopters could trigger a spiral of falling sales and rising electricity prices that make defection via solar-plus-battery systems even more attractive and undermine utilities’ traditional business models.
“How soon could this happen? (The RMI) analysis) shows when and where U.S. customers could choose to bypass their utility without incurring higher costs or decreased reliability. For California, the study showed that this could happen [in the] within a decade. New market realities are creating a profoundly different competitive landscape as both utilities and their regulators are challenged to adapt. Utilities thus must be a part of helping to design new business, revenue, and regulatory models”
The Davis municipal utility is in an exploratory stage now. When and how the city seizes the opportunity to make its energy future cleaner and more profitable is under study. Local groups, such as the Valley Climate Action Center and the Coalition for Local Power, are urging that the city tap its abundance of local energy experts to move the study forward. Stay tuned and keep and an open mind.