An Iowa Utility Death Spiral?? (And Other Items)

Could it happen in Iowa? For those of you unfamiliar with the “utility death spiral” concept, The Interweb has been full of discussion lately about big changes coming for utilities. Here’s how it goes: Many people start generating their own electricity by installing their own solar panels, small wind turbines, micro gas turbines, and fuel cells. This lowers the amount of customer’s captive to monopoly utilities. Those utilities have to raise electric rates among remaining customers to maintain services. This causes even more customers to install solar panels, etc. Rates go up even more. Soon… down the drain another utility goes.  The telecom industry, once highly regulated, has changed radically in the last 2 decades, so it seems possible that similar things could happen with electricity generation. I’ve linked to articles discussing this before. The first post I saw on this topic was in 2008. According to the author, almost half of U.S. electric customers could be generating their own electricity by 2028. If that happens, you can be sure the industry will look much different than it does today.  Here’s some of the latest buzz: 

Bloomberg Businessweek posted “Why the U.S. Power Grid's Days Are Numbered”. Stephen Lacey just posted “UBS Analysis: Efficiency and Solar Create ‘Difficult Road’ for Global Utility Sector in 2014” . William Pentland @ Forbes.com isn’t buying it , making the case that companies will adjust before the “death spiral” occurs.  John Farrell doesn’t agree in “Utility Shocked to Find It’s Already Dead”, making the case that decisions made by utilities in the 90’s, may have already sealed their fate.  A quote - “we can toss out the antiquated notion that a utility grid must be centrally planned and centrally owned in an era when cost-effective energy generation is neither”. A lot of generation and transmission assets planned or in construction may not be needed, but someone (That’s you dear ratepayer) will have to pay for them. Some utilities have aggressively moved to control renewables themselves, yet a lot of their customers will still want their own wind turbines and solar panels. Our utility friends seem to have forgotten that the customer is always right. Their only plan seems to be “pick a fight with customers while trying to retain them”, as noted in the 2008 post above.  

    

The investment folks have also noticed. Seekingalpha just posted Are utilities headed for a death-spiral? The Economist ran “European utilities - How to lose half a trillion euros” in October. The “death spiral” doesn’t seem to be a myth in Europe. I plan to crawl further down the rabbit hole on this issue in the New Year.

   

Shifting gears, it’s the holidays, and here’s a link to some solar powered Christmas gifts, along with a photo of some coal fired Christmas decorations spotted on a recent trip. 

Here’s hoping that customer’s utility has a great distributed generation program. Most likely though, the Santa’s are powered by a lump of coal judging by the link to MISO Midwest fuel sources found on John Farrell’s twitter account.  The link shows the grid powered by 71.8% coal today. 

  So it looks like we need to add much more distributed generation in Iowa to change the look of that graph. You can send a new year’s wish to the Iowa legislature to do just that!   

Happy Holidays, and thanks for checking the blog out this year!