The Electric Utilities' Fight Against Net Metering Will Likely Prove Ineffective

Nov. 22, 2015 4:39 AM ETEIX, HE, PCG, PEG, TSLA7 Comments

Summary

  • The electric utilities' growing push to end net metering should prove counterproductive in the long run.
  • Not only has the utility campaign been limited in its success thus far, but it is also incentivizing innovation in the energy storage industry.
  • Major public electric utilities should continue to lose market share in the energy industry, making them risky long-term investment choices.

The US electric utility industry is starting to experience an unprecedented amount of pressure. While the industry still seems healthy given its near-monopoly control over electricity generation, major electric utilities are clearly becoming worried about the DG (distributed generation) threat. Despite the fact that DG does not yet even account for 1% of electricity generation in the US, a growing number of electric utilities are rightfully convinced that DG represents one of their biggest threats.

As electric utilities perceive DG as an enormous threat to their long-term profitability, they are increasingly going after pro-DG policies. A huge number of public electric utilities like Hawaiian Electric Industries (HE) and Edison International (EIX) are notably fighting against net metering policies. Given that net metering has been essential to distributed generations growth thus far, attempts to reduce or altogether eliminate net metering will almost certainly increase moving forward. Unfortunately for these utilities, there is little they can do to stop DG's rise.

Short-Term Solution

By attacking net metering policies, the electric utilities are utilizing a short-term strategy that could backfire in the long run. Given the enormous amount of money at stake, the electric utilities will clearly try to defend their market shares. The easiest way to do this is to campaign against the DG industry, namely rooftop solar. While this strategy may work in the short term, it will only incentivize innovation within the DG industry.

Utilities like Edison International, Pacific Gas & Electric (PCG), Public Service Enterprise Group (PEG), etc., still have leverage over the DG industry in that it can provide DG companies with a grid infrastructure. Such utilities recognize that without a grid infrastructure, DG would not be economical at its current state. As such, attacking net metering is perhaps the simplest way for electric utilities to stunt DG growth. Without the

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AWS Certified Solutions Architect, AWS Certified SysOps Admin, AWS Certified Cloud PractitionerTop ~5% performer on Tipranks among all analysts and experts. https://www.tipranks.com/bloggers/simple-investment-ideas.

Disclosure: I am/we are long SCTY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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