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The Energy Industry Is Undergoing Radical Change

Jun. 05, 2020 2:19 AM ETAES, DUK, ENPH, FSLR, NEE, SEDG, SO, SPWR, TSLA38 Comments


  • New energy technologies are transforming the power industry.
  • Distributed energy generation is threatening to upend the traditional utility business model.
  • While there are a few utilities adapting to the new energy landscape, the majority of them are unprepared.

The energy industry is transforming at a rapid rate. The emergence of increasingly cost-effective renewable technologies like solar and wind are completely changing the industry. Electric utilities are starting to grapple with the fact that these new forms of energy will likely dominate the narrative moving forward. Whereas some utilities are embracing this change, others are struggling to adapt.

A few energy companies like NextEra Energy (NEE), AES Corp. (AES), and Duke Energy (DUK) are pouring billions of dollars into renewables. These companies are well-positioned to take advantage of renewables' explosive growth. Energy companies that are overly reliant on traditional energy sources like coal could find themselves at a disadvantage moving forward. In fact, some even predict that a utility death spiral will occur for these companies.

The emergence of cost-competitive renewables like solar and wind are changing the dynamic of the energy industry.

Source: iStock

Growth of New Energy Technologies

Renewables like solar and wind are opening up entirely new possibilities of how energy is generated. Distributed energy, for instance, has become increasingly viable with the advancements being made in solar and storage. Tesla (TSLA) is almost single-handedly pushing down the cost of lithium battery storage at a stunning rate. This, in combination with the rapid advancements being made in solar, is making distributed energy increasingly cost-competitive with centralized energy.

Solar PV is arguably the biggest threat to displace traditional fossil fuels moving forward. Despite solar's exponential growth, solar companies have had an extremely hard time profiting from this growth. Even leading US solar companies like SunPower Corp. (SPWR) and First Solar (FSLR) have struggled despite solar's growth. The consistent steep price declines experienced by solar have made it incredibly hard for solar companies to maintain healthy margins.

However, some solar companies like SolarEdge (SEDG) and Enphase (

This article was written by

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.

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Comments (38)

prudent 576 profile picture
Just noticed, significant insider selling 6/5/20, of ENPH. Also insider selling of SEDG, but not as heavy as ENPH. FYI
ephud profile picture
Those are pretty big sales indeed.
No one is defecting from the grid especially with less tax write offs now a days. Why would they? The grid is reliable, the grid is cheaper overall. I dont make my own clothes, I dont want to make my own power or collect rainwater either.
George Wind profile picture
you wrote: ....No one is defecting from the Grid.....
Actually many are.
Individuals and individual members of energy co-ops. Especially in California.
These former utility customers are lost to utilities forever, increasing the charge to the remaining customers.

That is part of the "death spiral" explained by the author.

You do not seemed to be aware of "mini-grids" growing rapidly.
Mini-grids formed by multiple home developments with common storage of excess day electricity, as well as a gas turbine back ups at night or when there are not sunny days.
Many of these house cluster only have 60 to 70% occupancy or large electric needs. Yet all have solar roofs, a new law in California.
Excessive electricity from the seasonally occupied houses is "pooled" by mini-grid distribution software, now getting standartized.

And BTW, most of this planet has no Grids to begin with.

That is why the village pooled solar and wind, tied, shared and distributed in the software driven mini-grids is becoming the future.
ephud profile picture
@George Wind

" ....No one is defecting from the Grid.....
Actually many are. "

If they are I think it's a foolish decision to disconnect from the grid. You double your the with batteries when the existing grid could be your battery. What sense does that make?
George Wind profile picture
many people (both individuals and communities) want to be "Grid-free", not because they are foolish, but because they want to save money.

To say that you are using the Grid as a battery is incorrect and very misleading.
What you really doing is that when your solar panel generate electricity, the electrons go automatically on the grid. You just sold your excess electricity to the utility.

Now the question is how much the utility pays you for your excess electricity. In 95% cases, the utility pays you their "wholesale" prices.
However, when you take electricity from the Grid, let's say at night (having no battery) you are buying electricity for whatever utility charges you, which in 95% cases is the "retail" price.
But their "retail" price is usually at least 3 times more than their "wholesale" price.
With storage getting cheaper every year, at some point you would be better off without using the Grid.
You may be getting some sweeter agreement from your utility but that is quite unusual.
George Wind profile picture
@Simple Investment Ideas,

To your excellent Summary part, I would like to add your Grid observation:
Whether or not major utilities will be successful in transitioning towards renewables is still highly questionable. It will be incredibly hard to transform an aging centralized grid energy infrastructure in a relatively short period of time. 
My additional comment:
Even upgraded Grid could never eliminate its two major disadvantages and vulnerabilities:

a) Up to 30% of generated electricity is lost in the Grid transmission. 100% of generates electricity is used locally. No transmission losses.

b) Centralized Grid is vulnerable to a sabotage by terrorists or even a foreign power internet attack. Distributed generation is not.
George Wind profile picture
Correction: Meant to say:
a) Up to 30% of generated electricity entering the Grid (Wind farms and large Solar farms), is lost in the Grid transmission.
Compared to the distributed solar market with 100% of generated electricity immediately reaching their nearby destination.
All electricity used locally bypassing the Grid. No transmission losses.
prudent 576 profile picture
I like beaten down fossil fuels producers, as oil and gas are not going away anytime soon. It is also obvious that greener folks intend to push renewables. Without getting into a debate about where the materials and power comes from for electric cars and buses, it appears solar makes more sense than wind. The wind turbines are a hideous blight on the beauty of nature. Solar panels are also unsightly, but at least one can't see them from miles away. One way or another, we'll have to have energy and oil and gas came down so low it was foolish not to buy good some during the COVID-19 'pandemic'. I'm long, DEV, ENPH, WTI, MRO.
I've never understood what people had against wind turbines aesthetically. I find them inspiring and elegant monuments to humanity's ability to tackle challenges. It is coal-burning plants, pipelines, and smog produced by carbon fuels that are depressing and ugly.
dbchambers profile picture
What is the view of Hydropower? IDACorp has a large amount of hydro generation for their customer base. How does it compare to Solar and Wind ?
Tidal is very good at consistently generating power as we have tides each and every day no matter the weather / seasons etc
Hydro might be good for reducing emissions, but the reservoirs cause a huge amount of environmental damage. Hydro dams are also extremely expensive, take a lot of time to build, and require a ton of infrastructure (since they are centralized), all of that reduces their economic advantage. A good current example is the Site C hydroelectric dam in British Columbia. Energy costs have changed so much since they first approved it that the economic argument is now very weak. The environmental and social backlash has also been huge.
James Hanshaw profile picture
@AlexLN I think that must be a country specific thing. I live in Switzerland and we have hydro power in our home coming from small and large sources. We have none of the problems you mention.
I believe we’ll see Tesla turn into a utility in the next two years. I expect them to use brand new cells (rather than sell them all to Energy customers or put them in vehicles). Others say they may give used up packs a second life once below ~80% range when new. By 2025 they could have a good amount of energy storage that buys electricity at night for cheap and sells in the day for highest price and evens out loads for the real big bucks and they make a ton of cash with a super high profit margin. And this resource lasts a long time and when it isn’t good anymore it’s recycled!
Tesla’s Energy biz is almost like printing money. Got to buy more shares....
Big Fat Dummy profile picture
TSLA + “high profit” + “energy biz” + “printing money”...you ever read one of their 10Ks?
Your name says it all.

Watch this space as they will not only dominate the car industry but also the energy sector and insurance.

Those are just the beginning.
Big Fat Dummy profile picture
Same question to you: have you ever read one of their 10Ks? ...
What is the electrical power requirement if 20% of all drivers used electric cars? Probably a lot. What is the energy generation comparison between gasoline and electricity? How much electricity is required to replace? A lot.

Can wind and solar do this? Does the sun shine in the dark? How many hours in a day can solar produce electricity? How many hours at max rate?
Wind / solar / geo / hydro / bioenergy.

Often, its not the producing of energy which is the problem, its the storage.
Hence why I often see many wind turbines not turning - cos they done need more energy right then.

Tesla will solve the storage problem and win big because of this.
Oh and if people / governments get on board like california have then a lot of households will have their own solar roofs (v3), powerwalls and EV's so the cars are literally running off sunlight!

Its a nice dream which is starting to happen now!
Truly sorry to spoil your DREAM.

I purchased a solar roof to “go green.” I still NEED power Company to supply peak daily AND seasonal loads. Especially when cloudy all day.

Storage will NOT cover that power gap.

Electric cars usually need charging DAILY AND at NIGHT.

TREMENDOUS power capacity is needed to keep KWHs flowing on CLOUDY days and at NIGHT.

Stored power still has to be moved.

Until Tesla can beam the power from SPACE without cooking birds and airplanes, the electric utilities will be necessary. Utilities will match their cost recovery to their rate structures. They will raise fixed charges and lower the power charge to eliminate the HUGE subsidies (hidden taxes paid by my neighbors) built into most tariffs today. Hawaii and California are already facing the REAL and growing problem of TOO MUCH power being produced at peak sun. Even GROUNDING that power and refusing to take it because there is NO WAY to store that peak production.

The hidden tax on my neighbors is real, but diminishing. It costs me 10 cents per KWH to produce power in the DAYTIME. My neighbors (via the electric company) pay me 12 cents / KWH for power. It costs the utility under 4 cents to generate that power. So my neighbors pay me an average of 200% tax on every KWH that I supply to them. The 8 cent gross margin above cost is required TODAY because voters were mislead by the solar industry lobbyists who forced politicians to require “clean” and “free” solar power subsidies to be paid. NO POWER is FREE. The power utilities MUST pass this hidden tax on to other customers, or face bankruptcy. (Unless the government rebates the loss and bankrupts the government.)

EVEN IF I COULD STORE SOLAR IN “FREE“ BATTERIES, this lost 8 cent margin MUST BE PAID BY SOMEONE to recover the 8 cents /KWH necessary to pay all of the utilities’ expenses to maintain a safe distribution system.

Storage, transmission, and distribution requirements will keep the power companies in business for the next 100 years UNLESS we all get nuclear energy in every building. PLEASE do not go there.
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