NRG Energy has made some fascinating moves recently that suggest it’s written the first few drafts of a Dear John letter to utilities. It’s not the only one disrupting the status quo, either. As energy demand surges in response to a growing global population and emerging-market development, and a changing climate forces us to get serious about constraining greenhouse gas emissions, all signs point to an energy future that bears little resemblance to what we know today.

Paradigm disruption
Renewables are making tons of headway lately, and 2013 promises to be a very good year for energy sources such as wind and solar. Their growing share of generating capacity presents challenges to the old-school utilities, though: Given that solar photovoltaics and wind are randomly variable energy sources, traditional power plants and transmission lines that were designed for steady supply struggle to accommodate the power fluctuations of renewables.

This means that as companies such as SolarCity push their sun-powered energy systems further into the marketplace, they do so at traditional utilities’ expense. In furnishing consumers with their own generation capacity, SolarCity bypasses utilities. The company’s partnerships with electric-vehicle manufacturers further subvert the legacy systems.

Disintermediation
This process of cutting out the middleman is one we’ve seen before. If you have doubts, ask yourself this: When was the last time you used a travel agent? Exactly. As companies like SolarCity offer customers renewable energy that is typically cheaper than power from the grid, they erode the need for utilities at all. And utilities have noticed.

In an interview with Bloomberg, Duke Energy‘s chairman and CEO, Jim Rogers, directly acknowledged the trend’s potential threat to his company over the long term. Duke is the United States‘ largest utility owner, and Rogers conceded that businesses like his could become less important in the long run.

“If the cost of solar panels keeps coming down, installation costs come down, and if they combine solar with battery technology and a power management system, then we have someone just using us for backup,” Rogers said. He also said Duke was considering a move into rooftop solar, describing it as a short-term opportunity.

At a 2012 energy conference, Susan Story — CEO of Southern‘s services division — directly acknowledged the shifting energy landscape. Southern, the United States‘ largest vertically integrated utility, has been making strides toward a smarter grid and has dramatically shifted its fuel sources. Traditionally coal-reliant, Southern burned more natural gas than coal for the first time in 2012.

Edge power
But are companies like Southern and Duke moving quickly enough to survive the disruption that appears to be under way? Incumbents tend to weather disruptive events poorly, and this could be no exception. Especially when you consider “edge power.”

Edge power is a new and evolving concept, but its core components are distributed generation, distributed storage, and distributed energy management systems. The idea is …read more
Source: FULL ARTICLE at DailyFinance