We have seen a staggering increase in renewable energy production within the last five years. Wind and solar power have all taken over larger portions of total energy production in the U.S. And it’s not just utilities that are cashing in on these technologies. Residential use, particularly of solar technologies, has taken a $2 billion bite out of the power generation pie. The appeal of a high-tech solution to the high cost of electricity and emission-free energy production has resulted in a rooftop solar movement on track to reach more than 1 million houses across the country. Inevitably, this shift in demand has had a powerful impact on the energy market, particularly electrical companies who are losing revenue at a surprising rate.
Increases in wind and solar energy capacity have also made a significant impact on CO2 production. Technological improvements, increased reliability, and reduced cost of solar power makes this alternative energy option more feasible on the residential scale, as well as within the overall context of the energy industry. In response, grid managers serving the eastern part of the country are planning to cut the total amount of electricity they will buy from conventional power plants by roughly 1,400MW as soon as 2019. This, in turn, could result in as much as $2 billion in lost revenue for electrical companies who are already feeling the pressure from tighter environmental regulations, facility retirements, depressed prices, and lower demand.
Overall, the U.S. energy industry seems reluctant to rely so heavily on solar power as the shift will likely slow investment in traditional power plants, reduce the reliability of the U.S. electricity system, and increase costs due to investment in a fast moving and sometimes unstable market. Power producers suggest looking to Germany as a case study of these issues already influencing the market. This change within the market is thought to create the risk of more reliable electricity generating resources lose significant amounts of revenue and retire prematurely.
Germany has been working under a renewable-energy focused transition plan designed to reduce dependence on fossil fuels. About 30 percent of the country’s power is now generated by renewable energy sources, which has in turn sunk power prices to their lowest levels in over 10 years. Closures of gas-fired units and canceled plans for coal-fired facilities have resulted in an estimated $1.13 billion loss. The overall drop in wholesale electricity prices have sent many companies into the red, an even more difficult position to be in considering the difficult political climate.
It is clear that in response to political and public pressure, energy companies must factor in renewable energy into their long-term projections. This does require a not insignificant investment in new technologies and shifting priorities, but the trajectory of the industry seems distinct. To ignore the effect of solar power and other renewables in the industry is to lose out on an important opportunity for electric companies across the country.