Last week, the largest producer of power in the United States took a radical step to acknowledge a basic fact: the solar energy revolution has finally reached the United States, and it cannot be stopped.
The company, NRG Energy Inc., said that it will start installing solar panels on rooftops of homes and businesses, according to a story in Bloomberg. NRG has recognized that its old way of doing things – building big, polluting power plants that contribute to global warming, then selling that electricity to a utility who distributes it – is quickly becoming antiquated in a world where solar power is simply cheaper than coal.
What does this mean for the utilities who have acted as middle-men, selling dirty brown power to Americans for the last century? Remarks from a big name in the power industry in that Bloomberg story revealed a lot:
“There’s been a huge effort to build solar on the rooftop, both residential and commercial. All of this is leading to a disintermediation of us from our customers.”
Greenpeace has campaigned aggressively over the past year to change Duke Energy from one of the biggest coal-burning polluters in the country into a clean energy champion. Duke is the largest utility in the U.S., with massive political power and capital; if it were to switch from selling brown power generated from coal, nuclear and gas plants to selling power made from solar energy, it would signal a sea change in the U.S. energy landscape.
So, will Duke adapt to the times and embrace solar energy? Well, Rogers seems scared enough in his remarks to at least consider it. He ought to be. “Disintermediation” is a fancy word to describe what happens when the middle-man in a business transaction – in this case Duke Energy – is made obsolete.
Disintermediation happens every time society undergoes rapid technological change. How many people have used travel agents to book flights in the last five years? When’s the last time you dialed into a telephone switchboard operator? Suffice it to say, if you’re in business, and you start hearing the word “disintermediation” applied to your industry, you better run for the drawing board, and fast.
We don’t have to get too imaginative to see how renewable energy has caused disintermediation in the energy sector. The process is in full swing right now in Germany.
Rooftop solar has grown so fast in Germany that solar and wind together now account for 22 % of the country’s power needs. It’s worth noting that this didn’t happen because Germany is any sunnier than the U.S. Germany gets less sunlight than Alaska… it’s hardly the desert.
No, German solar energy growth happened because of forward-thinking policies by its government to support clean energy development. Now that the rooftop revolution is under way there, utilities throughout Central Europe are being disintermediated, as Rogers would put it. A UBS study shows that utilities are shutting down coal plants throughout Europe because their market is being “cannibalized” by the rapid growth of rooftop solar power there.
Unfortunately, the US hasn’t enacted the same kinds of solar-friendly policies, so we’re a few years behind the Germans. We still need to enact policies like a carbon price and greater supports for the wind and solar industries – doing so will help us decrease our dangerous global warming pollution far faster and more smoothly, and allow us to reap more benefits from the growing solar economy.
But regardless, it’s clear that as solar energy keeps getting cheaper, the exact same dynamic that I underway in Germany is taking hold in the U.S. Graphs of U.S. solar energy development by state show the characteristics of an exponential growth curve that is accelerating rapidly. All new electricity growth in the US in January was powered by either wind or solar power (the same was true last September.)
All that brings us back to Duke Energy and Jim Rogers, who is leaving the company at the end of this year. Rogers has crafted an image for himself as something of an oracle for the industry, the first one to see the next big thing coming around the corner.
His recent words sound like those of a man who sees the solar revolution coming fast, and knows that it won’t be a bright one for Duke if the company doesn’t adapt. Unlike the German utilities that never saw their own irrelevance coming, Duke has the fair warning and the time to make a choice: it can either be a leader in the solar revolution, or it can continue on its coal-fired path to the ignominy of “disintermediation.”
Rogers has eight months before he retires to make that decision.