The Solar Eclipse of the Monopolist Utilities

At this year’s TED Conference, entrepreneur Elon Musk confidently predicted that, in the end, “solar will beat everything.” All it will take for the solar energy revolution to become a reality is millions of solar-powered homes across the nation forming a “giant distributed utility” bigger and more powerful than any utility that exists today. According to a new report from the Edison Electric Institute, by the year 2020 we’ll start to see the first severe cracks in the traditional utility power system. As more customers begin to generate their own power with solar panels, traditional utilities will no longer able to compete with cheap, plentiful solar power, leading to their eventual demise.

In other words, don’t mess with the sun.

As the cost of solar power continues to drop and as innovative ways to finance the cost of initial solar panel installations (such as Elon Musk’s SolarCity) continue to appear, it will simply make more and more economic sense to install solar panels on your roof to generate your own power from the sun. Currently, solar energy accounts for 1% of all power generation needs. By 2020, that figure could be 10%. And within a generation, solar power could represent a plurality of all power generation.

Anyone else see the scaling effect of an exponential technology here?

Abundant clean energy – once a mythical goal – is becoming a reality thanks to “people power.” In a two-minute video produced by Solar Mosaic (one of the companies championing the crowd-led solar energy revolution), founder Billy Parish suggests a powerful reason why the future of solar power belongs to the crowd: all of those cost savings from lower utility bills can be plowed back into meaningful projects for local communities. In a clean energy economy, everyone participates and everyone benefits. Compare that to the monopolist utility business model, where the customers do not win.

And it’s not just Main Street that’s trumpeting the power of the sun to break up the entrenched energy incumbents. Wall Street, too, has jumped into the fray, with jargon like “edge power” and “distributed power” now making the rounds among investment analysts. “Edge power” is the same concept as “people power” – people on the edge of an energy grid can increasingly meet their power needs without the need for a monopolist energy utility. The CEO of Duke Energy put it best in describing the ability of customers to produce their own power: “They’re just using us for backup.”

While there are still skeptics about the ability of the crowd to stick it to The Man, the economic case for solar energy is rapidly becoming just as convincing as the ethical and moral rationales for clean energy — especially as the solar energy players find ways to create partnerships with electric vehicle manufacturers and other members of the solar energy ecosystem. Christopher Mims of Quartz parsed the January 2013 Edison Electric Institute report and found four specific reasons why the economics of solar power are so convincing (e.g. “solar panels supplant the most profitable kind of power utilities sell.”) In the spirit of KISS economists everywhere, these four reasons can be boiled down to one simple macro observation: solar power is only getting cheaper, traditional fossil fuel power is only getting more expensive.

A number of tech visionaries – not just Elon Musk – have suggested that solar power is the truly exponential technology of our era. Ray Kurzweil, in his latest book, specifically threw himself behind the idea of solar power as the alternative energy source most likely to go exponential. By 2027, he says, solar will power the world. And, when it does, it could mean a bright future for all of us.

Image: Man installing solar panels on roof / Shutterstock