A disruptive technology is any revolutionary innovation that comes along and destroys a well-established business model.
We see this happen all the time in the online world:
- Napster and iTunes killed the CD industry
- Netflix drove Blockbuster out of business
- Amazon has made brick & mortar bookstores obsolete
- Uber is threatening the taxi cab industry
Even the US Postal Service is in trouble thanks to email.
But these disruptions don’t always have to rely on the World Wide Web. Solar is a perfect example of a technology that continues to threaten one of the most established business models in the world.
In fact, utility power isn’t simply established – it’s monopolistic.
How Solar Power Is Changing the Game
Solar is a scalable, affordable, and durable technology that allows average homeowners to generate their own clean electricity. Today’s solar photovoltaic (PV) panels create so much energy that many homeowners feed this excess power back into the grid – at a profit.
And not surprisingly, utility companies are shaking in their boots.
If people can create their own clean electricity on-site, traditional power providers can’t make as much money.
And the situation actually gets worse:
- As more people go solar, utilities lose revenue
- To cover fixed costs, utilities must raise rates for everyone else
- As rates go up, even more people go solar
- And the death spiral continues…
The only customers that are left behind are apartment dwellers and homeowners whose properties are unsuitable for PV installations. But even this is changing thanks to the rise of community solar gardens.
Is the Utility Death Spiral Inevitable?
Utility companies are all too familiar with what’s happening. According to Public Utilities Fortnightly editor-in-chief, Ken Silverstein,
My own research is showing that people at all levels of all utilities are thinking about the new energy paradigm. But thinking about it and acting are two different things. Some utilities are really moving aggressively, and others are far more deliberate in their approach.
The most common approach involves fighting against solar by attaching penalties and fees to prevent homeowners from investing in PV panels.
But this strategy probably won’t work – just as the music industry failed in its attempts to stop Napster and the MP3 revolution.
Solar Doesn’t Have to Be a Disruptive Technology
A better solution is to embrace solar. And thankfully, many utilities have already started to do that. By greening the grid, power providers can dramatically reduce their costs. After all, they don’t have to pay for oil, coal, and natural gas to run their generators.
Fewer costs = higher profits.
Utilities could further reduce costs by encouraging homeowners and businesses to install panels on their own respective properties. This saves power providers the expense of investing in large-scale solar farms.
The solar revolution is happening. Utility companies can try to fight it and end up like bookstores, CD shops, and video rentals. Or they can embrace this clean power technology and remain relevant for many years to come.
From where we stand, it’s a pretty easy choice.