The Electric Utilities’ Fight Against Net Metering Will Likely Prove Ineffective
The US electric utility industry is starting to experience an unprecedented amount of pressure. While the industry still seems healthy given its near-monopoly control over electricity generation, major electric utilities are clearly becoming worried about the DG (distributed generation) threat. Despite the fact that DG does not yet even account for 1% of electricity generation in the US, a growing number of electric utilities are rightfully convinced that DG represents one of their biggest threats.
As electric utilities perceive DG as an enormous threat to their long-term profitability, they are increasingly going after pro-DG policies. A huge number of public electric utilities like Hawaiian Electric Industries (NYSE:HE) and Edison International (NYSE:EIX) are notably fighting against net metering policies. Given that net metering has been essential to distributed generations growth thus far, attempts to reduce or altogether eliminate net metering will almost certainly increase moving forward. Unfortunately for these utilities, there is little they can do to stop DG’s rise.
By attacking net metering policies, the electric utilities are utilizing a short-term strategy that could backfire in the long run. Given the enormous amount of money at stake, the electric utilities will clearly try to defend their market shares. The easiest way to do this is to campaign against the DG industry, namely rooftop solar. While this strategy may work in the short term, it will only incentivize innovation within the DG industry.
Utilities like Edison International, Pacific Gas & Electric (NYSE:PCG), Public Service Enterprise Group (NYSE:PEG), etc., still have leverage over the DG industry in that it can provide DG companies with a grid infrastructure. Such utilities recognize that without a grid infrastructure, DG would not be economical at its current state. As such, attacking net metering is perhaps the simplest way for electric utilities to stunt DG growth. Without the ability to sell excess electricity back to the grid, the economics of DG fall apart.