Understanding the Utility Model

Solar Installations

G&S Electric Inc. and other roof top solar companies in the valley are fighting for a new direction in the way we generate electricity. Photovoltaic panel installations provide point of use power, create distributed energy resources, and empower home owners by reducing dependance on fossil fuel and nuclear power plants. Top solar contractors in Arizona are caught in a battle with the large utility APS over the future expansion of roof top solar. APS wants to minimize the spread of roof top solar. If it fails to do so, the utility company may no longer be viable. Understanding how utilities work, helps customers understand why the fight is so important.

Utilities are either regulated monopolies that can both produce and sell electricity, or they are deregulated entities that can either produce electricity, or sell electricity. Utilities are guaranteed rates by state regulating agencies which they can use to accurately project profit forecasts. These profit forecasts are published to large investing firms which then funnel money into the pockets of the utility stake holders. The entire financial system of a utility is based on getting paid to produce electricity and getting paid to sell electricity for a profit, which then encourages investors to give the utility money, making additional profits. The model has worked for a century and a lot of money has been made off the need to supply the nation with energy.

Utilities make bids to build and manage large power stations which run on nuclear or fossil fuels. They are awarded money to build power stations they control, thereby controlling the amount of electricity available, which they sell according to demand. Along comes roof top solar, and the business model begins to crumble. Roof top solar is not owned or controlled by the utility companies. Therefore, they are no longer able to control the amount of energy being produced. Each roof top solar installation becomes its own power station, so the demand of electricity from the power plant is lowered. Thereby lowering the rationale to charge higher rates. If your home has power, the utility cannot sell you the power it is making, and has excess electricity to try to sell else where. It stops making money.

In Arizona, utilities bet on making most of their money during the long hot summer days. Arizona homes and businesses crank up the air conditioning and spike demand for electricity. With higher demand, comes higher prices, and the utilities take advantage by charging peak load demand rates. Along comes roof top solar, and the business model changes. Roof top solar provides peak performance during long hot summer days. They begin operating at their most efficient rate, often providing excess electricity. So the roof top solar home is not purchasing the higher rate electricity, and the utility looses its most valuable resource. Additionally, the roof top solar home tied into the grid provides distributed energy resource and gives its neighbor some excess electricity, not owned by the utility. So neighbors are using electricity not generated by the utility and the demand for peak load lowers. Utilities loose lots of money. As more and more homes adopt roof top solar, the utilities begin loosing more and more money because it cannot sell its highest value product, the peak load rate.

Investors who trade in the utilities market are used to long term fixed rates of return based on simple models of guaranteed fees and profits. Along comes roof top solar and the 30 year investment model crumbles. Investors become nervous about trading in utilities, the value of utilities commodities lowers, investors stop trading, and utilities loose money. The Edison Electric Institute, the utilities trade group, just published their own report noting these risks. Utilities are at risk of no longer being profitable. The more roof top solar installations and the more distributed energy sources, the less money a utility can make. Additionally, the lowering cost of roof top solar installation and the lowering cost of battery reserves are making it easier for home owners to adopt an off grid solar system making them completely independent from utilities.

When the utilities own investment firm begins publishing warnings regarding the future of utilities to be viable, the investors are going to start backing out of utilities which are fast adopting roof top solar. So in order to keep investors on the hook, APS has to demonstrate it is one of the utilities that is fighting roof top solar. APS must demonstrate that it is doing everything in its power to minimize the impact of roof top solar and to prevent the spread of the solar industry. As investor money continues to flow in, APS spends it on negative ad campaigns, fighting for additional fees and increased rates, and most recently, fighting to eliminate requirements to adapt roof top solar as part of its power generating system.

Electrical contractors and roof top solar companies like G&S Electric Inc. are fighting for energy independence. Utilities are fighting for their investors to keep Arizonans dependent on electricity they control. It is vital to the state of Arizona that the benefits of the new solar economy continue to progress. G&S Electric Inc. remains a trustworthy electrical contractor company that promotes roof top solar where appropriate. As a top rated solar contractor and one of the best solar consultants, G&S Electric Inc. wants to be your partner in the fight for roof top solar. Find out if roof top solar is right for your home or business. Keep our economy growing and fight for energy independence.


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