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Clean Power Startups Aim to Break Monopoly of U.S. Utility Giants

A small band of upstarts is quietly trying to innovate their way into a 100-year-old energy market dominated by utilities and fossil fuels. Can it work?

Dec 12, 2012
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Solar installation

But a major shift in the power sector is still a few decades away, they agreed. "This is a very big and very powerful industry. It's not easy to change," said Marchant Wentworth, the deputy legislative director for the climate and energy program at the Union of Concerned Scientists.

Distributed solar is expected to be one of the biggest drivers of change in utility business models because of increasingly favorable economics for solar installations. Today, less than one-half of 1 percent of the nation's total electricity comes from distributed renewable power that's produced on people's homes and buildings.

In Germany, which broke the mold of big utilities and fossil fuels by democratizing its energy system, about 70 percent of the record 7,500 megawatts of solar it installed last year was distributed generation owned mainly by individuals, cooperatives and communities.

Solar power system costs are declining rapidly, thanks to falling panel prices, which have dropped by nearly 80 percent since 2008. New financing tools such as leases and Property Assessed Clean Energy (PACE) finance programs—which let homeowners pay back solar loans on their property tax bills—are enabling more Americans to afford the installations, spurring demand.

"If solar costs keep coming down—and we have every reason to believe that they will—then [rooftop] solar will eat away at the revenue of big utilities, because it's not under their ownership," said Ted Hesser, a clean energy analyst at Bloomberg New Energy Finance.

That could lead utilities in the next few decades to find new ways to make up for lost revenues, he said, including investing aggressively in large-scale solar plants to compete with smaller rooftop systems, or to become financial partners with the solar developers themselves.

"The entire business model for utilities might change, and what it changes into is a question mark," he said. "It's going to take a long time to be clear."

InsideClimate News reporter Elizabeth Douglass contributed to this report.

Clarification: An earlier version of this article said geothermal pump systems are not connected to the electrical grid. While heat and cooling generated by the geothermal system are not distributed on the power grid, the systems do draw electricity from the grid to run the pumps.

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