A few months ago, I wrote an article on why electricity should be sold as a service, and mentioned that California was heading in that direction. Interestingly, TotalEnergies, which had invested heavily in the company SolarPower, is now exiting the California market.
A minor regulatory adjustment triggered a corrective action, addressing the oversupply of solar panels and consequently, the company had to declare bankrupcty.
A weakening of the rooftop solar market in California was one big reason behind SunPower’s troubles, as inventories built up amid slackening demand. Regulatory reforms in the state contributed to the weaker demand as they removed a large part of the incentives that drove people to put solar on their rooftops.
My suspicion is that once regulators come to term with the fact that the pricing system in kwh no longer makes sense, then there is going to be more of this to come.
Renewable sources are not an inherently bad technology and they certainly do have an excellent future and business case. What the proponents unfortunately misunderstand is that to maintain a stable electricity system one requires more than one building block. In the days of vertically integrated utilities, the entire service to the end user was conveniently priced in kilowatt hours. But it could just as equally have been structured in fixed and variable terms (such as cellphone contracts).
Renewables, being positioned behind the distribution and transmission system, have disrupted the traditional pricing model. As a result, additional services required for reliability—such as Peak Capacity, Dispatched Ramping, Synchronous Power, System Strength, and Voltage/Frequency Stability—have now been unbundled and are charged at a fixed rate.
Previously, consumers could avoid these costs, effectively passing the expense of maintaining a stable supply onto utilities. This led to financial difficulties for Californian utilities, and with politicians heavily invested in the green narrative, solutions for corrective action were limited.
However, last year, the regulator unintentionally arrived at a promising solution, when out of desperation changed the net metering rules, because wealthy users were not paying their “fair share” for maintaining the grid infrastructure.
In my view, the introduction of a service-based model that includes Capacity and Time-of-Usage charges is the next logical step. We can expect to see more of this in the coming years. More bankruptcies are likely to occur.
Electricity should be sold as a service, not a commodity.
Electricity should be sold as a service, not a commodity. Correct Hugo.
It can't be sold as a commodity, because it isn't. It is created to look like a commodity and disguised as such and gets preferential terms. That should never be allowed.
Mainly because it cannot be provided at the right price as and when needed which is the consumer markets demand.
It is a parasite like wind energy.