bloomberg | There are 3,200 utilities that make up the U.S. electrical
grid, the largest machine in the world. These power companies sell $400
billion worth of electricity a year, mostly derived from burning fossil
fuels in centralized stations and distributed over 2.7 million miles of
power lines. Regulators set rates; utilities get guaranteed returns;
investors get sure-thing dividends. It’s a model that hasn’t changed
much since Thomas Edison invented the light bulb. And it’s doomed to
obsolescence.
That’s the opinion of David Crane, chief executive
officer of NRG Energy, a wholesale power company based in Princeton,
N.J. What’s afoot is a confluence of green energy and computer
technology, deregulation, cheap natural gas, and political pressure
that, as Crane starkly frames it, poses “a mortal threat to the existing
utility system.” He says that in about the time it has taken cell
phones to supplant land lines in most U.S. homes, the grid will become
increasingly irrelevant as customers move toward decentralized homegrown
green energy. Rooftop solar, in particular, is turning tens of
thousands of businesses and households into power producers. Such
distributed generation, to use the industry’s term for power produced
outside the grid, is certain to grow.
Crane, 54, a
Harvard-educated father of five, drives himself to work every day in his
electric Tesla Model S. He gave his college-age son an electric Nissan
Leaf. He worries about the impact of warming on the earth his
grandchildren will inherit. And he seems to relish his role as utility
industry gadfly, framing its future in Cassandra-like terms. As Crane
sees it, some utilities will get trapped in an economic death spiral as
distributed generation eats into their regulated revenue stream and
forces them to raise rates, thereby driving more customers off the grid.
Some customers, particularly in the sunny West and high-cost Northeast,
already realize that “they don’t need the power industry at all,” Crane
says.
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