4 ms·

I expect the opposite. As everyone moves to efficient light bulbs for instance, the utilities still want to make X% profit on Y revenue for Z customers, roughly

I expect the opposite. As everyone moves to efficient light bulbs for instance, the utilities still want to make X% profit on Y revenue for Z customers, roughly, and will adjust numbers upwards until they stay at least at the same place.

tangent128 9y ago
Except that increases the incentives to lower electricity usage. And even if you can't meaningfully cut your usage any further, inflating utility prices would still make a local solar installation more attractive.
- nathan_long 9y ago
  > Except that increases the incentives to lower electricity usage. Which further raises prices, which further decreases demand... this is known as the "death spiral" for utilities.
Bombthecat 9y ago
In Germany, this already starts to happening.
cletus 9y ago
I suspect you're right on the money here as we've seen this before, most notably with the dying cable TV model. Declining viewership, increasing viewer age (younger viewers are more highly valued by advertisers as a general rule) and the abundance of cord-cutting streaming options (ie Netflix, Amazon Prime, Hulu, HBO, etc) are all trending in the wrong direction (for cable companies and traditional broadcast outlets). The result? Rising prices to make up for the revenue shortfalls from selling less bundles. With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over. Utilities have significant fixed costs. These are the capex costs of building plants and power infrastructure. These don't get any cheaper if consumers consume less power. The most likely response is simply to raise prices. Solar in particular has been on a rapid decline in recent years. Utility price increases will only hasten adoption. Here's another thing to consider: electricity tends to be more expensive during the day and cheaper at night. This is because industrial and commercial usage tends to be at peak during the day. Utilities typically need to maintain a base load on their infrastructure to cover peak usage so any usage at night is "free" for them essentially, hence the subsidized cost. But consider this: in addition to residential usage of solar another response you'll see with increased utility prices is people installing batteries. This will not only store excess solar power but will allow customers to store power at night. Batteries too continue to get cheaper. I imagine that net this won't be good news for utilites either.
- philg_jr 9y ago
  > With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over. In the US, SlingTV offers the ability to get local Fox (NFC) and local NBC (Sunday night games) in their "Blue" package for $25/mo. You can jump up to "Orange" and get ESPN (Monday-night games) for $35/mo (but this package only allows you to run one stream to one device at a time). You do have the option to get both packages for the obvious cost, but at that point, you are coming up on the price of standard cable. SlingTV does have NFL Network, but Amazon got the rights to stream Thursday night games last season. Local CBS is still missing from Sling, so too bad if your team is in the AFC I guess. MLB (MLB.tv), NHL (NHL.tv), NBA (NBA TV) all have their "out of network" streaming services that can be purchased without a cable TV sub, but watching in-network games can typically be done with a $10/mo VPN service. In-network games for NHL/NBA/MLB are really what is left for disruption for the "big 4" US sports. But with Comcast tied NBC Sports and all of the regional channels, I suspect they will be holding on to those rights with a death grip.
  - soundwave106 9y ago
    The death knell for the cable companies will be when something challenges their virtual monopoly in high speed Internet. Considering that younger people tend to watch sports in a different manner than previous generations (more smartphone / social media oriented, according to this study -- https://www.mckinsey.com/industries/media-and-entertainment/our-insights/we-are-wrong-about-millennial-sports-fans https://www.mckinsey.com/industries/media-and-entertainment/...) I suspect that even sports is not going to be a saving grace for traditional cable. With 5G coming up and the possible promise of WISPs, fiber, satellite, or other technologies people are exploring to bring fast broadband outside cable, that death knell might be sooner than later. For power, utilities are heavily regulated by the state, which might mitigate some of this "death spiral" to some extent. But, yeah, they do have that same issue of cable companies of being heavily invested in a legacy hardware network. That being said, one counter example that comes to mind is the old copper-wire analog phone systems. In the US, most of the old Ma Bell monopoly transitioned to a more mobile oriented business (Verizon or AT&T) over time. Landlines have been on the decline for the last couple decades, but my impression is that the telephone companies were able to adapt instead of getting caught out for the most part, or trying to play legislative-bully against mobile. In contrast, the cable companies (my impression again) seem to be resisting technological trends and trying to use legislative strong-arming to sustain their business model, rather than reforming (their legal fights against muni broadband being a good example here). I do not see this as working long-term, at all. Unfortunately my impression is that the power companies are more comfortable emulating the cable companies (fighting to make solar power less viable to consumers for instance) instead of transitioning business models gracefully...
taoistextremist 9y ago
In a way, this is all kind of a free market solution to energy over-use (I'm not saying this happens all the time), companies develop electronics to be more efficient so that customers will look at how much less they'll spend on electricity, so energy companies will (due to their monopolies in many parts of the world) raise prices to keep their revenues consistent, which means there's an incentive to make electronics even more efficient.
crdoconnor 9y ago
>As everyone moves to efficient light bulbs for instance, the utilities still want to make X% profit on Y revenue for Z customers The logic behind this statement is mindblowing. It's like saying that because I want a ferrari, let's just assume one will appear. For what it's worth, Mr market has already priced in a significant fall in profits.
maxerickson 9y ago
Residential efficiency isn't really driving the drop though. It's big users moving to on site solar and the like. Residential lighting (the residential component seeing the biggest improvements in efficiency) is about 3% or 4% of the market ( https://www.eia.gov/tools/faqs/faq.php?id=99&t=3 https://www.eia.gov/tools/faqs/faq.php?id=99&t=3 ), so even huge improvements aren't going to upend the market. Trying to raise prices on commercial and industrial users just makes alternatives that much more attractive. There's a similar effect with residential hot water and space heating, both huge components of residential usage.
peeters 9y ago
This is exactly what has happened in Ontario. But a lot of that has come from boneheaded contracts that the government signed, which guaranteed payment for capacity, not usage. So the more demand falls, the more we pay per kWh, because the hydro companies are getting paid whether they actually generate power or not. The excess power is then exported for much less than what they're charging residents for it. Edit: Better in-depth look: https://www.theglobeandmail.com/news/national/why-does-electricity-cost-so-much-in-ontario/article33453270/ https://www.theglobeandmail.com/news/national/why-does-elect...
LgWoodenBadger 9y ago
To reinforce this, I was reading an article (can't remember the source now, unfortunately) about Caesar's switching to solar power and having to pay the Nevada utility ~$90 million dollars to offset the "lost revenue" to the utility. Caesar's wasn't obligated to pay, but they chose to to prevent the utility from passing that cost on to the residential customers.
- LgWoodenBadger 9y ago
  Found some sources. Closer to $50 million than $90 million, and these imply that Caesar's didn't have as much of a choice in it as in the source I first read (but can't find). https://www.reviewjournal.com/business/energy/caesars-to-pay-44-million-to-leave-nevada-power/ https://www.reviewjournal.com/business/energy/caesars-to-pay... https://lasvegassun.com/news/2017/mar/08/puc-approves-475-million-fee-for-caesars-to-leave/ https://lasvegassun.com/news/2017/mar/08/puc-approves-475-mi...
kerkeslager 9y ago
Generation and transmission, at least, are auctioned to the lowest bidder through RTOs. Collusion to inflate prices is prohibited. The RTOs are the industry self-regulating, but post-Enron the industry is under a lot of scrutiny and nobody wants the government to take over regulation. The resource (electricity) is completely fungible, so providers can only compete on price. So at least at the generation/transmission levels, I think competition might actually prevent what you're predicting. It's worth noting that generation occurs in different groups based on how expensive it is to increase or lower output, which is necessary constantly because usage fluctuates cyclically: 1. Hydroelectric is cheapest to scale up and down, so there's incentive to inflate prices and wait for high-usage times, especially when water levels are low. 2. Fossil fuels are mid-price to scale up and down, so there's some incentives for inflating prices, but fuel prices are also a factor. 3. Nuclear is extremely expensive to scale up and down, so there's incentive to try to always be the lowest price. Turning off and on is sometimes more expensive than selling generation at a loss. 4. Wind/solar are cheap to scale up/down, but are weather/time dependent and therefore unpredictable and uncontrollable to an extent. You can scale down cheaply by dumping energy into the ground, but you may not be able to scale up at any cost. It should be clear from this how important hydroelectric is to our power system's pricing. Nuclear/wind/solar often result in the most competitive generation costs, but if hydroelectric goes up in cost, nuclear would have to scale generation up and down more often at great cost. When wind/sun are good, there's competition for flexibility, but when they aren't, hydroelectric controls the price of adjusting generation. So I think that if companies adjust their numbers up to maintain profits, it will mostly be hydroelectric generation. I don't understand the effects of wind/solar on the market as well, because they weren't as large a sector when I worked at an RTO. However, I am under the impression that efficient energy storage would have a large impact on allowing wind/solar to compete with hydroelectric on ability to scale up/down. And this is urgent, because the inflated cost of hydroelectric's scaling is capped at the cost of fossil-fuel scaling, which is only going up in price in the long run.

tangent128 9y ago

Except that increases the incentives to lower electricity usage. And even if you can't meaningfully cut your usage any further, inflating utility prices would still make a local solar installation more attractive.

nathan_long 9y ago
> Except that increases the incentives to lower electricity usage. Which further raises prices, which further decreases demand... this is known as the "death spiral" for utilities.

Bombthecat 9y ago

In Germany, this already starts to happening.

cletus 9y ago

I suspect you're right on the money here as we've seen this before, most notably with the dying cable TV model. Declining viewership, increasing viewer age (younger viewers are more highly valued by advertisers as a general rule) and the abundance of cord-cutting streaming options (ie Netflix, Amazon Prime, Hulu, HBO, etc) are all trending in the wrong direction (for cable companies and traditional broadcast outlets). The result? Rising prices to make up for the revenue shortfalls from selling less bundles. With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over. Utilities have significant fixed costs. These are the capex costs of building plants and power infrastructure. These don't get any cheaper if consumers consume less power. The most likely response is simply to raise prices. Solar in particular has been on a rapid decline in recent years. Utility price increases will only hasten adoption. Here's another thing to consider: electricity tends to be more expensive during the day and cheaper at night. This is because industrial and commercial usage tends to be at peak during the day. Utilities typically need to maintain a base load on their infrastructure to cover peak usage so any usage at night is "free" for them essentially, hence the subsidized cost. But consider this: in addition to residential usage of solar another response you'll see with increased utility prices is people installing batteries. This will not only store excess solar power but will allow customers to store power at night. Batteries too continue to get cheaper. I imagine that net this won't be good news for utilites either.

philg_jr 9y ago
> With TV this will end badly unless something drastically changes because the rising prices will drive more and more people to cut-the-cord. I suspect as soon as you can get major sporting events in a convenient form outside of having a cable subscription it'll be game over. In the US, SlingTV offers the ability to get local Fox (NFC) and local NBC (Sunday night games) in their "Blue" package for $25/mo. You can jump up to "Orange" and get ESPN (Monday-night games) for $35/mo (but this package only allows you to run one stream to one device at a time). You do have the option to get both packages for the obvious cost, but at that point, you are coming up on the price of standard cable. SlingTV does have NFL Network, but Amazon got the rights to stream Thursday night games last season. Local CBS is still missing from Sling, so too bad if your team is in the AFC I guess. MLB (MLB.tv), NHL (NHL.tv), NBA (NBA TV) all have their "out of network" streaming services that can be purchased without a cable TV sub, but watching in-network games can typically be done with a $10/mo VPN service. In-network games for NHL/NBA/MLB are really what is left for disruption for the "big 4" US sports. But with Comcast tied NBC Sports and all of the regional channels, I suspect they will be holding on to those rights with a death grip.
- soundwave106 9y ago
  The death knell for the cable companies will be when something challenges their virtual monopoly in high speed Internet. Considering that younger people tend to watch sports in a different manner than previous generations (more smartphone / social media oriented, according to this study -- https://www.mckinsey.com/industries/media-and-entertainment/our-insights/we-are-wrong-about-millennial-sports-fans https://www.mckinsey.com/industries/media-and-entertainment/...) I suspect that even sports is not going to be a saving grace for traditional cable. With 5G coming up and the possible promise of WISPs, fiber, satellite, or other technologies people are exploring to bring fast broadband outside cable, that death knell might be sooner than later. For power, utilities are heavily regulated by the state, which might mitigate some of this "death spiral" to some extent. But, yeah, they do have that same issue of cable companies of being heavily invested in a legacy hardware network. That being said, one counter example that comes to mind is the old copper-wire analog phone systems. In the US, most of the old Ma Bell monopoly transitioned to a more mobile oriented business (Verizon or AT&T) over time. Landlines have been on the decline for the last couple decades, but my impression is that the telephone companies were able to adapt instead of getting caught out for the most part, or trying to play legislative-bully against mobile. In contrast, the cable companies (my impression again) seem to be resisting technological trends and trying to use legislative strong-arming to sustain their business model, rather than reforming (their legal fights against muni broadband being a good example here). I do not see this as working long-term, at all. Unfortunately my impression is that the power companies are more comfortable emulating the cable companies (fighting to make solar power less viable to consumers for instance) instead of transitioning business models gracefully...

taoistextremist 9y ago

In a way, this is all kind of a free market solution to energy over-use (I'm not saying this happens all the time), companies develop electronics to be more efficient so that customers will look at how much less they'll spend on electricity, so energy companies will (due to their monopolies in many parts of the world) raise prices to keep their revenues consistent, which means there's an incentive to make electronics even more efficient.

crdoconnor 9y ago

>As everyone moves to efficient light bulbs for instance, the utilities still want to make X% profit on Y revenue for Z customers The logic behind this statement is mindblowing. It's like saying that because I want a ferrari, let's just assume one will appear. For what it's worth, Mr market has already priced in a significant fall in profits.

maxerickson 9y ago

Residential efficiency isn't really driving the drop though. It's big users moving to on site solar and the like. Residential lighting (the residential component seeing the biggest improvements in efficiency) is about 3% or 4% of the market ( https://www.eia.gov/tools/faqs/faq.php?id=99&t=3 https://www.eia.gov/tools/faqs/faq.php?id=99&t=3 ), so even huge improvements aren't going to upend the market. Trying to raise prices on commercial and industrial users just makes alternatives that much more attractive. There's a similar effect with residential hot water and space heating, both huge components of residential usage.

peeters 9y ago

This is exactly what has happened in Ontario. But a lot of that has come from boneheaded contracts that the government signed, which guaranteed payment for capacity, not usage. So the more demand falls, the more we pay per kWh, because the hydro companies are getting paid whether they actually generate power or not. The excess power is then exported for much less than what they're charging residents for it. Edit: Better in-depth look: https://www.theglobeandmail.com/news/national/why-does-electricity-cost-so-much-in-ontario/article33453270/ https://www.theglobeandmail.com/news/national/why-does-elect...

LgWoodenBadger 9y ago

To reinforce this, I was reading an article (can't remember the source now, unfortunately) about Caesar's switching to solar power and having to pay the Nevada utility ~$90 million dollars to offset the "lost revenue" to the utility. Caesar's wasn't obligated to pay, but they chose to to prevent the utility from passing that cost on to the residential customers.

LgWoodenBadger 9y ago
Found some sources. Closer to $50 million than $90 million, and these imply that Caesar's didn't have as much of a choice in it as in the source I first read (but can't find). https://www.reviewjournal.com/business/energy/caesars-to-pay-44-million-to-leave-nevada-power/ https://www.reviewjournal.com/business/energy/caesars-to-pay... https://lasvegassun.com/news/2017/mar/08/puc-approves-475-million-fee-for-caesars-to-leave/ https://lasvegassun.com/news/2017/mar/08/puc-approves-475-mi...

kerkeslager 9y ago

Generation and transmission, at least, are auctioned to the lowest bidder through RTOs. Collusion to inflate prices is prohibited. The RTOs are the industry self-regulating, but post-Enron the industry is under a lot of scrutiny and nobody wants the government to take over regulation. The resource (electricity) is completely fungible, so providers can only compete on price. So at least at the generation/transmission levels, I think competition might actually prevent what you're predicting. It's worth noting that generation occurs in different groups based on how expensive it is to increase or lower output, which is necessary constantly because usage fluctuates cyclically: 1. Hydroelectric is cheapest to scale up and down, so there's incentive to inflate prices and wait for high-usage times, especially when water levels are low. 2. Fossil fuels are mid-price to scale up and down, so there's some incentives for inflating prices, but fuel prices are also a factor. 3. Nuclear is extremely expensive to scale up and down, so there's incentive to try to always be the lowest price. Turning off and on is sometimes more expensive than selling generation at a loss. 4. Wind/solar are cheap to scale up/down, but are weather/time dependent and therefore unpredictable and uncontrollable to an extent. You can scale down cheaply by dumping energy into the ground, but you may not be able to scale up at any cost. It should be clear from this how important hydroelectric is to our power system's pricing. Nuclear/wind/solar often result in the most competitive generation costs, but if hydroelectric goes up in cost, nuclear would have to scale generation up and down more often at great cost. When wind/sun are good, there's competition for flexibility, but when they aren't, hydroelectric controls the price of adjusting generation. So I think that if companies adjust their numbers up to maintain profits, it will mostly be hydroelectric generation. I don't understand the effects of wind/solar on the market as well, because they weren't as large a sector when I worked at an RTO. However, I am under the impression that efficient energy storage would have a large impact on allowing wind/solar to compete with hydroelectric on ability to scale up/down. And this is urgent, because the inflated cost of hydroelectric's scaling is capped at the cost of fossil-fuel scaling, which is only going up in price in the long run.