Investing in Distributed Generation
Don't Get Screwed by your Electric Company!
Billy Adams doesn't get an electric bill.
Perched along a hillside in the mountains of Western Maryland, Billy's home gets all its electricity from the sun.
He has a small battery pack that stores about five hours worth of electricity, and he heats his home with a very powerful 100,000 BTU wood stove.
Of course, Billy isn't your typical American.
He's never been a fan of living in the suburbs. He enjoys the peace and quiet of mountain living, rarely eats anything he hasn't hunted or grown himself, and doesn't have a single penny of debt.
For the most part, Billy's head is on straight. He doesn't seem to want for much and doesn't really seem to need much of anything. That being said, he can be a bit delusional at times when it comes to how he sees himself.
For instance, the last time I saw Billy, he was building a walipini. If you don't know, a walipini is basically an underground greenhouse. Tired of eating little more than canned vegetables throughout the winter, he decided he was going to use a walipini so he could grow fresh vegetables year-round.
He told me that once it was finished, he'd never have to leave his house again.
Then I reminded him that no one's going to deliver his diesel for his truck, and until he learned how to make his own toothpaste, he would have to venture out into the world at some point.
Still, Billy's doing pretty well for himself. He told me the electric companies fear people like him because more and more folks are realizing they don't need to be connected to the grid to live comfortably.
Truth is, while he may be right about not having to be grid-connected to live comfortably, most people aren't going to follow in his footsteps.
Most people don't want to chop wood for heat. Most people don't want to be limited to only five hours of electricity per night. Most people don't want to use propane to cook their meals.
The bottom line is that Americans have it pretty easy when it comes to energy.
We flip a switch, and there's light.
We turn the knob, and the stove burner lights up.
We set a dial, and the heat or air conditioning fires up.
Given the very comfortable way of life we all enjoy, why would anyone give that up?
As much as I love the idea of being energy independent, I don't think most people realize just how reliant they are upon the grid.
Sure, you can slap some solar up on your roof. But chances are, you're still going to be connected to the grid. And despite the fact that the nation's electric grid is severely flawed in terms of efficiency and safety, it still works well enough that you live a lot more comfortably than most folks on this planet. No amount of yearning for energy independence will change that.
Don't get me wrong — one day these huge towers and thousands and thousands of miles of copper and rubber won't be necessary. And the truth is, that day could come sooner than many would like to admit. But the fact is U.S. utilities are not these weak entities that are going to be brought down by dreams of energy independence and really cool software.
Although we have the technology right now to make the grid superfluous, there's a lot of money at stake for the utilities. And mark my words: They're not going to roll and over and die just because they are inferior to distributed generation.
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Where the Profits Are
According to a new report published by Accenture, as solar power and energy conservation initiatives grow, U.S. energy utilities could lose as much as $48 billion a year.
That's a lot of scratch!
But the utilities have at least another three to five years before this really starts to become a thorn in their sides. And by then, I suspect they'll be doing major deals with solar finance companies and installers to make sure they can still get a piece of the action.
Sure, there are some, like the Salt River Project (SRP) in Arizona that's been doing the equivalent of CIA-styled enhanced interrogation techniques on the solar industry there. The utility for the Phoenix area has gone out of its way to penalize anyone wishing to use the state's amazing solar resource to generate homegrown electrons — including new fees and rate hikes for solar providers.
Interestingly, I've found that most of the folks who dictate energy policy in the Grand Canyon state are bitter, hostile shut-in types who still think solar is some kind of socialist plot designed to destroy America. It's the Luddites in Arizona responsible for solar struggles — not the economics.
But aside from the knuckle-draggers over at the SRP, most utilities are waking up to the reality that they will either be part of the transition to a new energy economy or wither away and die under a cloud of mediocrity and denial.
As an investor, I haven't touched a utility in three years. And I have no intention of chasing these shaky institutions in 2015, either.
Instead, I remain focused on the disruptors — the companies that are bringing solar and other new energy technologies to the masses. SolarCity (NASDAQ: SCTY), Vivint Solar (NYSE: VSLR), SunPower (NASDAQ; SPWR), First Solar (NASDAQ: FSLR), SunEdison (NASDAQ: SUNE). These represent the new face of distributed energy.
No, distributed energy will not replace the grid anytime soon. The utilities and their massive control will not go gently into that good night. But they're also not going to experience the meteoric growth that you're going to see in new distributed energy developments.
And that's where the action is. That's where the opportunity is. That's where the profits are.
To a new way of life and a new generation of wealth...
Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor's page.
Energy Demand will Increase 58% Over the Next 25 Years
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