Tags: Musk | solar | electric | utility

Clock Ticking Down for Electric Utilities

By    |   Wednesday, 18 February 2015 07:56 AM

Paying the electric bill is never fun. Imagine if you could just unplug. You'll have that option soon, thanks to Elon Musk.

Musk, if you haven't heard of him, is kind of a 21st century Howard Hughes. He built PayPal into a billion-dollar business, sold it to eBay and then launched a series of other ventures. Two are publicly traded: electric carmaker Tesla (TSLA) and clean energy provider SolarCity (SCTY).

In his spare time, Musk launches satellites and delivers supplies to the International Space Station with his privately-owned SpaceX company. He wants to launch a manned mission to Mars. I suspect he will do it, too.

Musk took a lot of heat last week when Tesla reported a rough quarter. In between the bad numbers, though, he dropped a little news that could be the "missing link" for solar power.

I wrote last year (see Sunset Coming for Utility Stocks) that electricity providers were on shaky ground. What Elon Musk just announced will make it even shakier. He said that Tesla would soon unveil a stationary battery system that can power an entire home.

Why is this revolutionary? Rooftop solar cells are now efficient enough to power an average home for the same or lower cost than conventional "grid" power — when the sun shines. You still need the grid for nighttime and cloudy days.

Power storage technology, i.e., batteries, will solve this problem. Such systems exist now but they are expensive, heavy and hard to produce in mass quantities. Musk apparently thinks he has solved this riddle. We know he solved it for cars, so houses aren't too big a leap.

The Tesla/Panasonic "Gigafactory," now under construction in Nevada, will likely manufacture batteries for both Tesla cars and stationary use. SolarCity will no doubt add them to the residential systems leased by thousands of homeowners, but I'm sure Musk will sell them to others as well.

While we don't know details yet, Musk said production should begin in about six months. The units will probably be expensive at first. Supplies may be limited until the Gigafactory opens in 2017. That gives the electric utilities some breathing room. They had better use it well.

Even with today's technology, it is cost-effective to take an average home completely off-grid in sunny equatorial regions. People in Hawaii are doing it so fast that last year Hawaiian Electric (HE) agreed to sell itself to Florida-based NextEra Energy (NEE). Both companies face the same challenge, but NextEra seems to be adapting better.

Adapting might be the electric utility industry's only choice. Their entire business model is turning upside down. Companies like NextEra need to evolve away from centralized production and toward decentralized networks. They can still play a vital role and make good money — if they make the right choice. Their time is running out.

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Paying the electric bill is never fun. Imagine if you could just unplug. You'll have that option soon, thanks to Elon Musk.
Musk, solar, electric, utility
Wednesday, 18 February 2015 07:56 AM
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