Why Wall Street May Soon Shun Utility Stocks

on July 25, 2013 at 2:00 PM

Stocks Continue Two Day Slide Downward After Federal Reserve Comments

If you are a regular reader, then you may be tired of me warning that utility business models are in trouble. I started years ago. And just a few weeks ago I alerted you once again to the very real dangers of net metering.

But now we’re hearing a similar litany from the people who advise Wall Street. The bad news: utility stocks may take a beating as the news gets out. The good news: falling stock prices may be just the wakeup call utility executives need to get off the fence.

Peter Kelly-Detwiler was previously Senior VP of Energy Technology Services for Constellation NewEnergy. Today he is a founding partner at NorthBridge Energy Partners. Both positions afforded him a wide view of industry trends. He’s a true insider.

And he just penned a blog for Forbes asking if it is time to short your electric utility. He cites Fitch Ratings, where the managing director of utilities, power and gas says that rooftop solar and energy efficiency will begin eating away utility profits within five years.

(Warning: Some of us think the solar future may arrive sooner than expected. Which means the accompanying problems will be here faster too.)

He warns of a possible downward spiral. Net metering and energy efficiency cut the number of kilowatt-hours sold. This forces the utility to raise the rates to cover its costs. Because rates are higher, more people add rooftop solar and energy efficiency, further slashing kilowatt-hours. And around we go.

One answer is to begin a dialog with your regulators right now, with an eye toward getting changes made early. If you choose that path, you may want to reference the new Solar Electric Power Association primer on net metering. It attempts to give a balanced view of the issue.

Another answer is to join them rather than fight them. For instance, to get into the business of rooftop solar and energy efficiency yourselves.

Jesse Berst: July 25, 2013 via Smart Grid News

Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.