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Why Electric Utilities Avoid Solar Power

By Sid of Stone Marmot

July 25, 2008

Why do the electric utilities have few solar power facilities? Why do they invest so little in solar power? Why will they probably never have major solar power facilities?

The simple answer is that they have great difficulty competing with homeowner sited solar power systems for the following reasons:

The main reason is that, for most methods presently used by power companies to generate electricity, the costs of generating electricity drop dramatically as the power generator is scaled up in size. Anyone who has an internal combustion engine powered electric generator, be it gasoline, diesel, propane, etc., fueled, will quickly realize that running costs are much more than for what they pay for utility provided electricity. Even wind turbines become much more cost effective as their diameters are increased and their towers increase in size.

This is not true for solar power, at least with the photovoltaic solar cells we presently associate with solar power. The panels the power utilities would use are the same as what the homeowner would use. The only possible savings the power utilities would have would be with volume discounts in purchasing the solar panels. This savings is canceled out by all the extra costs the power companies have, like purchasing and maintaining the land for these panels (effectively free for homeowners), the transmission and distribution costs (virtually nonexistent for homeowners), billing department (nonexistent for homeowners), making up for transmission losses (presently about 7 % of all electricity generated is lost in transmission, plus the additional losses in scaling inherently low voltage DC solar power for more efficient high voltage AC transmission), and others (legal, accounting, benefits, lobbying, executive salaries, stockholders' returns, etc.). If the utilities tried to generate major solar power facilities, many of their potential customers will quickly realize that they can generate their own solar power as cheap or even cheaper than the power companies can provide it.

Private households can, and some do, generate hydroelectric power as cheap or even cheaper than the major utilities. But far less than 0.1 % of the households in the US have sites suitable for generating hydroelectric power. So these are not much of a threat to the utilities.

Another reason is that many of the utilities' potential customers will also realize that they have more control over the reliability of the power if they do it themselves. During a major storm, usually the number of houses that lose their electric power is much greater than those that have any major damage to them. If the house doesn't have any major damage, it would probably also still have a functioning solar power system. With your own solar power system, overloads caused by your neighbors, auto accidents, a tree falling a mile from you, terrorism, etc., won't have any affect on your electric service.

Another reason is that many of the present methods of generating electricity used by power companies are not available to private individuals. I doubt that any individual could legally have their own nuclear power plant. A household size coal fired electric plant is rather impractical, especially if you include the antipollution devices. Also, I doubt that the government would want to try to regulate and inspect and verify millions of household coal fired plants to assure they are meeting environmental standards. It is hard enough trying to control a relative handful of utility power plants. But this is not true for solar power. A private household could install a solar electric system easier and faster with little potential environmental problems than any power company could build a reasonable size solar power facility.

Aesthetics also limit the potential use of other potential home power systems. Few people would tolerate a noisy, smelly internal combustion engine electric generator operating by them 24 hours a day except in emergency situations. Many complain about tall wind towers with their fast moving parts near their property. But solar power is silent, often part of the house, with no moving parts.

Solar electric power is ideally suited for distributed generation, that is, generation at the place it is being used. It scales very easily from very small systems, like pocket calculators, on up. Efficiency is much greater with reduced transmission distances and less voltage conversions. So solar power isn't that well suited for centralized generation, like most of our present electrical systems.

This scares power companies. Presently, they have monopoly control over the whole electric power system. With solar power, it is much more efficient and cost effective for the power generation to be resident at the homes and businesses that use the power.

There still may be a place for the power companies in providing an interconnect between users so that they have a backup if they have to take down their own systems for some maintenance or if they need extra power for some special situation, such as a party or to accommodate extra needs due to guests. But this is a much smaller and more optional market as many would have no need for hookup to the utility grid.

The power companies could also lease solar installations to private homeowners and businesses and maintain these systems. Many would probably welcome and take advantage of this service. But other small private businesses could also provide this same service just as effectively, so the power companies would have much more competition.

Also, the utilities would probably still be needed in places with little or unreliable solar power. Their larger generating facilities may also be better suited for satisfying the needs of very electricity intensive industries, such as aluminum manufacturing.

Consequently, you will never see the major power companies make major efforts in developing or providing solar power. They would be effectively slitting their own throats, business-wise. In fact, as solar power starts to become more popular, you with probably find the utilities trying to block it or take control of it.

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