Today's electric power utilities could lose half their addressable market to energy efficiency, solar and storage, and other distributed generation, according to "Energy Darwinism -- the evolution of the energy industry," a new report (PDF) from the investment banking arm of Citibank.
"Consumers face economically viable choices and alternatives in the coming years which were not foreseen five years ago," the analysts write.
According to REneweconomy, the price fall of solar panels has exceeded all expectations, resulting in cost parity being achieved in certain areas much more quickly.
"The key point about the future is that these fast 'learning rates' are likely to continue, meaning that the technology just keeps getting cheaper. At the same time, the alternatives of conventional fossil fuels are likely to gradually become more expensive."
"This is not a 'tomorrow' story," the report says. "We are already seeing utilities altering investment plans, even in the shale-driven U.S., with examples of utilities switching plans for peak-shaving gas plants, and installing solar farms in their stead."
Even wind may cut into traditional approaches, despite its intermittency. Citi says that while wind's intermittency is an issue, with more widespread national adoption it begins to exhibit more baseload characteristics, such as running more continuously on an aggregated basis. "Hence it becomes a viable option, without the risk of low utilization rates in developed markets, commodity price risk or associated cost of carbon risks."
Citi admits that storage is still a nascent industry, but so was solar five to six years ago: "The increasing levels of investment and the emergence of subsidy schemes which drive volumes could lead to similarly dramatic reductions in cost as those seen in solar, which would then drive the virtuous circle of improving economics and volume adoption."
How fast will the changeover take place? Citi says history tells us that such changes are never gradual, citing the graph below as evidence.
Dinosaur image by Pimnana_01 via Shutterstock.