Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model, which has remained virtually unchanged for a century, to the ground.
So, just a bit of background. You probably know that electricity is provided by utilities. Some utilities both generate electricity at power plants and provide it to customers over power lines. They are “regulated monopolies,” which means they have sole responsibility for providing power in their service areas. Some utilities have gone through deregulation; in that case, power generation is split off into its own business, while the utility’s job is to purchase power on competitive markets and provide it to customers over the grid it manages.
This complexity makes it difficult to generalize about utilities … or to discuss them without putting people to sleep. But the main thing to know is that the utility business model relies on selling power. That’s how they make their money. Here’s how it works: A utility makes a case to a public utility commission (PUC), saying “we will need to satisfy this level of demand from consumers, which means we’ll need to generate (or purchase) this much power, which means we’ll need to charge these rates.” If the PUC finds the case persuasive, it approves the rates and guarantees the utility a reasonable return on its investments in power and grid upkeep.