Solar power is not only making the energy industry cleaner; the technology is also causing disruptive changes in a business model that had remained static for more than a century, since energy consumers of all sizes can now generate their own electricity at a reasonable cost for the first time since power grids were invented. Although some of the largest industrial and commercial clients have owned and operated their own power plants for some time, these systems are like those used by energy companies, and scaling them down for homes and smaller businesses is unfeasible. On the other hand, solar photovoltaic systems have a modular design that can scale from just a few panels to thousands according to the energy needs of each consumer.
For decades, only governments and large corporations held control over the energy supply, since only they could raise the capital required to build and operate power plants. In the case of energy corporations, this created a natural monopoly requiring government regulation, but even with regulation customers were left without choice other than purchasing their energy from the power grid. Many regions and countries have a competitive energy market, where customers can choose their provider, but the power grid itself remains under the control of a utility company that charges all transmission and distribution fees without competition.
How Solar Power Has Changed the Energy Business
Solar photovoltaic systems have existed for decades, but they only became a cost-effective energy source since around 2010. In many countries, the total ownership cost of a solar PV system is now lower than the cost of obtaining an equivalent amount of energy from the power grid. This is especially true for Australians, who are starting to see some of the highest electricity rates in the world.
Decentralised energy sources such a solar power remove the middleman from the energy industry, allowing consumers to connect directly to an energy source in their property. The operating cost of a power grid is removed from the equation, along with utility company profits!
Solar power still has one key limitation: it relies on a resource that is unavailable during nighttime, and only available in limited quantities during cloudy days. Utilities companies have taken advantage of this by charging variable electricity prices throughout the day, and the highest rates are normally charged after sunset, when electricity demand is at its highest point in the day and solar energy production has already ceased.
However, smart batteries are becoming more affordable each year, and in places with expensive electricity they are starting to make financial sense: the cost of adding energy storage to a solar PV system is compensated by the ability to avoid peak-hour electricity rates. In fact, batteries allow energy consumers to benefit from variable electricity prices: if surplus generation from solar panels is not enough to fill the batteries, they can simply draw energy from the power grid during off-peak hours, when electricity prices are the lowest. If you store one kilowatt-hour when utility rates are low and consume it when rates are high, you have saved the price difference.