[mikeyouse]

A big portion of the existential threat to power companies is the possibility of price-spirals.

The cost of maintaining all of the power infrastructure for a region is relatively fixed, especially if people don't disconnect completely when they add renewables. This cost is generally recouped by a small surcharge to every kWh that's provided to customers. The possibility of a spiral arises when customers start purchasing significantly less power from the utility, which means the per-kWh cost for the remaining customers will have to increase. As this cost increases, the ROI of adding solar panels improves, so more people add solar. As more people add solar, the utility must increase prices to the remaining customers.. etc. etc.

There's also pressure on this spiral from solar installers since the 'soft costs' make up the majority of new installations. As more people purchase systems, the per-installation price will decrease due to installers getting bulk discounts for materials, efficiencies (physical and bureaucratic - dealing with permits, etc.) from previous experience, and a bigger base to spread out the costs of their own capital equipment.

Detractors think that utilities are fear-mongering to increase their operating and price flexibility, which would likely result in higher profits in the near-term. I don't think I buy this theory though, looking at my last bill of about $50, $28 was generation and about $25 was transmission & distribution (T&Ds). PG&E bills T&Ds based on system costs / proportional usage, so if I cut my power, my T&Ds would drop to almost 0, increasing the cost on everyone else.

Here's a pretty balanced article about the issue;

http://www.renewableenergyworld.com/rea/news/article/2014/04...

[AnthonyMouse]

It seems like the obvious solution is to make transmission and distribution a flat amount rather than trying to amortize it per KWh.

[mikeyouse]

It will likely come down to that but since utilities are typically government-granted monopolies, it will take legislative action to allow changes. It will be a tough political sell since it would actively discourage new investment in distributed renewables and socialize the costs so that the people who used the most energy (and therefore drive most of the demand for T&D) will pay the smallest proportion of their upkeep.

[derekp7]

So if the power companies are worried about people buying less electricity, why do they constantly send out power saving tips, and push things like CF and LED bulbs, etc? Is that only because they are required to by law?

[mikeyouse]

The EPA and various utility commissions mandate efficiency programs, and efficiency improvements are often tied to promises of allowed rate hikes, but utilities also want to shave demand where possible.

An ideal world for a utility would be one where everyone used a moderate amount of energy at all times. The reality though, is that peak consumption is typically 100% higher than the night-time lows. An example from a utility;

http://i.imgur.com/gPR7DNk.png

Most of the efficiency programs are targeted at lowering that daytime peak. You would need less overall generation (saving money on building new power plants) and have a much more stable system if you could flatten that whole curve.

[toomuchtodo]

Its cheaper to reduce consumption than build additional power plants. The cheapest watt is the one you never needed to generate.

[mikeash]

Both increasing and decreasing capacity is expensive. If people use more power, you need to build more power plants, and that costs a lot of money and is politically difficult. If people use less power, you now have excess capital investments in the form of power plants you built in the past.

Their ideal is for power usage to remain exactly constant, or at least grow at a constant pace that matches local realities. The population and their power use wants to grow faster than that. Efficiency helps to compensate for that.

You'll also note that a lot of the efficiency tips are aimed at peak consumption. That's not the case for light bulbs, but there's a lot of stuff around more efficient air conditioning. Peak power is much more expensive than average, and in many places the power company can't charge residential users accordingly. Air conditioners tend to be used at peak usage times, so decreasing that peak usage can save them a lot of money.