Solar Tracking: The Impact of Solar Power on the Utilities Market

February 17, 2017- The solar power landscape has changed quite a bit in the last several years. Its consumption keeps increasing while prices for installing such systems have become more competitive. According to McKinsey & Co., global installations of solar-tracking systems have increased by more than 50 percent each year since 2006. At the same time, the cost to install rooftop solar panels has dropped from almost $7 per watt peak of capacity to $4 or less as of 2013.

Installation costs are not the only expenses going down, as the price of equipment and materials is dropping as well. This is also in addition to lower costs associated with the purchase process. In fact, pieces such as customer acquisition, regulatory incentives, approvals, and financing make up almost half of the total cost of a residential solar power installation in the United States, says McKinsey & Co, and those prices are also decreasing.

It’s not much of a surprise that governments, consumers, and investors are beginning to turn to solar power as a long-term energy solution. While this is great for the environment and energy costs in the long run, it can create a disruption in the utilities market.

Traditional technologies used to generate power, such as coal, natural gas, and nuclear energy, are starting to feel the competition. And it’s not just in residential segments, it’s also commercial projects, geographical areas, and potentially wholesale and industrial markets. For example:

  • Japan’s government is working on substituting a considerable portion of its nuclear capacity with solar power after their nuclear accident at Fukushima.
  • The United States and Europe are both adopting solar solutions at rates 4-times higher than those in 2009.
  • Africa and India are quickly replacing diesel with distributed solar energy systems to bring power to areas that previously did not have it.
  • As companies are beginning to become more environmentally aware, those with large footprints and excessive power costs are also turning to solar power.

In the grand scheme of things, solar energy accounts for a very small percentage of the United States’ electricity generation as of now, yet has the potential to grow and take a share of the market. This would be very harmful to the business model for utility companies, as much of their profit comes from being the only option in the market. On the other hand, consumers might benefit, as the cost for utilities would have to become more competitive.

On a large scale, solar generation gaining popularity is a positive and seemingly inevitable trend. Because of this, companies selling home products or services across a range of industries might benefit from partnering with solar power installers. Not only would that allow a company to capitalize on a growing industry, but also adjust their business model and management practices to take advantage of the long-term potential of solar power.