The uneasy mix of modern solar power and traditional utilities. May 4, 2015, Vol. 20, No. 32 • By ELI LEHRER
The ideal of a staid, heavily regulated industry that offers blue-collar jobs with respectable wages, pensions, and strong community ties—usually lamented as a thing of the past by observers on both the left (Elizabeth Warren, Paul Krugman) and the right (Pat Buchanan, Rick Santorum)—does still exist. To find it, one need look no further than America’s electric utilities.
Whether they are stockholder-owned colossuses or customer co-ops, utilities operate mostly under regulated rates that guarantee profits. They face little competition. In 33 states, consumers have just one power provider to choose from in their region. Nationwide, more than 80 percent of residential power comes from monopolies or former monopolies.
These utilities pay nice dividends to stockholders, offer jobs for life to many employees, and provide generous support for everything from civil rights organizations to art museums. Historically, the case for their status as “natural monopolies,” where competition would do more harm than good, has been so strong that it’s literally used as an example in major economics textbooks.
But new technologies—in particular, the growing availability of affordable, efficient rooftop solar panels—threaten to disrupt utilities’ business models in unpredictable ways. While this forthcoming disruption of the power grid may offer more good than bad, it also creates real uncertainties that policymakers will need to confront.
The major driver of change is that rooftop solar has finally come into its own. When first brought to market in the 1970s, rooftop solar panels generated power at a cost of more than $70 a watt. By the end of this year, low-cost manufacturers in China will begin offering panels that produce energy at a cost of around 40 cents a watt. Combined with leasing arrangements that let property owners install panels at little to no out-of-pocket cost and net-metering agreements that let them sell unused energy back to utilities (albeit under a variety of pricing schemes that are both complicated and controversial), the decision to install solar panels is becoming a simple one for many homeowners.
One recent study from the Rocky Mountain Institute, a think tank whose board is heavy with alternative energy investors, applies a rigorous model to conclude that, within two decades, solar will be fully cost competitive in many markets and for huge numbers of consumers. As one example, the study projects that, within 15 years, as much as a quarter of the power generated in New York’s Westchester County will come from solar panels. This could be a big problem for utilities. Rocky Mountain estimates they could lose nearly $35 billion in revenue. This amounts roughly to last year’s total revenues for the two largest electric utilities and is greater than the 20 largest utilities’ combined profits for 2014.
Even much smaller drops in revenue could be a big problem. The technology and business model of rooftop solar are most competitive in the areas where utilities make most of their profits. Because they generate the most energy during the sunny midday peak, when power generation is most costly and most profitable at the margin, even modest consumer use of the existing, relatively expensive solar panels can cut into some utilities’ bottom lines. Since they provide a direct substitute for some power plants run by existing utilities, rooftop solar panels establish a ceiling that would make future rate increases harder to sustain. Finally, since they reduce the need for some new types of power infrastructure, rooftop solar makes it harder for utilities to make the case to build new generation capacity. This is a potential problem because, in regulated markets, most of the cost of new infrastructure investment, plus a profit margin to reward investors, is built into utility rates according to a set formula.
Broader use of solar panels will reduce air pollution and the output of climate-change-causing greenhouse gases. It also likely will cut the bills consumers currently pay to utility-scale power companies. But this shift will cause real dislocations.
We live in an era of disruptive technologies, and in nearly every case, one can identify ways in which the new technology is inferior to what it replaced. Mobile phones supplanted more reliable landlines. Ridesharing services often provide smaller cars than taxicabs. Jet airplanes replaced more comfortable sleeper trains.
A rare, worthy reform, made in Washington.Jan 5, 2015, Vol. 20, No. 17 • By ELI LEHRER
Mary Cheh, who represents a leafy, affluent, embassy-filled section of Washington, doesn’t fit anyone’s image of a free-market reformer. A member of the D.C. Council since 2007, the sixty-something’s dress and manner are those of the Harvard-educated law professor she is. Many of her legislative priorities—free breakfast programs and green energy—could come from the playbook of any urban progressive.
Mark Strand, 1934-2014Dec 22, 2014, Vol. 20, No. 15 • By ELI LEHRER
Before his death late last month at the age of 80, Mark Strand could claim one of the most varied careers of Americans active in the arts. Born on Prince Edward Island in 1934 and raised everywhere from Montreal to Brazil to pre-Castro Cuba, Strand was a painter, collage-maker, translator, writer, art critic, and, most of all, a poet.
The case for an early exit from high school to community college. Oct 20, 2014, Vol. 20, No. 06 • By ELI LEHRER
In 2009, Bryce Harper—then a sophomore at Las Vegas High School and already the best high school baseball player in the nation—made the unusual and controversial decision to forgo his final two years of high school, on the grounds that there was simply no effective competition for him at that level. He passed the GED test and enrolled in the two-year College of Southern Nevada.
It can be done, but not the way the environmental left proposes. Sep 8, 2014, Vol. 19, No. 48 • By ELI LEHRER
From Al Gore to the leadership of groups like the Union of Concerned Scientists, environmentalists long have warned that global disaster is certain unless we do something about rising sea levels. The “something” that most on the left want is to remake our energy economy and increase government control over energy use in order to cut down on human emissions of greenhouse gases that cause the thermal expansion of ocean water and the melting of polar ice sheets.
‘The line between politics and entertainment has become more distinct.’ Mar 3, 2014, Vol. 19, No. 24 • By ELI LEHRER
Last fall, during an earnings conference call, Netflix CEO Reed Hastings made an announcement that landed him on the front page of every newspaper business section: His company had surpassed HBO to become America’s biggest pay-TV service. Today, about 30 million Netflix accounts exist, serving about a quarter of America.
A better approach to poverty.Feb 10, 2014, Vol. 19, No. 21 • By ELI LEHRER and LORI SANDERS
President Obama’s State of the Union speech brimmed with ideas to increase upward mobility and spur job creation—most of which have been tried previously, without good results. From calling on Congress to raise the minimum wage to announcing the creation of six new “high-tech manufacturing hubs” centered around research universities, too many of these ideas flow from misplaced confidence in the ability of top-down government policy to steer the economy and lift the circumstances of those in poverty.
The skipper of the good ship ‘Bestselling Poetry.’Dec 2, 2013, Vol. 19, No. 12 • By ELI LEHRER
In order to possess literary merit, poetry must do at least one of three things adequately: condense emotion, embody truths about the human condition, or enrapture readers with the poet’s ability to put words together in a beautiful way. Great poems can do all of these things. Adequate poetry manages at least one; bad poetry does none. And Robert Bly, a selection of whose works are collected here, is a bad poet.
Who and what, exactly, is the chef du jour? Sep 16, 2013, Vol. 19, No. 02 • By ELI LEHRER
The show’s hero has huge muscles, wisecracking sidekicks, and a mysterious origin. In each episode, he performs feats beyond the abilities of mere mortals. He fights for values that just about everyone shares, and he dispenses common-sense wisdom in a way that seems profound. Each episode ends, satisfyingly, with him leaving the place he visits better than he found it. The hero, in short, is a superhero. In this case, his name is Robert Irvine, and he stars in a cooking show.
His administration was greener than you think. Jun 17, 2013, Vol. 18, No. 38 • By ELI LEHRER
Mention Ronald Reagan to an avowed environmentalist, and you’ll generally elicit a groan. In the conventional telling, the Gipper appointed right-wing extremists to key environmental positions and proceeded to give timber companies and energy interests a free hand to despoil nature. Had Congress not stopped him, the tale goes, all of the environmental progress of the 1970s would have been swept away in the 1980s.
8:16 AM, Apr 11, 2011 • By MICHAEL WARREN
Tom Cross, the Republican minority leader in the Illinois state house of representatives, emailed this letter to the editor in response to Eli Lehrer's article, "Pensions Aren't the Problem," which appeared in the March 28th issue of THE WEEKLY STANDARD:
In his recent article “Pensions Aren’t the Problem”, author Eli Lehrer highlighted the State of Illinois’ pension crisis in attempting to make his case that pension reform doesn’t make much difference in a state’s fiscal health.
The chronicle of popular science fiction/fact.Mar 15, 2010, Vol. 15, No. 25 • By ELI LEHRER
Analog Magazine: Science Fiction, Science Fact (that’s the actual full title) turns 80 this year, and seems at first glance like an anachronism.
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