Those Solar Panels on Your Neighbor's Roof Are Killing a 100 Year-old Business Model

For 100 years or so, we've gotten our power pretty much the same way: a utility sends electricity from a big, centralized power plant—usually coal, gas, or nuclear—through transmission lines to your home, which is usually many miles away. Now there's a popular alternative: you slap solar panels on your rooftop, and generate your own power. Many folks are doing exactly that, and they might just end up killing the those 100 year-old utility companies where they stand.

The Edison Electric Institute—a group that represents utilities—just released a report (PDF) outlining and fretting over this very trend. Grist's David Roberts has a good piece that dives into the details, but the gist is that the following steps may end up destroying the :

1. As solar panels become cheaper, more people will be able to afford solar panels, so more people will by them.

2. As more people buy solar panels, less people will buy power from utilities.

3. As less people buy electricity from utilities, the price utilities must charge for power will go up.

4. More and more people will switch to solar panels.

It's a vicious cycle fed by clean, distributed power. It's also an oversimplification: there are other kinds of distributed, non-utility power that will help feed the cycle (private solar arrays, small wind turbines, etc) but the bulk of this will come from rooftop and home (or community) owned solar.

And this boom is well under way. Navigant Research projects that "in just the next five years, 2013 to 2018, 220 GW of distributed solar PV will be installed worldwide, representing $540.3 billion in revenue."

That is half a trillion dollars that people will be spending to buy the right to create their own power, and half a trillion dollars consumers are snatching out of the pockets of utilities. If they don't adapt, and fast, they may be goners.

Good riddance. The utility system is archaic, vulnerable, and it stifles innovation. When you rely on central power, a single felled tree can knock out the lights for an entire city. In the Anthropocene, this age of more frequent disasters, and more extreme whether (not to mention hackers and terrorism), that's a huge liability. Plus, when folks have got their own solar panels, along with their own smart monitors, they're going to be more likely to experiment. To hack them, to improve energy efficiency—or, maybe most importantly, their kids will grow up thinking about clean power generators as something that can be hacked.

Roberts and Navigant are right; we're opening a can of worms here that's about to change the way we generate, distribute, and think about power forever. And unless those utilities muscle that can shut, or adapt to the times, their business model is headed for extinction.