• 1 min London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 1 hour Rosneft Signs $400M Deal With Kurdistan
  • 4 hours Kinder Morgan Warns About Trans Mountain Delays
  • 10 hours India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 15 hours Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 19 hours Russia, Saudis Team Up To Boost Fracking Tech
  • 1 day Conflicting News Spurs Doubt On Aramco IPO
  • 1 day Exxon Starts Production At New Refinery In Texas
  • 1 day Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 2 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 2 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 2 days China To Take 5% Of Rosneft’s Output In New Deal
  • 2 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 2 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 2 days VW Fails To Secure Critical Commodity For EVs
  • 2 days Enbridge Pipeline Expansion Finally Approved
  • 2 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 2 days OPEC Oil Deal Compliance Falls To 86%
  • 3 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 3 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 3 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 3 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 3 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 3 days Aramco Says No Plans To Shelve IPO
  • 6 days Trump Passes Iran Nuclear Deal Back to Congress
  • 6 days Texas Shutters More Coal-Fired Plants
  • 6 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 6 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 6 days Chevron Quits Australian Deepwater Oil Exploration
  • 6 days Europe Braces For End Of Iran Nuclear Deal
  • 7 days Renewable Energy Startup Powering Native American Protest Camp
  • 7 days Husky Energy Set To Restart Pipeline
  • 7 days Russia, Morocco Sign String Of Energy And Military Deals
  • 7 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 7 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 7 days India Needs Help To Boost Oil Production
  • 7 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 7 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 7 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 7 days District Judge Rules Dakota Access Can Continue Operating
Goldman Sachs: Inventory Drawdowns Will Not Continue

Goldman Sachs: Inventory Drawdowns Will Not Continue

Goldman Sachs has reported that…

Is The Aramco IPO On The Brink Of Collapse?

Is The Aramco IPO On The Brink Of Collapse?

Conflicting news suggests that Saudi…

Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

More Info

Solar Hits Millionth Installation In The U.S. – Faster Growth Ahead

Solar Roof Installation

In February, the millionth solar installation was completed in the United States. That momentous number has taken forty years to arrive. Fortunately for renewable energy advocates everywhere, the next million installations will likely take a lot less than forty years. At the end of 2015, the U.S. solar market had a total capacity of 27 gigawatts.

While that number may sound like a lot, in reality it’s only 1 percent of the overall electrical mix of the country. Given that, solar still has a long way to go before it becomes a major energy production source in the U.S. Conversely, solar power also has a long potential growth runway ahead of it.

Solar power installations are expected to grow 119 percent in 2016, or roughly 16 GW of additional installed base. That compares to 7.3 GW installed in 2015. By 2020, the U.S. could have 100 GW of installed capacity and an annual growth installation rate of 20GW. On the whole then, solar still seems to have years of growth ahead of it.

Related: Wave Of Violence Causes Nigerian Oil Output To Fall To 20 Year Lows

Solar’s growth is changing the economics of the conventional utility industry. Now that more than a million households have solar panels, grid managers are set to cut the amount of electricity they buy from conventional power plants by 1,400 MW starting in 2019, according to industry consultants ICF. That amount represents the power capacity consumed by roughly 800,000 households.

While it sounds extreme to call conventional electrical generation a business in secular decline or even at risk of being disrupted, there might be more truth in either of those arguments than many investors would like to believe. The cuts to the conventional grid due to solar represent more than $2B in lost revenue. Adding to generation woes, environmental rules are becoming tougher and tougher with no sign of turning back, and wholesale power prices are being driven largely by the price of natural gas. The current minor rebound in natural gas and oil prices notwithstanding, there is still a glut of both commodities, and that is especially true for U.S. natural gas. Against this backdrop then, it’s little wonder that electrical wholesalers seem to be struggling. Revenue from electricity sales fell 1.3 percent to $388 billion in 2015.

Related: Increasing Outages Continue To Stabilize Oil Prices

Yet it’s too soon for either environmentalists or solar business owners to begin celebrating. An industry with almost $400 billion in annual revenues is still very much a lion in a cage match with a solar mouse. Utilities can call on political power and the ability to effectively arbitrage prices based on peak usage throughout the day (though storage batteries are increasingly undermining this latter tool). In addition, there is nothing to stop major energy companies from entering the solar business on their own either in the rooftop segment or with a distributed grid model. Finally, and perhaps most importantly, utilities and generation firms still command the lion’s share of capital in the industry. It is well within the capacity of utility firms to buy part or all of various new technology companies thus giving themselves a call option on changes in the industry.

Utility companies have many tools at their disposal to help deal with the changing environment if they accept that the environment is changing and choose to adapt. After all, mammals were a lot smaller than dinosaurs, yet the former survived the changing environment of the Ice Age as the latter died in droves. Utilities could learn a thing or two from that historical analogy.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News