Are Traditional Utilities Becoming a Thing of the Past?

Millions of people rely on utility companies to produce and deliver the electricity that powers homes, schools, and businesses. These companies have faced many challenges during the past several decades, but the utility industry is now facing its greatest challenge. Backed by strong consumer demand for cleaner energy, companies that produce clean energy are gaining market share and making it difficult for traditional utility companies to compete. If the traditional utility industry is going to survive, executives must be willing to make fundamental changes to their policies and strategies.

A report released by the Edison Electric Institute indicates the electric industry is engaged in a battle against companies using new technologies to produce and deliver electricity. Utility companies are having a hard time competing against these clean-energy providers, as they no longer have an edge when it comes to pricing. The cost of using renewable energy sources has decreased significantly, and some companies have developed energy rate structures that make it more affordable for people to use cleaner energy.

Government officials have played a central role in educating consumers on the importance of using cleaner sources of energy. President Obama developed a blueprint to produce more energy in the United States and reduce reliance on foreign sources of energy. He also has a goal of doubling the country's use of clean energy by 2035. The Obama administration has invested a significant amount of money in renewable energy, doubled the amount of energy produced by solar, wind, and geothermal generation technologies, and provided support for large solar power and wind farm projects.

One senator even introduced the Clean Energy Standard Act of 2012 to reduce energy imports, increase domestic energy production, and promote the use of clean energy in the United States. The act is not yet a law, but it shows the leaders of utility companies what they can expect as senators, state representatives, and cabinet members work to create policies regarding renewable energy. Solar batteries are also emerging as a threat to traditional utility companies because they make it possible to produce and store energy without relying on utility providers. These batteries are still somewhat expensive, but prices are expected to fall enough to prompt some consumers to reduce their reliance on traditional utilities. Some utility companies have even lobbied to do away with net metering, which requires them to give utility customers credits for power they generate and return to the grid.

Traditional energy sources are by no means obsolete, but there is a clear push for Americans to use solar power and other types of clean energy. If utility companies are going to remain competitive, they must focus on using renewable sources of energy instead of coal and other traditional and nonrenewable energy sources. Otherwise, alternative energy companies will continue to gain market share and push traditional utility companies out of business.

(Photo courtesy of freedigitalphotos.net)