When big companies go off-the-grid for their power

The Wall Street Journal has a pretty thorough look at companies that are opting to generate their own power and slowly move away from the grid. Big companies have been generating their own power in places like India for decades, afraid of dealing with an unreliable grid, so much so that many were unaffected by the largest blackout in world history which occurred in India last year.

The situation in the U.S. has some parallels in that it’s driven by risk and economics. Big companies with data centers and mission critical applications don’t like outages and want to generate their own power. Additionally, solar power costs have come down significantly. Many models see grid-parity by 2020. But apparently Wal-Mart sees that date as happening even sooner. From the Journal:

Since 2007, when the first solar arrays went up on its store roofs in California, the installed costs of Wal-Mart Stores Inc.’s WMT +1.69% solar systems have dropped from $6 or $8 per watt of capacity to about $3.50 per watt, said David Ozment, the company’s senior director of energy management. He said he expects the retailer to be paying as little for solar power as utility power “in less than three years,” opening the floodgates to solar expansion.

So what’s a utility to do? Well, one argument is that if you can’t beat them join them. This logic argues that utilities should help with distributed power installation and permitting, as well as logistics and engineering. That would be a radical transformation that I suspect won’t entirely address the loss in customer base. The reality is that I think at some point utilities may be relegated to managers of the grid–transmission and distribution. And less as generators of power. There’ll be big fights over how to compensate utilities for that service, and let’s hope it doesn’t cancel out the cost savings of moving to renewable power.