3 Ways Power Suppliers are self-destructing.

You open the familiarly branded envelope and uneasily extract the notice. You already know it will be bad news: It is a power bill.
You look at the amount, and feel a knot in your throat. Immediately you think of some scheduled purchases that you had planned for this month, and that you may now have to tell your partner that perhaps those must wait another month…

For some this may already sound familiar. For some it may become a familiar scene when the predicted 20% increase in electricity prices becomes real in a few months!

Rising electricity prices are a blessing in disguise. They cause three important things to happen, three forces that are fatal for the power retailers.

1. They raise the error margin for disruptive innovators. In simple terms they will not have to try so hard to be competitive. They can afford to be more expensive than even the current alternative, and still be in the race. This exponentially increases the chances of a disruptive innovation (or several) entering the market. Marginal ideas suddenly become commercially viable.

2. They create a massive pool of customers for these innovations and new products. Some people will simply not be able to afford to buy from the conventional suppliers, some will simply look for better options because those have become available.

3. The power retailers will be unable to respond fast enough. The higher prices will invariably be linked with quarterly and annual profitability obligations. Those figures will be eroded simultaneously by both the loss of market-share and by the probable need to lower prices.

What will these disruptive ideas look like? What happens to the grid? The imagination is the limit, and over the next few blogs I will explore some of these ideas.

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4 thoughts on “3 Ways Power Suppliers are self-destructing.”

  1. I think your scenarios are possible outcomes of rising electricity costs, but they assume that people simply accept paying more for power at their current usage levels and wait for the market to evolve to cleaner power (that may or may not be cheaper). Higher power costs (or gas costs for that matter) help make efficiency measures more attractive. Amory Lovins from the Rocky Mountain Institute claims that most of us can easily save around 30% of our power usage from relatively easy changes. The problem is that cheap power makes conservation and increased efficiency so much less important. Expensive power could mean more efficient appliances, more efficient lighting, more natural day-lighting, or better yet, smaller homes altogether. Either way, I agree that high energy costs are definitely a blessing and our efforts to keep energy costs depressed are only raising societal costs elsewhere.

    1. Thank you, very valid point. I will explore this in detail in a future post. Ultimately “saving” electricity is a false economy. It is based on the premise that our energy sources are harmful to the environment. It is imperative to be efficient, and we need also must figure out how produce what we need with zero harm to our ecosystem.

  2. I think your scenarios are possible outcomes of rising electricity costs, but they assume that people simply accept paying more for power at their current usage levels and wait for the market to evolve to cleaner power (that may or may not be cheaper). Higher power costs (or gas costs for that matter) help make efficiency measures more attractive. Amory Lovins from the Rocky Mountain Institute claims that most of us can easily save around 30% of our power usage from relatively easy changes. The problem is that cheap power makes conservation and increased efficiency so much less important. Expensive power could mean more efficient appliances, more efficient lighting, more natural day-lighting, or better yet, smaller homes altogether. Either way, I agree that high energy costs are definitely a blessing and our efforts to keep energy costs depressed are only raising societal costs elsewhere.

    1. Thank you, very valid point. I will explore this in detail in a future post. Ultimately “saving” electricity is a false economy. It is based on the premise that our energy sources are harmful to the environment. It is imperative to be efficient, and we need also must figure out how produce what we need with zero harm to our ecosystem.

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