The hydropower assets of the Tennessee Valley Authority would give Southern Company a way to avoid doing distributed solar for a while. Will SO CEO Tom Fanning and Georgia Power CEO Paul Bowers bit the bullet and go straight for distributed solar instead of helping Duke privatize TVA for a short-term stopgap that would set both of them farther behind the disruptive solar curve?
Wes Patoka wrote for Motley Fool 24 May 2013, Who Benefits the Most if the TVA Is Privatized,
The Southern Company is pays out 85 percent of its earnings and sports a dividend of 4.4% percent, slightly higher than Duke’s. Southern Company’s 18.5% operating margin is coming from the coal plummeting in price. This gives The Southern Company a competitive cost structure today, but it will need to spend billions upgrading its fleet to comply with federal regulations. The TVA’s hydro-power assets would give the Southern Company a quick solution to its fossil fuel heavy fleet.
Kemper Coal crashing SO’s stock gives SO more incentive to do something about its fossil fuel addiction, and its 19 months late and $1 billion over budget nukes at Plant Vogtle. Which will it be, SO? TVA to delay the inevitable, or distributed solar now and lead the region and the world?
Neither of these two old guard electric companies can compare to Solar City’s (NASDAQ: SCTY) renewable revenue mix. SolarCity takes a different approach to electricity generation. SolarCity is installing solar panels on homes and selling the power back to the homeowners. This strategy gives SolarCity long term revenue contracts, but requires massive capital investment up front. Recently Goldman Sachs gave SolarCity’s business model a $500 million vote of confidence and it boosted the stock 25% in one day.
As the cost per watt keeps going down on solar panels, SolarCity’s contracts with its customers will look more lucrative to homeowners in sunny states. This could mean that SolarCity will be picking off customers from traditional grid companies one by one. Could this company diversify its revenue streams to bring itself to profitability by picking up generating capacity or regulated customers?
Remember, FDR is the villain of SO’s corporate hagiography Big Bets, because he created TVA, carving it out of territory SO claimed, and because of his
…insinuations that all utilities were guilty of betraying the public’s trust. He also proclaimed the rights of any community unhappy with its service to take over private utility operations and develop their own power sites—a “birch rod in the cupboard” to be used when good service was not provided by private companies.
Is it any wonder SO and Georgia Power don’t want SB 51 passed, modifying the antique 1973 Territorial Electric Service Act to enable distributed solar power? But maybe we the voters and ratepayers do. It’s time for SO to make a big bet on solar, before it’s all water over the dam.