Utilities Should Fear Consumers "Cutting the Cord"

Cable companies aren't alone; cord cutting will be a legitimate threat to utilities.

May 14, 2014 at 1:57PM

Much has been made of the threat cable companies face from consumers cutting the cord -- that is, the cable cord in your living room. But what consumers aren't cutting is the Internet access cord that affords them streaming content. That means cable companies aren't completely losing the customer.

Look out 10 years, though, and a total loss of the consumer is exactly the threat utilities may face. For the past century, electricity and its long path from cradle to grave, didn't receive much thought. Flip the switch, the light comes on, pay the bill.

But as our energy usage habits have increased dramatically (think of all the devices we have today) and electricity rates have increased at a long-term rate well above broader inflation, where our electricity comes from and how we're using it have become focal points for home and business owners.

Over just the past half-decade, solar panels have proliferated, with nearly 200,000 homes and businesses installing solar in the past two years alone. As costs continue to fall, the rate of installations will pick up, which means, odd as it sounds, eroding market share for utilities.   

Solar and energy storage today
But for all of those installations, only a tiny fraction have installed any sort of accompanying energy storage devices. That's because battery backup systems have traditionally approached the cost of an entire solar installation, which hampers overall economics -- economics that may already mean a multi-year payback.

So, those homes and businesses lacking any storage capability must still buy power from the utility company during periods when solar panel production is either insufficient or nonexistent. 

That could change, though, if advances in energy storage continue. Partnerships like those between SolarCity (NASDAQ:SCTY) and Tesla Motors (NASDAQ:TSLA) offer promise -- not only in technological advancement, but in their proven marketing machines that can rapidly increase visibility, adoption, and by extension consumer influence over power markets. Today, the two companies' existing partnership enables SolarCity customers in certain markets to opt for a battery system that amounts to little more than a backup for emergency situations. But with the advances Tesla has driven in lithium-ion battery technology, it's no great leap to imagine a future where solar systems complemented with battery systems become a no-brainer.  

Solar, coupled with economical energy storage, will empower consumers to tell their friendly neighborhood utility company "thanks, but no thanks."

How utilities stand to lose
Broadly speaking, utilities generate revenue from one or some combination of three sources: generation, transmission, and distribution. Large utilities such as Duke Energy and Exelon play in all three spaces, while smaller municipal and rural co-op utilities tend to play in one or two. 

Irrespective of their size, however, utilities large and small, in one space or three, would feel the squeeze. Less end user demand means less power generated, which means less electricity is transmitted long distances over high-voltage lines, which means less electricity is ultimately distributed to the end user. 

Disruption of this multi-billion dollar nature takes time, but we may well be nearing a tipping point. 

However, all is not lost for utilities. They have amassed large sums of money and their lobby is proven and powerful. Standing idly by as solar and perhaps other technologies threaten them is not viable. Their actions over the next decade, in policy, in countermeasures, and in investments made, will impact their long-term future. 

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 



Brandon Workman has a long position in SolarCity. The Motley Fool recommends Exelon, SolarCity, and Tesla Motors. The Motley Fool owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers