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the financial services company Barclays made a surprising announcement: it downgraded the US electric sector from market weight to underweight. Operating in regulated markets with little competition, American utilities have had a wonderful run for the last few decades, making handsome profits every year. Now Barclays thinks the game is up, as it has competition from an outsider: solar energy. It is worth examining this issue on World Environment Day, as India too will reach this milestone in the near future.

Greatest enemy of coal

The real problem is not that solar energy can match coal in large power plants. It is that distributed solar power is disrupting the business model of utility companies. This trend is most pronounced in Europe, where utilities have lost more value since the recession than the banks have. Renewables now account for more than two-thirds of new capacity added in Europe every year.

Not all of the troubles of utilities are due to renewable energy, but solar power is taking away demand when it matters most: during peak hours in the afternoon. No wonder many European utilities were downgraded in the last two years.

The US is now seeing the acceleration of this trend, as hundreds of thousands of people put up solar arrays on their rooftops. In the last quarter alone, 1.33 gigawatts of solar panels were put up in the US. It is creating what author Jeremy Rifkin calls the zero marginal cost society — or near-zero, to be precise.

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