In the lead-up to the 2008 financial crisis, there were very few people on Wall Street who predicted the near-collapse of the U.S. financial system.
But there's another coming threat to U.S. companies that nearly everyone on Wall Street seems eager to warn about: the decline of the traditional utility.
In recent months, Citigroup, Bank of America, Goldman Sachs and UBS have issued economic analyses or downgrade warnings for the power sector, calling distributed generation an existential threat to electricity providers. These don't even include the series of reports from Wall Street projecting the coal industry's decline.
The latest comes from analysts at Barclays, who wrote last week they expect corporate bonds in the utility sector to underperform against the market. Barclays targeted the combination of solar and storage as the primary disrupter.
"Based on our analysis, the cost of solar plus storage for residential consumers of electricity is already competitive with the price of utility grid power in Hawaii. Of the other major markets, California could follow in 2017, New York and Arizona in 2018, and many other states soon after," wrote the credit analysts.
The Barclays warning follows a February report from the Rocky Mountain Institute concluding that solar-plus-storage could be cost-effective for tens of millions of utility customers around the country by 2024 -- putting revenue of $34 billion at risk for power companies.
Around the same time, Goldman Sachs piled on with its own report touting how storage combined with rooftop solar could destroy the traditional relationship between power providers and their customers.
"Decreased reliability from an aging distribution infrastructure, a broadening desire to reduce the carbon footprint, and perhaps most importantly, the reduction of solar panel and battery costs could also work together to make grid independence a reality for many customers one day," wrote two clean energy experts at Goldman.
Listen to the Energy Gang's conversation with Jon Creyts of the Rocky Mountain Institute about solar plus storage and the economics of grid defection:
So is this just a case of fashionable "ruin porn" where analysts pile on to the next big intellectual trend? Or are these firms pointing out the real financial implications of structural changes coming in the utility sector? It's both.
"I think what's really happening is a growing consensus that the next decade or two will be messy in the electricity market," said Shayle Kann, the VP of GTM Research. "Organizations of all stripes are peering into the abyss and trying to make out the shapes. My view is that ultimately the distributed energy revolution will reshape, but not replace, electric utilities."
Some of the analysis assumes technology changes will happen with very little regulatory change. Although U.S. regulators have been criticized for moving slowly to help (or force) utilities to take on a more service-oriented approach, some states are taking on the shift with enthusiasm.
Though this may be a valid threat, "it won't occur in a vacuum," said Kann.
California, of course, has been the long-time leader in promoting renewable energy and efficiency. Regulators there are now grappling with how to make net metering sustainable and how to value distributed storage systems.
In Hawaii, utility commissioners and the governor publicly chastised the state's largest electricity supplier for failing to craft a plan to manage large amounts of distributed solar, storage and demand response. The Public Utilities Commission issued three orders requiring HECO to build a plan for retiring old coal plants, better manage the interconnection of solar PV and wind projects, and create clear rules for procuring demand-side reductions to balance the grid.
New York is also undertaking one of the most ambitious regulatory plans to turn the state's utilities into "distributed system platform providers" that get rewarded based on their ability to meet environmental and consumption-reduction measures, not by building more power plants.
Listen to the Energy Gang's take on the regulatory shift underway in New York:
However, Barclays analysts believe these regulatory changes are still outliers, and warned about the financial risks if regulators and utilities are caught flat-footed.
"Technological change creates precisely the environment where slower-moving incumbents and their regulators can fall behind the curve, risking credit volatility, or disrupt the regulatory compact, possibly leading to unexpected losses for bondholders," they concluded.
That could create "a rare opportunity for investors to express views about a potential for a major change" by undervaluing utilities that are not prepared for the shift.
Many stakeholders and industry observers agree that renewables truly arrived when Wall Street investors started taking their profit potential seriously. Now the industry has hit a new level of mainstream acceptance. Renewables aren't just seen by financial experts as a siloed opportunity -- they're seen as a widespread threat to their traditional investments.