SolarCity Corp (SCTY), NV Energy, Inc. (NVE), Duke Energy Corp (DUK) – Disruptive Technology: The Sun

Utility companies could be in some serious trouble. The most susceptible companies are in rural areas with high capital costs. As Duke Energy Corp (NYSE:DUK) covers most of the Carolinas, it does have some large cities that it services, but there is also an expansive rural network. This rural portion of its service area has high fixed costs of distribution can take years to recoup. If customers were to switch to renewable sources on their own, it could end up costing the utility millions. Duke Energy Corp (NYSE:DUK) would end up charging more to all of its customers as a distribution fee to maintain its current network of power lines as a backup electricity supply.

Duke Energy Corp (NYSE:DUK) has large exposures to the wholesale electricity market with its large generation fleet. It also has a lot of exposure to rural sunny areas in the south, the prime candidates to cut the cord. There could be a lot of challenges ahead of this power behemoth.

Foolish bottom line

Electric companies have already started to consolidate in the regulated distribution segment. These assets will be the most valuable in the future, as they will be considered the “backup structure and medium of exchange” for consumers to move electricity. Much like water utilities own the pipes. Electric utilities that have a lot of revenue coming from coal will and have regulated markets in the south will be the most susceptible.

SolarCity Corp (NASDAQ:SCTY) has seen a massive run up in its stock price recently. This company’s decentralized solar panel “generators” provide it bond-like income that will continue to grow over time as the price of panels comes down. Once this stock pulls back, it would become a perfect pick for a long term investor.

The article Disruptive Technology: The Sun – Part 1 originally appeared on Fool.com and is written by Wes Patoka.

Wes Patoka owns shares of Duke Energy. The Motley Fool has no position in any of the stocks mentioned. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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