Barclays Sees Trouble Ahead for U.S. Electric Utilities

Money manager, Barclays Global Investors recently downgraded the entire electric power sector of the U.S. high-grade corporate bond market, saying it sees long-term challenges to electric utilities from solar energy, and that the industry’s bonds do not reflect the likely changes to the electrical grid that lie ahead. It’s a noteworthy downgrade since electric utilities make up nearly 7.5% of Barclays’ U.S. Corporate Index by market value.

According to Barclays, a confluence of declining cost trends in distributed solar photovoltaic (PV) power generation and residential-scale power storage is likely to disrupt the status quo. The cost of solar (including 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.