Access and cost revolution sweeping through utilities

On a January evening, Anand is shelling betel nuts by the light of an electric lamp in Halliberu, his village in India's Karnataka state.

As his friends gather on the lamp-lit porch to swap stories, children play in the yard. Inside, after decades of cooking in the dark, Anand's mother prepares the evening meal while a visiting neighbor weaves garlands of flowers.

In October, Bangalore-based Simpa Networks Inc. installed a solar panel on Anand's whitewashed adobe house along with a small metal box in his living room to monitor electricity usage. The 25-year-old rice farmer, who goes by one name, purchases energy credits to unlock the system via his mobile phone on a pay-as-you-go model.

When his balance runs low, Anand pays 50 rupees ($1) -- money he would have otherwise spent on kerosene. Then he receives a text message with a code to punch into the box, giving him about another week of electric light. When he pays off the full cost of the system in about three years, it will be unlocked and he will get free power.

Before the solar panel arrived, Anand lit his home with kerosene lamps that streaked the walls with smoke and barely penetrated the darkness of the village, which lacks electrification. Twice a week, he trudged 45 minutes to a nearby town just to charge his phone.

“Things are much easier now,” Anand says, describing how he used to go through 5 liters (1 gallon) of fuel a month, almost half of it bought from the black market at four times the price of government kerosene rations. “There was never enough.”

Anand is on the crest of an electricity revolution that's sweeping through power markets and threatening traditional utilities' dominance of the world's supply.

From the poorest parts of Africa and Asia to the most- developed regions in the U.S. and Europe, solar units such as Anand's and small-scale wind and biomass generators promise to extend access to power to more people than ever before. In the developing world, they're slashing costs in the process.

Across India and Africa, startups and mobile phone companies are developing so-called microgrids, in which stand-alone generators power clusters of homes and businesses in places where electric utilities have never operated.

In Europe, cooperatives are building their own generators and selling power back to the national or regional grid while information technology developers and phone companies are helping consumers reduce their power consumption and pay less for the electricity they do use.

The revolution is just beginning, says Jeremy Rifkin, a professor at the Wharton School of the University of Pennsylvania and author of The Third Industrial Revolution (Palgrave Macmillan, 2011).

Disruptive to the economic status quo, the transformation opens up huge opportunities to consumers who may find themselves trading power in the future much as they swap information over the Internet today, he says. “This is power to the people,” says Rifkin, who was once best known as a leading opponent of the Vietnam War.

India has 30 gigawatts of mainly diesel generators that could be replaced by cheaper solar power tomorrow, says Tarun Kapoor, joint secretary at the Ministry of New and Renewable Energy.

Within a decade, installing photovoltaic panels may be cheaper for many families than buying power from national grids in much of the world, including the U.S., Japan, Brazil and the U.K., according to data from Bloomberg New Energy Finance.

The ultimate losers in this shifting balance of power may be established utilities. They've invested billions of dollars in centralized networks that are slowly being edged out of markets they've dominated.

As it is, with big utilities also generating more and more power with alternative fuels, renewables provided 20 percent of the European Union's power in 2010, up from 14 percent five years earlier, according to the Paris-based Renewable Energy Observatory. The EU aims to raise that share to about 34 percent by 2020.

European utility stocks are already suffering as entrants using new technologies pour in to meet demand. The Bloomberg European Utilities Index touched a seven-year low in September, and German power futures contracts were in the doldrums as of March 12.

In many underdeveloped regions, it hasn't made economic sense for utilities to build the capital-intensive infrastructure required to deliver energy from traditional sources.