Recently, there have been a number of media articles alerting investors to the increased costs of grid supplied electricity and the ongoing shift by consumers to roof top solar panels. It's creating something of a double-edged sword – the higher the cost to households of electricity, the more households are trying to reduce their bills by going "off-grid". In turn this leads to higher electricity prices as electricity generators such as AGL Energy Ltd (ASX: AGK) and Origin Energy Limited (ASX: ORG) try to recoup their large, fixed costs from their thinned-out customer bases.
What does this mean for investors?
For investors, one only needs to look at your own electricity bill to see that the whole sector appears to be getting out of hand and that the appeal of utilising solar panels will likely only get stronger, particularly as financing and battery power becomes more accessible and efficient.
Origin Energy has gone some way to mitigating this factor by substantially increasing its exposure to LNG production via its investment in APLNG, while AGL Energy has more to lose from a decrease in demand from the electricity retail market.
Just as the generators and retailers including AGL Energy and Origin Energy could be big losers if a substantial shift away from the grid by customers occurred, so too could be the infrastructure providers such as DUET Group (ASX: DUE) and Spark Infrastructure Group (ASX: SKI) which own electricity distribution assets.
While it is perhaps too early for investors to be 'alarmed' by this possible scenario, it is certainly worth being 'alert' to the possible dangers.
