Solar plus battery storage could destroy utility business model

Rooftop solar panels combined with battery storage have very real potential to destroy the reigning grid utility model, according to a study released this week by the Rocky Mountain Institute. And the destruction could happen quickly.

Solar plus batteries could kill utilitiesRooftop solar panels combined with battery storage have very real potential to destroy the reigning grid utility model, according to a study released this week by the Rocky Mountain Institute. And the destruction could happen quickly.

“We weren’t really surprised to see that it could happen,” said Jon Creyts, RMI managing director. “What surprised us is how quickly it could happen. Within 10 years, we could have tens of millions of utility customers who have favorable economics for defecting from the grid.”

Rocky Mountain Institute partnered with Homer Energy and CohnReznock Think Energy CRTE (CRTE) to produce the study that looks at when the economics will shift and solar and battery combinations will be as affordable as grid power.

Discussions about the “threat” solar energy poses to the traditional utility grid model have recently focused on net metering. Utilities in several states, such as Arizona and Colorado have asked to cut net metering rates or impose fees on solar customers that will all but eliminate the financial benefits of going solar.

But behind that debate is the real threat to utilities – affordable solar and storage combinations.

“Once economics are no longer a factor, that’s a utility death spiral,” said Jamie Mandel, an RMI senior consultant on disruptive technologies.

It’s already happening in Hawaii, where more than 10 percent of utility customers are on net metering programs. And now that the utility won’t allow any more grid connection, solar customers are simply going off the grid with storage. Electricity rates are so high in Hawaii – usually about three times the rates on the mainland – that the economics are already there.

“That is really a postcard from the future,” Creyts said. “We have a lot to learn from Hawaii.”

The study found that the economics will favor rooftop solar and battery combinations over the grid in New York by 2025, in California by 2031 and in Kentucky and Texas by 2047.

“Of course, there are a lot of situations where customers will adopt the new technology even before it’s economically viable,” Creyts said. “You need look no farther than Sandy to see that happening.”

If utilities are going to survive, they will have to change their business models. Right now, they’re focused on selling kilowatt hours. Many are looking at changing over from old coal-fired power plants and investing in new generation. But those plans are based on a 30-year payback where utilities are predicting a certain level of electricity sales. Rooftop solar panels combined with battery storage will likely disrupt utility predictions.

RMI and its partners are working on a companion report that will offer solutions for utilities, Creyts said.

Until that comes out, however, the discussion needs to change and utilities need to be looking toward the future and making adjustments for a world where consumers have more than one choice for their power.

“We’re shifting away from a monopoly model,” Mandel said. “The ability to defect is actually more important than actual defection.”

 

 

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