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Nick Cunningham

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Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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Off-Grid Solar Threatens Utilites In The Next Decade

Off-Grid Solar Threatens Utilites In The Next Decade

The utility death spiral could be just around the corner.

A new report from the Rocky Mountain Institute (RMI) finds that solar photovoltaics combined with battery storage could become cost competitive with grid electricity in key parts of the United States within a decade.

That would pose an existential threat to the traditional utility. As more homes and businesses opt for solar power equipped with battery backup storage, utilities will lose their customers. That makes it increasingly difficult to finance and maintain expensive grid assets, forcing utilities to raise rates on remaining customers, further pushing people to go off-grid. For example, in the Northeast, within 15 years utilities could see 9.6 million fewer customers. That will make it daunting for utilities to keep spending billions of dollars per year in order to maintain the grid. Related: How Much Longer Can OPEC Hold Out?

RMI concluded in a 2014 report that “solar-plus-battery” – which amounts to a “utility in a box” – will reach grid parity at the commercial level in New York by 2025. Solar-plus-batteries could become the most attractive form of electricity generation.

But it is not as if utilities will only start to see their business case threatened in 2025. Insurgent solar power is already cutting into their sales, albeit at a small-scale. That will only accelerate. There are a variety of reasons that a stampede towards solar will soon begin, even before the average cost of solar-plus-battery officially falls below electricity generated from the grid.

For example, people who are interested in lowering their personal impact on the environment have become earlier adopters, and will continue to do so. Another reason people may opt for off-grid solar-plus-battery path is due to concerns about reliability. A spate of severe storms in just the past few years has highlighted the fragility of the conventional electric grid. Superstorm Sandy in 2012 knocked off power to 8.2 million people. The derecho that hit the mid-Atlantic just a few months earlier cut off power to 4.2 million people, some for as long as 10 days. More recently, a small fire at an electric transformer in southern Maryland sparked a power outage in Washington DC on April 8, even cutting off electricity to the White House and the State Department.

Yet more motivation, according to RMI, is the rising frustration with utilities. Rate increases and fights over net metering are pushing people to cut their ties with the grid. Related: Is Private Equity Distorting E&P Asset Prices?

But ultimately, a mass exodus will occur when the price is right, and that milestone is within sight. For some parts of the U.S., such as Hawaii where electricity is expensive, it already is cheaper to go off-grid with solar-plus-batteries. For New England, which also has high electricity rates, grid parity will come by the middle of the next decade.

And those are conservative scenarios. Breakthroughs in technology that bring down the cost of solar panels or batteries will only move that timeline forward. For example, researchers at Stanford University have invented a new battery that uses aluminum instead of lithium. The aluminum-ion battery is potentially longer-lasting and safer than the lithium-ion batteries used in electric cars and other appliances today.

“We have developed a rechargeable aluminum battery that may replace existing storage devices, such as alkaline batteries, which are bad for the environment, and lithium-ion batteries, which occasionally burst into flames,” Hongjie Dai, a professor of chemistry at Stanford, said in a press release. “Our new battery won't catch fire, even if you drill through it.” Related: Top 12 Media Myths On Oil Prices

Even better, the battery charges ultrafast. While it can take several hours to charge a smartphone with a lithium-based batter, the Stanford aluminum battery can charge a smartphone in one minute.

But for off-grid electricity, it is even more important for batteries to have long lives. Here too the Stanford battery offers benefits. “The grid needs a battery with a long cycle life that can rapidly store and release energy,” Dai said. “Our latest unpublished data suggest that an aluminum battery can be recharged tens of thousands of times. It's hard to imagine building a huge lithium-ion battery for grid storage.”

The battery still needs to improve its energy density, but the potential is there. If and when solar panels can be combined with batteries to provide a more reliable and cheaper alternative to grid electricity, utilities could enter the death spiral.

By Nick Cunningham Of Oilprice.com

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  • David Hrivnak on April 12 2015 said:
    For many people the grid will still be very useful. For me to net zero I would either need a battery 8 times the size of the Tesla Model S (estimated at $200,000) or need to add a number of solar panels and would have to dump that energy in the summer. The issue in NE Tennessee is we have short cloudy days in the winter just as the heating load reaches a maximum. So while I produce 2X my needs in the spring I barely produce half of my needs in the winter.

    So there is a place for the utility if they just embrace new technology rather than try to fight it.
  • Lyle on April 13 2015 said:
    It will be interesting to see how governmental entities that have used publicly owned utilities as cash cows to fund other programs react. My guess is that they will institute exorbitant permit fees or come up with some sort of other fee to either deter installation or generate alternate revenue through some sort of piggyback scheme. I think it's safe to assume that those utilities that aren't able to somehow join in the solar expansion will be spending lots of dollars lobbying for statutory impediments to widespread adoption.
  • James Rust on April 14 2015 said:
    I can't imagine someone could have enough storage to get off the grid for ever. The cost would be prohibitive. In Atlanta where I live we go for weeks without seeing the sun. I average 70 kilowatt-hours per day and I would want storage for 2000 kilowatt-hours to feel comfortable. What would that cost-half million dollars. Those who want to be off grid for a considerable amount of time should have to pay hook-up fees of $100 per month or more.

    Solar is not economical in most places in the U. S. now. If the government gets off the back of utilities, we should see no increase in cost of electricity because of our vast fossil fuel reserves that need development. Adding storage to solar will drastically increase the price and make solar non-competitive for those who value money.

    James H. Rust, Professor of nuclear engineering
  • Joe Bumcigarski on April 15 2015 said:
    Hello, Friends,

    I believe a fundamental mistake some people are making is that the power generated must be 100 Volts A.C.

    I made a system that provides ALL of my electricity for under $200.00 USD.

    It runs on 12 Volts D.C..

    A single photovoltaic panel charges a couple of car batteries (wired in parallel) I use as a power reservoir. I can also use wind (I made a wind generator from an old 20" fan blade and a D.C. motor), an automobile with jumper cables, or a "trickle charger". All of the parts can be bought at an auto parts store or a truck stop.

    I use it for a 12 Volt frying pan, water heater, lighting, an evaporative cooler (a primitive air conditioner) a food cooler, computer, a 12 Volt TV, radio, C.B. Radio, and WiFi, among other things.

    I use a simple sine wave Voltage Inverter ($20.00 at any auto parts store - or online) to change the 12 volt D.C. to 110 Volts A.C., which lets me use whatever I would normally on an A.C. system.

    I have never run out of free power and can use the utility's system if necessary.

    Be well.

    Thank you.

    Joe Bumcigarski
  • Ed Hutchinson on April 16 2015 said:
    There is net zero and grid defection. At our house we are at grid net zero now, but only about 15% of what we generate is used concurrent with generation. The rest is net metered. It would be fairly easy and cheap to get through a summer night or a few cloudy days. Getting past a VT winter with solar and storage would cost a fortune. We can depend on three months with very little solar generation and loads twice the size of summer loads. Grid defection is extremely unlikely at this latitude.
    Actually, we crossed the line back to net consumers by getting a Plug-in-Prius.

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