Report: Off-Grid May Soon Reach Tipping Point

Declining costs of solar power are making off-grid energy systems increasingly viable, getting closer to grid-parity with conventional sources of power from the electrical grid. Meanwhile, costs for big utilities are not declining, and as they begin to lose customers, their revenues will drop. According to a report from investment bank Morgan Stanley, solar systems with battery technology that allow consumers to leave the grid entirely will not only be able to compete with on-grid power, but the market may reach a tipping point at which people leave the grid at an accelerating rate.

Much has been written about the "utility death spiral," but usually with an eye on customers installing solar and taking advantage of net metering policies by staying connected to the grid and selling back their excess power. Morgan Stanley's report suggests that ratepayers may go beyond that and completely disconnect from the grid, a prospect that may occur far quicker than many once believed. Morgan Stanley studied several scenarios for the growth of solar, the most bullish of which finds that the "addressable" market for distributed solar could be 415 gigawatts within a few years. That dwarfs the current installed solar capacity of about 6.2 gigawatts.

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Driven in part by Tesla's announcement that it would build a new battery factory, the cost of batteries for home power storage could continue to decline. In "sun rich, rate high" areas of the United States, like Hawaii, the West, and the Southwest, off-grid solar systems will become as cheap or cheaper than grid power in five to eight years from now. Other estimates already put 10 states at grid-parity: Arizona, California, Connecticut, Hawaii, Nevada, New Hampshire, New Jersey, New Mexico, New York, and Vermont. The trend doesn't bode well for the health of large utility companies.

By Joao Peixe of Oilprice.com