Reverse power flow: How solar + batteries shift power from utilities to consumers
For 100 years, most decisions about the U.S. electric grid have been made at the top by electric utilities, public regulators, and grid operators. That era has ended.
Sun, July 22 2018
Small-scale solar has provided one-fifth of new power plant capacity in each of the last four quarters, and over 10 percent in the past five years. One in 5 new California customers of the nation’s largest residential solar company are adding energy storage to their solar arrays. Economic defection––when electricity customers produce most of their own electricity––is not only possible, but rapidly becoming cost-effective. As the flow of power on the grid has shifted one-way to two-way, so has the power to shape the electric grid’s future.
The shift of power into customer hands is already having three, unintended consequences:
Legacy, baseload power plants are becoming financially inferior to clean energy competitors.
Electricity sales have stagnated as customers reduce use and produce electricity for themselves.
Communities are reaping greater economic rewards from power generation, as electric customers, individually and collectively, produce more locally.
Almost no utility or utility regulator is adequately planning for this fundamental shift. Dozens of utilities across the country have proposed new gas-powered generation that has little chance of remaining online through the end of its economic life due to stiff competition from solar-plus-storage. Some have been approved despite substantial gaps in the economic analysis.
Utility have also made reactionary moves, or made gestures inadequate to address the magnitude of system change. There tend to be three inadequate utility responses to the reversed flow of decision-making power:
Utilities have damaged their reputations by resisting customer interest in distributed energy resources, sending lobbyists to preempt or curtail policies that reward customer-sited and customer-owned power generation.
Utility investments in large-scale renewable energy have addressed environmental concerns, but these low-cost power purchases have not delivered reduce electricity prices for end users nor assuaged the interest in over 70 cities of reaching 100% renewable electricity more rapidly.
Utilities have deployed utility-owned distributed energy resources, but in ways that withhold much of the economic or financial benefit from customers.
Regulators and state legislators cannot expect incumbent utilities to respond adequately because the rise of economical solar-plus-storage challenges the century-old assumption of a natural electricity distribution monopoly. Instead, electricity market rules should facilitate fair compensation for distributed energy resources and market participants where technology already allows them to compete.
This report details recommendations for changing utility oversight and modifying electricity markets to transition from the dying utility distribution monopoly to a vibrant, democratic energy system where customers have the opportunity to choose distributed energy options that benefit themselves and the greater grid.
Utilities don’t have time to prepare for a future with economical, distributed energy storage because it’s on the doorstep. In 2016, the first hints of a storage-driven transformation of the electricity business came as a “postcard from the future” in Hawaii. Sunrun offered their Brightbox, a combination solar-plus-battery product with a price of 19 cents per kWh, almost 50 percent cheaper than grid electricity. Sunrun began offering its Brightbox service in California in December 2016. By 2018, 1 in 5 new residential Sunrun solar customers in California were choosing to add storage.
These early adopter states just scratch the surface of the competitive landscape.
Based on a proxy measure of electricity prices, the combination of on-site solar and energy storage can already compete with the price of serving nearly 26 million residential electricity customers in 19 states.1 The ILSR model compares customers installing a 7-kilowatt-hour Tesla Powerwall and a 5-kilowatt solar array to utility electricity prices, with the percentage of each state’s customers who can generate cheaper power themselves shown on each state:2
ILSR’s analysis isn’t alone. According to McKinsey, within three years an Arizona electric customer would be able to serve 80 to 90% of their electricity needs with solar and battery storage, at a lower price than by buying electricity from the utility company.
Storage prices have fallen remarkably fast, as illustrated by the remarkable price declinesfor battery battery storage for solar - prices droppingstorage technology in the last three years (measured in the cost of energy averaged over the expected life of the battery).