Solar-storage combo poses grave threat to traditional utilities — report 

Source: Krysti Shallenberger, E&E reporter • Posted: Friday, April 10, 2015

Public utilities will face additional future hurdles to their traditional business model that could cost them as much as $34 billion in revenue, according to a new study from the Rocky Mountain Institute, a Colorado-based research nonprofit.

Titled “Economics for Load Defection,” the report asserts spikes in electrical rates coinciding with decreased costs for solar and battery storage will spur customers to purchase less power from grid operators, with smaller-scale solar-plus-battery systems powering the majority of their electrical generation. This could squeeze out public utilities and other electrical providers unless they take action now, said spokesman and author James Mandel.

But revamping current business models and state and federal regulations while plugging customer-based energy providers into the grid system could iron out future generation issues while balancing predicted electrical rate hikes, the report said.

Mandel said he and the 11 other researchers examined small-scale rooftop solar arrays paired with battery storage for the study. They did so within five varied geographical locations — Hawaii, Kentucky, New York, California and Texas — to factor in different electricity rates, historical rate increases and ability to generate solar energy to charge grids.

The report follows the RMI’s 2014 report titled “Economics of Grid Defection,” which said battery storage combined with rooftop solar panels from local electrical providers at a cheaper rate could lead to large numbers of customers deserting traditional public utilities as renewable energy sources reach grid parity, or when the cost to purchase renewables matches or is lower than costs of purchasing power from the electrical grid (EnergyWire, Feb. 28, 2014).

The researchers decided to focus on more plausible outcomes with this subsequent report.

“We wanted to look at a much more likely scenario with this study,” Mandel said. “We felt like that first report had a decent amount of interest but wasn’t a realistic prediction.”

Customers instead are more likely to choose solar-plus-battery systems connected to the existing grid, with a small amount of customers truly defecting.

Even so, these systems could lead to revenue shortfalls and lost sales for public utilities along with a significant loss of their customer base.

For example, Westchester County in New York would see traditional grid contribution from public utilities shrink to 5 percent by 2050 from the current 100 percent, though a rising contribution from solar generation could make up the difference, the report said.

Costs to maintain grid systems will increase to $2 trillion between 2020 to 2030, according to a 2008 Edison Foundation study cited by the RMI researchers. Revenue from energy sources in the current market normally offsets such cost disparity, but “even if a small fraction of the sales supporting that investment and revenue is lost, it will likely have a large impact on the system’s [costs],” the report said.

Lost revenue from energy sales from residential customers could add up to $15 billion with 9.6 million customers projected to leave the grid entirely — which would account for a 50 percent loss in sales. For commercial users, the utilities could see sales decline by 60 percent, losing $19 billion in revenue and 1.9 million commercial customers.

Fights against net metering — in which customers sell excess green energy back to public utilities — have sprouted up in many states. But the report suggests that eliminating net metering only delays the inevitable problem facing utilities dealing with growing demand for solar and other renewables.

Net metering plays a role in these systems’ future development, Mandel said. But RMI researchers deliberately left out net metering policies when forecasting different scenarios except one, he added.

“With net metering, customers tend to treat the grid as storage,” Mandel said, which almost eliminates the need for combined battery and solar operations on a rooftop-type scale. “If you take net metering away, which we don’t think is a good idea, you still see positive economics to invest in self-generation. It just happens more slowly.”