The utility response to grid defection

Utility responses to grid defection will be one of the many topics being discussed at the Energy Storage World Forum in Berlin this May. Pic: Energy Storage World Forum.

Utility responses to grid defection will be one of the many topics being discussed at the Energy Storage World Forum in Berlin this May. Pic: Energy Storage World Forum.

By Mike Stone

Utilities are seeking new ways to respond to grid defection as the economics of solar-plus-storage make it easier for homeowners to disconnect.

A report called The Economics of Grid Defection, by the Rocky Mountain Institute (RMI), concludes that in territories such as Hawaii off-grid solar plus storage is already economically competitive with remaining on the electricity network.

Tens of millions of customers will defect in other areas such as California and New York as solar plus storage achieves grid parity by 2030, and possibly even 2020, the RMI predicts.

And grid defection is by no means a US-only phenomenon.

In many parts of Australia and Germany, for example, the business case for residential PV and storage is still far from convincing, but that has not stopped homeowners from installing systems for a whole host of other reasons. 

Beating back energy independence

Uncertainty over when mass grid defection might take place puts utilities in a difficult position regarding approaches to a phenomenon many wish would simply go away.

Indeed, in Spain utilities have been instrumental in passing laws which effectively ensure residential solar is more expensive than electricity available from the grid.

But as the RMI report points out, there are alternatives to using regulatory muscle to keeping consumers on the grid.

“Though many utilities rightly see the impending arrival of solar-plus-battery grid parity as a threat, they could also see such systems as an opportunity to add value to the grid and their business models,” it says.

Already some utilities are taking a more far-sighted and pluralistic view of the factors leading to grid defection and are taking tentative steps towards by offering a carrot to stay on the grid, rather than wielding a legislative stick. 

Supporting domestic storage

Providing the hardware for energy autonomy is one emerging reaction to the burgeoning wave of solar plus storage.

Australian utility AGL Energy announced last year that it is partnering with Sunverge Energy of California in order to sell domestic storage in Australia. And AGL is not alone.

Other utilities in Australia are offering household storage to buy or lease, plus the opportunity for ongoing monitoring and support.

The last two options are interesting strategies to keep customers tied to the utility, if not necessarily the grid itself. In Germany, E.ON is providing solar-plus-storage systems of its own.

The company will be presenting on ‘How to Structure the Business Case for Energy Storage to Give Clarity to DSO’s And TSO’s Decision Makers’ at the 10th Energy Storage World Forum in Berlin, from May 8 to 12.

The motivation for supporting residential energy storage is not always just about hanging onto customers, however. 

Facilitating distributed energy

As renewable penetration grows, being able to call on storage or discharge from a giant battery is clearly a benefit for utilities wanting to balance supply and demand.

But instead of investing in a huge grid-scale array, utilities could amalgamate distributed storage assets to form virtual power plants, as Consolidated Edison is considering doing in New York.

Meanwhile in Germany, MVV Energie has gone in the opposite direction by building a large battery plant to store clients’ excess solar-generated electricity, an ingenious approach to keeping them tied into the grid.

Excess home-generated electricity is a potential commodity and revenue stream for households. And being able to buy cheap electricity from a generator of their choice could offer homeowners considerable savings.

Peer-to-Peer trading

Taking advantage of such peer-to-peer networks also provides a good reason to stay connected to the grid.

Open Utility is just one example of a growing number of electricity providers that connects independent power producers with consumers with the aim of increasing profits for the former and savings for the latter.

True peer-to-peer trading is dependent on having the right grid technology, according to Solar Council secretary Geoff Bragg. Writing in RenewEconomy he said: “Anyone with a smart meter could join the market as a buyer or seller.”

Of course, without a grid connection, peer-to-peer trading would be impossible, and with grid defection, it becomes moot.

Time will tell if utilities can help make this form of electricity trading more attractive than simply adopting domestic storage and leaving the grid, but what is clear is that energy companies cannot afford to ignore the issue.

The growing movement off grid

Bloomberg New Energy Finance (BNEF) predicts that 66% of all storage, excluding pumped hydro, will be behind the meter by 2024, compared to just 16% at present.

BNEF’s Global Energy Storage Forecast, 2016-24 suggests 45GW and 81GWh of storage could be installed by 2024, with 30GW to 43GW behind the meter.

And that figure doesn’t take account of lower battery prices thanks to the second-life effect, which could reduce lithium-ion battery costs to as little as $49 per kWh in a couple of years.

A key insight from the BNEF forecast is that the principle driver for the growth in behind-the-meter storage is energy independence. Electricity consumers want to produce, store and control their own, mostly solar-generated power.

The question for utilities will be whether they should help or hinder the process.

  • ‘When Will the Economics and Practicalities of Grid Defection Work Out and How Should Utilities Respond?’ is just one of the many topics being covered at the 10th Energy Storage World Forum and 4th Residential Energy Storage Forum. Download the programme now.

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