Distributed Solar: Add Batteries, Remove Grid

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Advances in battery technology and availability allow consumers to store the energy they produce. Solar-plus-battery systems create the potential for a new population of energy users who disconnect completely from the existing grid. What does this mean for the future of utility providers? 

Make hay while the sun shines, so the saying goes. Sunlight is a powerful but intermittent source of energy, and the classic quandary of solar installers has been how to reconcile this variablitiy with consumer expectations of 24-hour-a-day, on-demand power.

Although the residential solar industry has seen rapid growth over the past decade, solar energy production has had limited penetration into the overall energy market, due in part to the prohibitive costs of battery storage systems. Without the ability to store solar energy in a battery bank, single-point users typically have two options: either configure in-home systems to take advantage of solar generating hours by using the energy immediately as it is generated (as with solar water heaters), or rely on the existing utility grid to absorb the surplus energy and provide compensation via a net metering arrangement with the local provider. In both cases, the consumer uses a rooftop PV array to supplement an existing relationship with a utility company. 

Technology exists that could change this. As it becomes economically viable for individual homeowners to use battery banks to store locally produced energy, utilities are forecasted to play a significantly different role in the production, distribution, and sale of electricity.

The gold standard of any renewable alternative energy source is the achievement of grid parity, the point at which the calculated cost of generation equals or drops below what the utility company charges its traditional grid-based customers. An economically competetive combination of rooftop solar plus on-site battery storage has been an elusive goal for the solar industry, but recent developments in production techniques and materials are driving the once-prohibitive cost of batteries lower and lower.

A report published in March by the Rocky Mountain Institute offers a range of predictions on how soon technology advancements and decreasing costs will allow energy consumers to switch to the distributed generation model and disconnect from the local utility entirely. The report suggests that with advances in solar-plus-storage systems, grid parity could be reached sooner than previously suspected; according to some of their estimates, parity could be achieved well within the 30-year outlook of a utility provider’s business projections.

The accelerated arrival of grid partiy for distributed solar has led to some dire predictions about the fate of conventional utilities. The ongoing debate over fair pricing for net metering customers is an indication that utility companies are keen to adjust their strategic outlooks in order to address the changing realities of the distributed solar industry.

While it is likely that the advent of solar-plus-storage will erode current levels of utility profits to some degree, it is not neccessarily a harbinger of mass defections and total utility collapse. PV solar production is still constrained to a specific sector of the energy consumption market. Those who live in multi-unit buildings, those who rent from landlords unwillilng to cover the installation costs of PV solar, or even those with shaded roofs are unlikely to be able to take advantage of this particular manifestation of solar power generation.

But with an increasing number of customers already seeking to avoid utility costs through net metering, the arrival of a vehicle for complete independence from traditional utilities will likely find traction with a segment of the consumer base. Even utility companies agree that this phenomenon cannot be ignored, and forward-thinking strategists are seeking ways to maintain relevance as the relationship between individual energy users and large-scale utilities continues to evolve.