New Report Predicts Large Numbers of Solar Customers Will Leave the Grid by 2025

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A new report from Rocky Mountain Institute, CohnReznick Think Energy, and HOMER Energy predicts widespread customer defection from the electric grid by 2025. Hawaii, California, Kentucky, Texas, and New York are the prime candidates for disrupting current utility business models.

 

As the solar industry focuses on net metering battles around the country, there’s some indication that in the not-too-distant future, this could be a non-issue.

 

A report released today by Rocky Mountain Institute (RMI), HOMER Energy, and CohnReznick Think Energy (CRTE) claims there’s serious potential for a large number of customers in major markets to leave the grid altogether by 2025. Not only that, but they should be able to do that without incurring higher costs or lower reliability.

 

The report’s main points:

 

  • A considerable number of utility customers will likely see economics that favor their leaving the grid within 10 years.

  • Utilities will likely experience significant revenue loss before this defection.

  • The likelihood of long-term customer defection signals the eventual demise of traditional utility regulatory models.

 

 

The report’s authors expect the hybrid combination of solar photovoltaic and battery storage to become cost competitive with retail grid electricity rates by 2025. That could lead to migration of customers away from the grid well within the 30-year planned economic life of typical utility investments like central thermal generation plants and transmission infrastructure.

 

The report the possible scenarios in five different U.S. regions: Hawaii, California, Kentucky, Texas, and New York. It identifies when solar PV and storage combinations could disrupt existing utility business models in those markets.

 

The continuing decline of solar PV and battery storage costs, coupled with increasing retail electricity prices, has resulted in grid parity today for commercial customers in Hawaii. The most optimistic projections, based on certain solar and efficiency targets being met, depict grid parity for millions of residential and commercial customers in New York and California within this decade.

 

“Solar-plus-storage represents a fundamentally new paradigm,” said RMI Managing Director Jon Creyts, PhD. “While other distributed generation options still require some degree of grid dependence, solar-plus-storage provides an opportunity for customers to cut the cord to their utility entirely. To remain competitive, utilities need to understand how to leverage hybrid systems within the electricity system.”

 

Even before total grid defection becomes a reality, the report predicts, utilities will see further revenue decline. That’s because solar-plus-battery systems that are sized to meet most of a customer’s load will become cost-effective sooner. In addition, other motivating factors such as customer desire for increased power reliability and low-carbon electricity generation are driving early adopters ahead of grid parity.

 

“To best compete, property owners and developers will need to understand how distributed generation and storage is rapidly changing energy economics,” said CRTE Founder and President Mark Crowdis. “By assessing the impact of these new technologies and the innovative contracting approaches that support them, property owners can be at the leading edge of this new market, ensuring long term financial savings for their properties.”

 

The big question is how — and whether — utilities will adapt.

 

The second installment of the report will offer solutions for how utilities might rethink the threat of such hybrid resources and unlock opportunities through new business models — within existing regulatory frameworks or under an evolved regulatory landscape — to better capture the value of distributed resources.

 

“As storage and control technologies improve, we have the opportunity to incorporate more and more renewable energy sources into the grid in a way that balances and optimizes those power sources,” said HOMER Energy CEO Peter Lilienthal, PhD. “Properly regulated, these hybrid technologies can be a benefit to the larger grid, rather than a threat as they are sometimes depicted.”