Batteries combined with rooftop solar may speed grid's 'death spiral' -- report

A new study estimates that cheap batteries paired with rooftop solar panels is a new sort of threat to the traditional utility business model, hastening the day when on-site power is cheaper than grid power and utilities struggle to pay off the power plants and transmission lines they've already bought.

By as soon as 2020, the report asserts, tens of millions of businesses and homeowners in California and New York may be able to combine solar panels, batteries and sometimes a backup diesel generator to get local electricity cheaper than that from the grid. Much of the rest of the country may be able to do the same by the 2030s, it states.

The report is the work of the Rocky Mountain Institute, a think tank focused on sustainability.

An analyst took issue with one of the report's central contentions: that the battery-solar panel combo will be so robust that it creates the opportunity for a "utility in a box" that will allow large numbers of buildings to abandon the grid entirely -- "from grid connected to grid defected," as the report puts it.

"The concept of people leaving the grid because they have batteries and solar panels, I don't think that's going to happen," said Sam Jaffe, an analyst who specializes in batteries at Navigant Research. "There is going to be a point, probably pretty often, where you run out of battery power, and that time you will pay any amount to get electricity."


One of the surprising findings in the report, titled "The Economics of Grid Defection," is that solar power plus batteries and diesel backup is already cheaper than grid power for some commercial buildings in Hawaii, which has the highest electricity rates in the country.

Supplying all of a building's needs with sun power has long been the dream of hobbyists and off-the-grid types but is now poised to enter the mainstream in a big way. The nation's largest rooftop solar installer, SolarCity, announced a partnership with the electric automaker Tesla in December to lease batteries to businesses and homeowners the same way it does with solar panels. Other battery startups such as Green Charge Networks and Coda Energy are striking similar deals with solar leasing companies.

The study examined the impact of paired solar and batteries in states that have different electricity rates, regulations and penetration of solar photovoltaics, including Kentucky, New York, California, Hawaii and Texas.

In Los Angeles and Westchester County, N.Y., a commercial building with a battery bank, solar panels and a backup diesel generator will able to beat the grid on price by 2025, the report projects. The rest of the country may take 30 years to reach that point. The report adds that regions that have the most solar panels today may be able to produce commercial-scale power more cheaply than utilities by the 2030s, even without a supplemental diesel generator. Homes would trail that trajectory by five or 10 years.

Solar panels cost half what they did in 1998, and prices for battery storage have declined nearly as much just in the last four years, according to one estimate.

The concern for utilities, the report notes, is that these seismic shifts could take place well within the 30-year life span of costly assets like power plants and transmission lines. They may become difficult to maintain as the number of those paying for power is in decline.

"Even before mass defection, a growing number of early adopters could trigger a spiral of falling sales and rising electricity prices that make defection via solar-plus-battery systems even more attractive and undermine utilities' traditional business models," the report says.

The study taps into utilities' growing fear of a "death spiral," a concept that gained currency when it was explored in a report by the Edison Electric Institute in early 2013. It speculated that the challenges of updating a creaky grid infrastructure, along with flat or declining use of electricity and possible future limits on the use of fossil fuels, could force utilities to raise rates even as alternative power systems become common and affordable.

The Edison Electric Institute yesterday declined to comment on the new report.

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