Friday, April 10, 2015

Customers Will Leave the Grid Behind in Droves Over Next 10-15 Years

Rocky Mountain Institute has just published a fascinating study on the future of "grid load defection" in the U.S.A. under likely pricing scenarios.  You can download it here:

There is now significant concern in the U.S. -- and there SHOULD be significant concern in Japan -- about the likely failure of the traditional utility business model, as revenues decline once customers can self-generate electricity on an economic basis using solar PV and, eventually solar PV + battery storage.

One response is to charge customers a fixed amount for maintaining the grid, even if they reduce their consumption significantly based upon self-generation.  RMI's study suggests that such approaches only prolong the inevitable.  Over the next 10-15 years, almost everywhere in the U.S. a combination of solar PV + battery storage will become economically optimal, causing customers to purchase much less power and pushing down utility revenues.

The RMI study posits maximum potential customer defection in the Northeast U.S. at 50% of residential and 60% of commercial customers by 2030.

They highlight the need for new utility business models and new regulatory approaches to avoid this.  Of course, the faster on-grid electricity prices rise ... the faster defection will occur.  And the faster solar PV and storage costs decline ... well, you get the picture.

According to RMI, "although they could represent significant load loss, customers’ grid-connected solar-plus-battery systems can potentially provide benefits, services, and values back to the grid, especially if those value flows are monetized with new rate structures, business models, and regulatory frameworks."

But there is a major risk of a huge new group of centralized generation "stranded assets".


Now think about the situation in Japan where on grid power is much more expensive, and the cost is going up much more rapidly, and the current central planning process to decide on "energy mix" is giving a major role for new coal-fired generation and nuclear -- two generation sources that are not currently "economic" and so are just not being built in the U.S. ... and in many cases being mothballed.  What is the likely result?

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