Will Energy Storage Plus Solar Inspire Customers to Abandon Utilities?

- by Lisa Cohn, February 28, 2014, Energy Efficiency Markets

[[{"type":"media","view_mode":"media_large","fid":"363","attributes":{"alt":"","class":"media-image","style":"width: 333px; height: 266px; margin: 3px 10px; float: left;"}}]]To hear the Rocky Mountain Institute tell the story, it’s not a question of whether utility customers will start defecting from their utilities in favor of off-grid solutions that involve energy storage and solar energy. It’s a question of when.

Truth is, it’s already happening in Hawaii—where solar plus storage are cost-effective when compared to utility electric prices, says Jon Creyts, a managing director at RMI. Along with Homer Energy and CohnReznick Think Energy, RMI just released a report detailing the potential for customer defection from the electric grid in major markets by 2025. And customers could do this without incurring higher costs, the report says.

“The economics for grid parity today are already happening in Hawaii. A very robust set of developers and suppliers entered and were doing quite well,” Creyts says. However, the utility experienced troubles taking in high levels of solar from independent solar producers. The power was overloading some of the transmission lines. So regulators took action to restrict developers’ activity, he says.

It makes sense that this is happening in Hawaii, where utility rates are three times higher than the average rates in the US. But what may come as a surprise is the speed at which off-grid solar, combined with energy storage, may be cost-effective in other parts of the US, particularly California and New York City, says Creyts.

“One of the surprising findings from the report: We wanted to understand when these systems could compete with retail electricity prices,” he says. “We found that in the southwest—particularly northern California–and also the northeast–especially New York City– these systems could be economic for tens of millions of customers in the next 10 years,” says James Mandel, a manager at RMI.

And that’s based on conservative estimates, he says. With less conservative estimates, we’ll see an even faster defection by customers from utilities, he says.

“If these reduce costs more dramatically, we could see those tens of millions of customers see favorable economics by 2020. That would be a rapid transition, and a real challenge to the utility business models,” says Mandel. For example, in Westchester, N.Y., commercial customers may find that it’s financially sensible to go for solar and storage by 2019, says Creyts.

While a mass move by customers to solar-plus-energy storage could hurt utilities, it could provide numerous advantages to customers and the environment. We’d see more clean energy at competitive costs, fewer emissions, and these customers would be immune from utility blackouts. And, according to RMI, the customers would not see compromised reliability.

However, utilities may need to start bracing for this change, says Mandel. Next, RMI plans to release a report detailing how utilities can benefit from the trend.

“We have a companion report under way that will focus on utility business models and alternatives that can use this resource effectively” says Mandel.

“The systems could be used to provide grid resources in order to manage the grid. They could also be used to provide self-sufficiency for individual customers.”

Of course, before anyone could jump ship from their utilities, they’d likely need financing for the solar-plus-storage option. A number of companies are now offering innovative financing options, especially for rooftop solar systems. But additional financing options would be helpful, he says.

So what’s to prevent customers from defecting? Will they be afraid to leave the utilities they’ve worked with for years and years?