The die is cast. Disruptive energy — in the form of solar plus energy storage — will upend the U.S. electric grid as we know it over the next three decades. That’s the implication of a new report, “The Economics of Load Defection,” by the Rocky Mountain Institute and Homer Energy.
The falling price of solar-plus-storage creates “a real and present threat to traditional utility business models,” the report says. It forecasts dramatic grid defection in the geographic areas it studied.
For example, in the energy-intense Northeast, utilities could lose as much as 10-20 percent of their sales within just five years. By 2050, 80 percent of residential customers and 97 percent of commercial customers may no longer buy utility power, according to the report.
For microgrids, this news is good. Microgrids will thrive on a distributed grid. And solar and energy storage are often key components of new microgrids.
But what will all this disruption mean to the overall health of the electric grid? The report sees two possible futures.
Under the first, disruptive energy disrupts for the good. The technologies are integrated efficiently under business models that send proper price signals: electricity becomes valued based on time, location and the role it plays on the system (capacity, ancillary service, etc.).
Customers consume, produce and sell energy; they become market players, possibly along the lines of changes put forward by New York in its Reforming the Energy Vision (REV). Basically, utilities and regulators embrace local energy and treat it as a grid asset, not a grid enemy.
Under the second scenario, disruptive energy creates havoc as the old and new power industries war rather than integrate. Local energy is shut out of the grid markets. With little incentive to stay, customers basically take their solar-plus-storage systems and go home; they self-generate without contributing to the grid. This will create an over-building on both sides, on the grid and among self-generators, since neither can count on the other for back-up or services.
Credit: Rocky Mountain Institute/Home Energy
Which scenario will dominate? Much depends on whether or not states adopt regulations that foster the right business models, ones that create disruptive energy for the good. Here are five approaches that the report says can move the industry in the right direction.
More Grid-Optimized Smart Solar: Utilities and grid operators encourage use of sophisticated inverters that help distributed energy to island from the grid, improve voltage ride through, and power quality management. This includes making grid interconnection easier and less expensive and offering more accurate price signals and transparent data. This would encourage solar PV panel orientation that takes into account not only the customer’s needs, but also those of the grid, particularly distribution circuit/feeder and macrogrid peaks, based on time and locational congestion.
Total Energy Service (Behind-the-Meter Optimization) Customers are increasingly seeking more energy services. Many of these services benefit both the customer and the grid. They include energy assessments, efficiency improvements, distributed energy resources, smart appliances and energy monitoring & management. With these assets, customers gain more control over their energy use; they can adjust consumption to market signals, maximize or minimize export, participate in demand response and take advantage of other market opportunities.
Utility-Coordinated, Customer-Sited Systems Here the utility takes ownership of the solar-plus-storage model, possibly as the coordinator of the systems or even as the owner of the customer-sited systems. As owners, utilities can cover the cost of the systems in their rates, and therefore free the customer from making the upfront investment. (This approach could face some opposition from competitive players, however.)
Utilities as Finance Providers Utilities and grid operators provide financing for customer-sited systems, leveraging their strong balance sheets and ability to create economies of scale to reduce equipment and installation costs. Customers might pay back the loan through on-bill financing options. This would particularly benefit customers who cannot afford upfront solar-plus-storage costs.
Distributed Systems Coordinator (e.g., aggregators or virtual utilities) Utilities or an independent third party manage a platform for distributed energy services. Being proposed as part of New York’s REV, this approach brings to the distributed energy markets the kind of successful exchange and management created on the wholesale market by regional transmission organizations. The distributed system coordinator could leverage and aggregate resources for the greater good of the grid, bidding them into local markets to earn revenue from sales of energy, capacity, or other ancillary services. The coordinator also might create incentives for customer participation in the form of coupons, discounts, monthly participation dividends, or in-kind system warranties.
Stay tuned. All of these approaches are likely to be increasingly discussed by regulators, policymakers and industry leaders in the coming months (and years – change happens slowly in the electric regulation.)
Let us know what you think of these five approaches – or others not mentioned – to help bring about a new grid that efficiently integrates old and new world technologies. Please post your comments below. Or sign up for our new Linkedin Group: Community Microgrids and Local Energy.
Download the Rocky Mountain Institute and Homer Energy report here.
