The Dropping Cost Of "Grid Defection" Means You Could Soon Ditch Your Electric Company

Solar panels and battery energy storage are getting cheaper and easier. Soon, off-the-grid living could go mainstream.

The killer app? That would be solar panels plus batteries. When you put the two together, homeowners don't need utilities anymore, and perhaps not the grid either.

A new report looking at the economics of grid defection shows that defecting need not--and very soon, will not--cost money. The analysis from the Rocky Mountain Institute shows that "parity"--the point at which generating and storing power yourself is cheaper than using a utility-- "is here already or coming soon for a rapidly growing minority of utility customers."

RMI focuses on solar panels plus batteries because of these technologies' maturity, cost-effectiveness, and because, in combination, they allow owners to live independently. They could allow "widespread grid defection," RMI says.

The analysis looks at five states (New York, Kentucky, Texas, California, and Hawaii) under on four possible scenarios of technology development and government support. Here are three arguments RMI makes about the future for owners and utilities:

Grid parity will come for millions by 2020

In places where traditional power is expensive, like Hawaii, grid parity is already a reality. RMI expects tens of millions of defectors in New York and California by 2020, and the rest of the country to follow gradually. Under one improved technology scenario, "off-grid systems prove cheaper than all utility-sold electricity in the [South West] just a decade out from today." Texas is set to have parity by 2027, it says.

Certain owners will leave early, putting pressure on utilities

"There will be segments of the customer base for whom the economics improve much sooner," the report says. These are people who qualify for capital, who care about low-carbon electricity, and want perhaps greater efficiency. The question is whether the utilities can cope with this early erosion of their base. RMI says it could force utilities to raise prices to cover, thus pushing more people away. "This early state could accelerate the infamous utility death spiral--self-reinforcing upward rate pressures, making further self-generation or total defection economic faster," the report says.

Utilities will have to adapt their business models

The report says solar-plus-battery systems signal "the eventual demise of traditional utility business models." The question is whether utilities can adapt to the new environment, moving away from pure power sales to pay off huge upfront investment. The future, ironically, may be in enabling defection but selling other types of services on-top (for example in efficiency and home management).

RMI still sees a role for utilities. Not everyone will want to leave the grid, even if it's cheaper. The "grid is in the midst of transformation," it says, "but that shift need not be an either/or between central and distributed generation. Both forms of generation, connected by an evolving grid, have a role to play."

[Image: Electricity via Shutterstock]

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  • Shawn Metz

    Living in AZ, I would love to see solar become more affordable. In fact, I've wondered why they don't establish micro solar farms for the new housing developments. While we can't readily convert an entire city over immediately, we could provide new solar in the desert's sunny climate to eliminate (or reduce) added strain on the "grid."