June 2, 2013

...AND CHEAPER...:

Solar panels could destroy U.S. utilities, according to U.S. utilities (David Roberts, 4/10/13, Grist)


Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model, which has remained virtually unchanged for a century, to the ground.

That is not wild-eyed hippie talk. It is the assessment of the utilities themselves.

Back in January, the Edison Electric Institute -- the (typically stodgy and backward-looking) trade group of U.S. investor-owned utilities -- released a report [PDF] that, as far as I can tell, went almost entirely without notice in the press. That's a shame. It is one of the most prescient and brutally frank things I've ever read about the power sector. It is a rare thing to hear an industry tell the tale of its own incipient obsolescence. [...]The thing to remember is that it is in a utility's financial interest to generate (or buy) and deliver as much power as possible. The higher the demand, the higher the investments, the higher the utility shareholder profits. In short, all things being equal, utilities want to sell more power. (All things are occasionally not equal, but we'll leave those complications aside for now.)

Now, into this cozy business model enters cheap distributed solar PV, which eats away at it like acid.

First, the power generated by solar panels on residential or commercial roofs is not utility-owned or utility-purchased. From the utility's point of view, every kilowatt-hour of rooftop solar looks like a kilowatt-hour of reduced demand for the utility's product. Not something any business enjoys. (This is the same reason utilities are instinctively hostile to energy efficiency and demand response programs, and why they must be compelled by regulations or subsidies to create them. Utilities don't like reduced demand!)

It's worse than that, though. Solar power peaks at midday, which means it is strongest close to the point of highest electricity use -- "peak load." Problem is, providing power to meet peak load is where utilities make a huge chunk of their money. Peak power is the most expensive power. So when solar panels provide peak power, they aren't just reducing demand, they're reducing demand for the utilities' most valuable product.

But wait. Renewables are limited by the fact they are intermittent, right? "The sun doesn't always shine," etc. Customers will still have to rely on grid power for the most part. Right?

This is a widely held article of faith, but EEI (of all places!) puts it to rest. (In this and all quotes that follow, "DER" means distributed energy resources, which for the most part means solar PV.)

Due to the variable nature of renewable DER, there is a perception that customers will always need to remain on the grid. While we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically "cut the cord?" [Emphasis mine.]

Indeed! Just the other day, Duke Energy CEO Jim Rogers said, "If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using [the grid] for backup." What happens if a whole bunch of customers start generating their own power and using the grid merely as backup? The EEI report warns of "irreparable damages to revenues and growth prospects" of utilities.

Posted by at June 2, 2013 5:08 PM
  

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