Improving Batteries and Falling Prices Allow Consumer Exit

Off-grid electricity has been possible for a long time. But it came at a cost. Generators are expensive to fuel and require a lot of maintenance. Lead-acid batteries have short lifetimes and poor performance.

Cheaper lithium-ion batteries and solar panels improve the value proposition. If the power company raises rates, demands an easement to run service, takes years to complete studies to start or increase service, or isn't committed to reliability, saying "No Thanks" becomes realistic.

We can already see the future in some places. Roughly one-third of Hawaiian and Australian homes have rooftop solar. In California, a distribution company wanted electric trucks, but its grid connection wasn't adequate to charge them. They hired a company to build and finance a solar/battery/generator microgrid without even bothering to contact the utility, knowing they would take years to do a grid study and that the upgrade charge would probably be outrageous.

Factors Driving Cost Decreases

Further cost declines in solar and batteries allow more customers to defect (fully or partially) from the grid.

Residential solar in the US is very expensive compared to places like Australia. Most of the cost difference comes from direct and indirect permitting costs plus higher marketing and sales expenses. Municipal governments make it hard to do installations effectively. Poorly designed incentives combine with long installation times to encourage byzantine financial structures that take a lot of effort to sell to homeowners.

Efforts like SolarAPP for automated permitting and more sales using simple loans or cash promise to decrease costs. Suppliers are trying to incorporate more components into a single package. The equipment will come in one piece instead of separate batteries, charge controllers, and inverters. The US should eventually match countries like Australia, where residential installations are ~30% more than utility-scale.

It seems likely that most houses will have solar panels within the next two decades. Whether they stay connected to the grid is less clear.

A House Can Be a Smart Grid

An off-grid home might need to double or triple the rated panel capacity than the norm to ensure reliability on cloudy days. The cost goes up but so does electricity production.

The extra energy can power electric cars and heat water. Cars get charged on sunny days, and hot water tanks can store water to reduce heating on cloudy days, improving the economics of the system. If batteries are expensive, most homeowners will only buy enough to get through the night and overbuild solar capacity. If costs fall dramatically, then batteries can carry more of the load.

Another effect is that the last 1% of reliability gets increasingly expensive. At some point, it is better to trickle charge the batteries a few times a year with a gasoline generator than add more solar panels. Utilities could still be in the game for these services. Serving an additional household has a low cost. The utility might not be able to compete on price for bulk electricity, but they could alter rate structures to help both parties. Utilities could charge a very high rate for customers with low per month kWh usage and implement demand charges instead of a fixed monthly line item on solar customers. "Off-Grid" users will trickle charge their batteries when their software projects a deficit. They will be willing to pay higher rates since meeting their tail reliability is expensive, and demand charges ensure they pay for the utility to maintain the infrastructure.

Electric heating may play some role but is a surprisingly complex topic. A drafty house with an air-source heat pump would be a disaster for a solar + storage home system. A well-insulated home with a ground-source heat pump might barely see a blip in its usage. An efficient house where the owners prefer colder nighttime temperatures might only need to run the heater during the day. Off-grid electric heating depends on a lot of factors.

Software to manage household battery charging, vehicle charging, and a hot water tank is straightforward. The hardware is falling rapidly in cost. Coordination problems mostly go away. The idea of leaving the grid dumb while making houses "smart" is underrated.