The appeal of distributed generation is growing as the economics improve sharply, and a perfect storm of delayed infrastructure investment, falling prices for distributed renewable energy sources and a series of high profile centralized transmission grid failures mean the business is approaching a “tipping point.”
“We’re looking at a mass exodus away from the centralized utilities,” Gen110 Co-founder and CEO Jason Brown told Breaking Energy in a recent follow-up to an interview following a successful round of fund-raising by heavy-hitter venture capital firms earlier this year. Since the beginning of the year Gen110 has gone from being able to meet utility prices for electricity provision for one in ten homes to forecasting it will be able to match utility rates for three in ten by the end of this year.
That has happened both as its own rates have fallen, reflecting economies of scale and slipping costs, and as utility rates have continued to climb in California, where Gen 110 is currently focused. The major utilities in California have continued to apply for successive rate increases, Brown notes, adding anecdotally that state utilities have been advertising the amount they are spending on infrastructure.
Utilities are set to spend as much as four trillion dollars on infrastructure in the coming years, read the details of that looming investment need here.
“Any time a for-profit company is advertising how much it is spending on infrastructure, it speaks to the delayed and very dramatic costs that have piled up to fix the grid,” Brown said. Those costs are now being “layered up on current ratepayers” even as more sign on for distributed generation and leave a shrinking pool of remaining utility-dependent customer paying rates that cycle ever higher.
What happens when the smaller group of people continue to pay the smaller pool of still-rising costs remains an open question, but Brown says that “one of the longest-standing monopolies in our country is in danger of falling.”
“Utilities have deferred all this maintenance to a time of technology change,” Brown.
The addition of lower-cost energy storage could completely tip the business model away from the centralized model of power production, Brown said, citing a 4 cents per kilowatt energy storage cost as the price point where adoption of distributed generation would accelerate.
Established utilities will continue to fight distributed generation, Brown expects, but at when storage hits a competitive price “it won’t matter what they do.”
The appeal of distributed generation can go beyond the economic appeal, as the reactions to widespread outages in India earlier this summer compounded a series of high-profile, if less widespread, blackouts in the US this year. After struggling with the impact of the Fukushima nuclear failure and the preemptive shutdown of other nuclear units last year, the country has become “a really exciting market” for use of microgrids and solar generation, Brown said. The US can learn from these modular solutions being deployed in developing countries, he said, but widespread use could only disrupt the existing US regulatory models further.