Batteries And DG Negative For Utilities

on May 14, 2014 at 2:00 PM

2013 World Solar Challenge Static Scrutineering

That may be an understatement

There has been a flurry of reports coming from all directions leading to similar conclusions, namely the demise of the traditional utility business model. The latest is a March 2014 report from an unlikely source, Morgan Stanley, concluding that “improvements in batteries and distributed generation could partly or completely eliminate some customers’ usage of the power grid,” adding, “We see the greatest potential for such disruption in the West, Southwest, and the mid-Atlantic.”

Morgan Stanley’s analysis, among other things, suggests that for high cost California, residential solar PV grid parity is near, with or without the investment tax credit (ITC), currently at 30% and dropping to 10% by 2017, unless extended (Fig on right).

Depending on how the fate of state-level net energy metering (NEM) laws, currently in place in 43 states, are decided, rooftop solar PVs could flourish across the US, especially in high cost and/or sunny parts of the country.

Comparisons are made to the telecom industry and the rapid migration of customers to mobile telephony since early 2000. While the analogy is not perfect, it serves to focus the mind – in this case utility executives’.

It is estimated that by 2018, as many as 60% of US households will no longer have a hard-wired landline, as they are called. To many youngsters, being tied to a wall or desk while talking on the phone must appear totally uncool, and unnecessary, which, of course, it is.

That, however, is not the end of the story. The ubiquitous prevalence of Internet, text messaging, and other means of communications has rendered talking on the phone as outdated as hula hoop. As illustrated in graph on page 25, the number of minutes people talk on the phone, another uncool and unnecessary pursuit if you ask any teenager, has dropped continuously since 2000.

At this rate, hardly anyone will be talking to anyone else in 10 years’ time, with the possible exception of this newsletter’s editor.

Morgan Stanley’s analysis turns to EVs and storage when it asks. “Can Tesla be an energy company?” the answer to which is, “If the battery is good enough …” Based on projections, Morgan Stanley estimates that Tesla could have as many as 3.9 million EVs in North America by 2028 representing 237 GW of storage capacity, an astounding number.

Given that each of Tesla’s current Model S EVs can feed the average US household for 3.5 days, such a scenario would turn Tesla into an energy company – whether intended or not.

Coming from an investment firm, Morgan Stanley can be excused for missing the point in a few key areas. In the report’s preamble, for example, it says, “Our analysis suggests utility customers may be positioned to eliminate their use of the power grid.”

While having a dependable EV with large battery storage certainly offers a convenient medium to dump any excess generation from solar PVs during sunny hours for later use, or to charge the batteries for transportation, most experts believe that the great majority of customers would be better off to remain connected to the grid, using it sparingly and benefitting from its inherent reliability and dependability.

The fully off-grid option discussed in the Morgan Stanley report would only seem attractive if net energy metering laws were repealed and/or exorbitant fixed charges were introduced penalizing customers’ casual dependence on the grid.

But even in this case, the fixed connection fees have to be outrageous before many customers would willingly forego the luxury of a dependable grid.

Perry Sioshansi is the President of Menlo Energy Economics and Editor & Publisher of EEnergy Informer. He can be reached at [email protected].

His latest two books are Energy Efficiency: Towards the End of Demand Growth and Evolution of Global Electricity Markets, both published in 2013 by Elsevier. Further details & 30% discount available here.