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Published on May 29th, 2014 | by Guest Contributor

33

Why Owning Your Own Power Plant Might Not Be Crazy

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May 29th, 2014 by
 

Originally published on Rocky Mountain Institute.
By Leia Guccione 

It’s been three months since we released The Economics of Grid Defection exploring when off-grid solar-plus-battery systems could reach economic parity with retail electric service.  These systems could become competitive with retail electric service within the next decade for many commercial customers and for many residential customers in the decade thereafter. Since the release of our results, the industry has been abuzz with follow-on commentary considering the implications for utilitiesconsumers, and third-party service providers.

Of course, favorable economics do not equate to adoption. Just because customers could defect doesn’t mean they will. For the individual customers actually considering these investments many other factors come into play, such as performance risk, hassle/convenience factor, and simply the plain, easy inertia of continuing to get their power as they always have.

Even so, it’s not that far-fetched to imagine a day when large segments of customers choose to go mostly or even entirely off-grid with clean, quiet, distributed solar-plus-battery systems. In fact, could owning your own power plant become as convenient and practical—if not quite as ubiquitous—as the consumer appliances and electronics already so commonplace that we take them for granted in our daily lives—a refrigerator, a clothes dryer, or a computer?

THE EVOLUTION OF APPLIANCES

If we look at the lineage of our modern home appliances and personal electronics, the original predecessors of those we have today were often expensive, clunky, and unsafe. Yet engineers at companies such as General Electric, Maytag, and Whirlpool saw an opportunity and had a vision, which brought us light bulbs, refrigerators, washers, dryers, toasters, radios, electric stoves, and vacuum cleaners.

Decades later, similar vision and innovation brought us computers. The original computer processors were large, loud, and expensive. The computers of the 1960s and 70s were only practical for use by government agencies, large corporations, and universities, relegated to warehouses and specially designed office rooms. In that era, no one would have considered owning a computer for personal use, but the vision of Fred Moore, Steve Wozniak, and many other engineers at companies like IBM and Xerox brought us the power of personal computing that billions of people enjoy today.

THE (PERSONAL) POWER PLANTS OF THE FUTURE

When many people think of power plants they think of large industrial facilities with heavy machinery—hot, loud, and dirty. While this is an accurate description of many existing power plants, including those that I once operated, the personal power plants of the future will be much different.

Quiet, clean, and contained, your solar-plus-battery home energy system will be nearly indistinguishable from the refrigerator, chest freezer, or furnace in your basement—an essentially silent “box” that does something for you and your home, except this one will be connected to solar panels on your roof. In fact, as property developers and energy service companies become more familiar with these systems, they will most likely become integrated with the other systems in your home, leveraging the waste heat produced by your battery to help heat your home and provide other services.

Still, many will argue that personal power plants won’t offer the same game-changing value that personal computers or other appliances have brought us; that the cost savings, reliability, and environmental benefits of a zero-carbon personal power plant just won’t be that attractive to many homeowners.

Sandy, Irene, and Katrina suggest otherwise. If you don’t think many people value reliability, just look at the recent financials for Generac, the leading American manufacturer of residential back up generators. The company has seen year-over-year net residential sales increases of 31.7% in 201143.7% in 2012, and 19.6% in 2013.

ARE CONSUMERS READY FOR PERSONAL POWER PLANTS?

There are those who might argue that personal power plants will seem too complex and technically sophisticated for most Americans. Well once upon a time, many said the same thing about computers. Computers are highly sophisticated machines, and most of us don’t have the first clue how to assemble a computer or write code, nor do we want to. Yet PC manufacturers such as Apple, Dell, and HP build computers that are suited to our needs, and software developers like Microsoft have given us the interfaces that allow us to fully use the computing power of these machines. Further, stores like BestBuy and Costco make it easy to purchase these devices, they’ll provide us a warranty, and service support when necessary. In other words, the technological complexity operating behind the scenes and under the product shell hasn’t deterred consumers from tapping into the incredible value and services such appliances provide.

Others will argue that these technologies are too expensive to go mainstream. While these technologies aren’t economical for the majority of U.S. consumers today (Hawaii being the one notable exception), the prices for these systems are on the decline, and if we consider air conditioning as another historical example of what lies ahead, these systems could be in a surprisingly large number of homes before we know it. Before mass production of the window air conditioning unit was made possible in 1947, air conditioners were only seen in luxury hotels and movie theaters. At the beginning of the 1950s, very few homes had air conditioning. By the end of the same decade, most American homes had a least one air conditioning unit. And by the end of the 1960s, most new homes were built with central air conditioning. What began as an expensive, loud, and obtrusive device you affixed to your window had become affordable, quiet, and integrated into almost every home.

To wit, personal power plants might be ready for consumer primetime, just like a wave of other examples where consumers switched from a centralized and/or outsourced service to providing it for themselves with appliances:

  • The switch from ice block delivery service to refrigerators and freezers
  • The rise of the swanky home theater system while large movie theaters have seen flat or even slowly declining ticket sales
  • The shift from delivery of firewood or district heating systems to the in-home furnace
  • The similar shift later in the 20th century to common in-home air conditioning units
  • The television’s “promotion” from a one-per-household appliance around which the whole family gathered to a point today where Americans on average have as many TVs as people per household, with a third of homes boasting four or more TVs

Power plants—once the expensive domain of an exclusive few (the ~3,000 U.S. utilities plus other generators) that built big, central versions—might one day in the foreseeable future give way to a personal power plant for the masses.

POWER TO THE PEOPLE?

When put in perspective, a silent solar-plus-battery system—a personal power plant—that ensures our home has power, saves us money relative to buying electricity from a central utility, and lowers our carbon footprint, doesn’t seem all that bad, in fact, it seems pretty good. Or at least it will seem pretty good sometime soon. Such systems aren’t economic for most customers—yet. But that day will emerge over the coming decades.

So what does this mean for utilities, consumers, and third-party service providers?

  • The way we buy power will change. Where almost every consumer once made a phone call to the utility company to establish electric service, now some consumers will go to their local hardware or home improvement store and pick out a system that is right for them, to be installed later that day.
  • Property developers and energy service companies (ESCOs) need to start dating, or at least get a lot smarter about one another’s line of business. As we showed in our analysis, the greatest value exists when solar-plus-battery systems are integrated with complementary investments in efficiency. As we see the emergence of the “internet of things” the greatest competitive advantage will accrue to those companies that can provide bundled offerings that combine personal power plants with super-efficient appliances and home energy management systems to provide consumers with the greatest overall value with lower total overhead and transactional costs.
  • There is urgent need for regulatory reform. Currently, many utilities are not allowed to participate in distributed assets that displace or defer the need for traditional grid investments. Where this is the case, this regulatory limitation needs to be eliminated, allowing the utility to engage in opening the distributed power system market for the benefit of all.

Not everyone will want a personal power plant, and not every home will be suited to have one. There is still a great deal of technology innovation and industry evolution that will be necessary to make personal power plants a reality. Towards this end, RMI continues to work with both insurgents and incumbents to understand the implications these disruptive opportunities will have on the electricity industry. The detailed investigation of these systems and the likely opportunities for new business models, technology innovation, and regulatory reform will be the focus our forthcoming second report on solar-plus-battery systems. In the meantime, it’s worthwhile for everyone to consider that owning your own power plant might not be nearly as crazy as it seems at first glance.

Images courtesy of Shutterstock.

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  • John Ragozzino

    I don’t think people have a grasp of how much energy a refrigerator or an air conditioner uses. Lithium ion batterys work great in cell pones and computers,
    but high-load devices require a more more energy-dense supply.

  • seamless demandresponse

    I think today a very realistic step which is at least a step towards more autonomous, independent residential energy usage is adding some battery based energy storage directly in major appliances.
    For example a refrig or AC unit with a modest Li-Ion battery dock, and some ubiquitous connectivity (wi-fi the most obvious). This is not super dramatic but is a very timely and very smart opportunity for a major appliance OEM such as Samsung, LG, GE, or Whirlpool to jump immediately into a leadership position in moving major home energy loads to become smart energy platforms themselves.
    The docking ideas avoids any big up-front financial risk at the factory, and allows the latest/cheapest battery technology to be populated anywhere downstream, with incentives/subsidies from government or utilities (which already exist!) to make this even more cost effective.
    And like subsidies for the energy storage element, a real infrastructure and demand for the capability exists as well, in the form of Demand Response programs. An appliance with a dock capable of inserting a 1-2 hour Li-Ion battery and receiving signals from a DR provider or local utility is truly a game changer, and a refrigerator with a cool green LED light bar which flashes gently or glows brighter when the reffrig switches to battery mode is actually cool (I’ve seen a prototype), and arguably a more compelling “smart appliance” feature than the iffy LCD displays and recipe suggestions that these OEMs are trying to push at present.
    My 2 cents…

  • John Ragozzino

    Nope….nat gas is plentiful and cheap, and coal plants will remain in operation
    out of necessity. No panels on my roof any time soon.

    • Bob_Wallace

      Enjoy your life, Cleopatra….

      • mds

        Yep, this guy’s an idiot.

  • John Ragozzino

    Give it a rest Bob. I live in Phoenix. AGAIN, retail power is 10 cent/kw, and my neighbor’s solar panels are filthy again. 4 sets of batteries in my motorhome
    in 18 years. Solar installs are down in Phx 50% year to date. The party is over.

    • Bob_Wallace

      Get a clue, John.

      If you’re going through batteries that fast you’re abusing your batteries. Your money.

      If you think the solar party is over, well, you’ve already demonstrated your connection to reality. Here’s a hint – it’s poor.

      Arizona relies on coal for the majority of its electricity. Coal is going away. AZ also uses a lot of NG, that price is going up. And AZ has a big hunk of nuclear. You’re now getting affordable power from paid off nuclear plants. As those coal and nuclear plants go out of service they won’t be replaced with “affordable” nuclear, you’re coasting on previous expenditures.

  • John Ragozzino

    Funny to watch the energy zealots go into orbit when there is just a little bit of pushback. His panels are dirty right now, from the mud-rain we get this time of year,
    just like my car, and I wash it once a week. Wholesale grid power is 1.6 cents per KW.
    My retail cost is 10 cents. I said “Retail”. How many times a year is good for an old man to climb on a wet roof with a powerwasher???? I change the batteries every
    4 years in my motorhome. No way I’ll do that at home as long as there is affordable
    grid power available.

    • Bob_Wallace

      Mud-rain? Where do you live, in outer Hades?

      OK, so you were being dishonest when you said you’d purchase 1.6c electricity. Now, please tell us where one finds a grid that has 1.6/kWh wholesale power and what generates that power. You live in Paraguay or Albania?

      Put the correct batteries in your motor home and treat them correctly and you won’t have to be swapping out every four years.

    • mds

      Disinformation is not the same as push back. I’m certainly not going into orbit over somebody who cannot even tell falsehoods that are even close to believable. You flatter yourself. You are not a threat to the truth as I see it.

  • mds

    Whenever you have articles on this subject you get polar responses from people who:
    (a) Think the grid is necessary. …or
    (b) Think off-grid is the way to go.
    Clearly, the answer is in-between.

    Is the grid necessary or required? No, there are already people living off-grid. This is increasing, and will increase more rapidly, as it becomes more economically feasible to do.

    Is 100% off-grid (i.e. no grid) the final solution? Probably not, it has been shown the grid can provide valuable resource redistribution services across the wider areas when used with Solar and Wind. Less energy storage is required when this is done. I certainly don’t see the grid going away soon where I live in the Seattle area. We have cheap hydro and poor Solar resources.

    What about micro-grids for small communities? This too is already being done on small islands. Two utilities in Australia have already recommended that a few of their more remote communities would be better served by going off-grid to a micro-grid solution.

    Clearly the answer is in the middle. Further, the ratios of off-grid to micro-grid to macro-grid will obviously vary widely in the future. In some areas, like mine in NW US, the macro-grid will continue to dominate. In areas like Australia, with very high grid costs and awesome solar resources, I expect to see a very high percentage of off-grid homes/businesses and small community micro-grids. In areas like Hawaii, with very high electricity costs from centralized oil generated electricity, I expect to see a very high penetration of distributed Solar PV, but the dominant energy storage solution is less clear. Their electricity distribution should not cost much their grids are very small compared with Australia for example. Maybe their Solar PV storage solution for over-night will be centralized because that is cheaper …or maybe new low-cost in-home energy storage devices will dominate.

    It is clear to me low-cost over-night energy storage solution (a variety of them) are now coming to the market and will sometimes reside in individual buildings (homes or businesses) and sometimes at the centralized utility. That will again be an economic and customer preference trade-off.

    What is less clear to me, is how long-term (seasonal or multiple-cloudy day) storage will be accomplished. Right now you can do this with a Diesel, CNG, or propane generator if you are off-grid …or you can stay connected to the grid, pay for that connection, and pay for the out-of-season or off-weather power when you need it.

    Will more economically feasible, and more convenient, long-term energy storage solutions be produced that compete better with a grid connection? Will the low-cost over-night solutions coming to the market now be low enough in cost to use for several days of power only once or twice a year?

    Solar PV and over-night battery storage is now a done deal. Look for it to see wide adoption. Long-term (seasonal or multiple-cloudy-day) storage is the remaining problem. The long-term storage problem should have a large impact on the number of people to go off-grid and this decision will be heavily influenced by the cost and effectiveness of the available solutions. Want to forecast where out power configuration is going? Figure that one out.

  • John Ragozzino

    Love to watch my 67 year old neighbor climb up on his roof with a powerwasher
    every month to clean the dust and dirt off his $50K solar panel installation. No thanks, I’ll pay retail for 1.6 cent electricity on the grid.

    • Bob_Wallace

      There’s no need for your neighbor to clean his array that often unless you live in a very unusually dirty place. Say next to a coal plant spewing tons of ash every day. And there’s certainly no need for a power washer.

    • mds

      Every month? Liar.
      1.6c/kWh? Liar.
      Troll.

      • Bob_Wallace

        As tempting as it is, how about we refrain from calling each other names?

        • mds

          Sorry, better? You can delete the other one.

    • mds

      Every month? I don’t believe you.
      1.6c/kWh? I don’t believe you.

  • Bob_Wallace

    Perhaps in a few places in the world going offgrid might make sense. In the ‘lower 48′, unless you live far from the grid, it doesn’t.

    What people are mostly talking about is adding some batteries to their solar system in order to run for some of the non-sunny hours from ones own power. Most people are still going to want the grid for extended cloudy days. Dealing with a generator is a pain and the cost of electricity fairly high.

    And, realistically, it’s likely the utility can sell you electricity for less than you can make and store it. They will have access to cheap wind and bulk storage.

    • Matt

      I think what will come first are PV and batteries, that can drop from grid when it isn’t stable. I’m inside the belt in Cin Ohio. Lost power for two long drops (~7 hours total) but almost worse were the 10 (2-10 second drops) and the 30 (.1-1 second drops). That kind of thing toasts your electronic. My next door neighbor lost some. So I think your see people having enough to hold them self over for short time, then neighborhood micro grids. Just like my HOA has a pool and shared public place. Could have a big battery and a disconnect point from the grid. Then your little micro grid can stay up, extra NRG your your panels just goes next door. That is the idea planted by Sandy in many peoples mind.

      • Bob_Wallace

        What may make sense is owning enough storage to provide late afternoon/evening power from one’s own solar. Then refill from cheap late night grid power for the pre-solar hours.

        In the case of a prolonged grid outage people could cut back to minimum usage and get through on solar and ‘small storage’.

      • mds

        What will come first?
        Well SolarCity is already offering Tesla Li battery pack integrated with Solar specifically targeted at the neck of the duck curve.
        Sunpower is targeting Solar with battery backup in Australia. It’s not clear to me if this for off-grid use or just increase use of Solar PV. I’m guessing both.
        I’d say it will depend where you live, what your grid situation is, and how good your solar resources is.
        Three clear energy storage clear uses:
        1. Save costs at the neck of the duck, when the sun has gone down.
        2. Off-grid storage of Solar PV, when the sun is down.
        3. UPS use. Provide good power when the grid is down. (Your requirement.)

  • Vensonata

    This theme of going off grid is coming up more often and tends to draw quite a bit of interest judging by the comments. What if appliances came with batteries. Consider a fridge with a battery…wait that could be ice! A washing machine with a 2 kWh battery. TV easy with l.e.d. Laptops have them already. Of course your car will have them. Not far to go.

  • Rick Kargaard

    Currently, grid delivery costs us more than the electricity we use. The same is true for natural gas. Gasoline costs me about 100 to 150 dollars per month.
    Total costs average about 350 per month or less.
    If we could replace all three with a personal power plant, without a grid connection, then it starts to look more feasible.
    We only need to see a little lower capital costs for electric vehicles, batteries and power plants.
    Granted, our energy uses are lower than most, but it may even better paybacks with heavier usage.
    We seem to be getting closer and closer to feasible personal energy independence all the time One kicker in the plan is the taxes included in current costs and how they will be replaced.

  • Bart Martens

    A collective grid based storage (for instance with hydro power) will be cheaper and more reliable than individual ones. Balancing costs are lower if more load and production profiles are combined. Grid based solutions that combine central and decentral renewable production and storage can meet higher renewable targets at a lower cost. The step out of the grid momevement has a lot of similarities to the step out of the state idea of the Tea Partiers. It might be attractive for those who can afford their own solutions. Those who are lacking the means to invest in their own production and storage will be confronted with higher grid costs imposed on fewer grid dependants. A really sustainable society needs collective infrastructure as well. The shift of centralised services to individual appliances has not always be desirable. The fade out of movie theaters for instance. Or the district heating. Due to district heating a country as Sweden is capable of running its economy on more than 50% renewables. Greening individual heating systems is far more difficult than greening a central district heating (with excess heat of industrial processes, geothermal energy, biomass,…).

    • nakedChimp

      Well, the problem with the collective infrastructure always only then starts to become a problem when it must turn a profit for the “owners”, shareholders or investors – instead of being infrastructure that is there for the citizens.

      arne-nl nailed it:
      “The threat of defection to solar + battery is a good incentive to keep them customer friendly.”

      I would add: “where possible”.. from my POV people living as tenants are screwed.

      • Bart Martens

        Of course: a grid is a natural monopoly and should be properly regulated. Both the needed investments as the allowed fee on the invested capital should be agreeded by the regulator.

  • JamesWimberley

    A thin argument. All the examples, from toasters to computers, are for products and services that provide direct benefit to the occupiers of a flat or house. Electricity is the same whether you buy it from the grid or make your own. The advantages to DIY are either intangible or economic, apart from a small improvement in reliability. Solar generation is atypical in that it has few economies of scale – you can buy the same panels as Warren Buffett. Storage and non-solar generation (like wind, geothermal and biomass) exhibit normal economies of scale, which means that community and utility solutions will generally be cheaper than domestic.

  • vadik

    I live in a country which has reached at least my personal grid parity for PV this year, that is it makes economical sense to me to go buy a panel. But buying my own battery is still years away.

    What matters is that the grid is a good thing, no need to fight it, imagine pump storage in the mountains in the socket.

    As long as utilities do not get greedy and offer reasonable prices for connection, I see no reason to defect to own battery.

    • http://electrobatics.wordpress.com/ arne-nl

      “As long as utilities do not get greedy and offer reasonable prices for connection, I see no reason to defect to own battery.”

      That exactly nails it. The threat of defection to solar + battery is a good incentive to keep them customer friendly.

  • spec9

    It is not crazy . . . but it doesn’t seem smart. I think people should remain attached to the grid so that we can do supply & demand load balancing based on current conditions. I’d rather add more panels to a solar PV system than spend that money on batteries.

    • LookingForward

      Both is even better and smarter financially in the future, when batteries are at grid parity even at off peak loads.
      You can profite for your own energy 24/7 and access energy produced on sunny (and windy with residential/commercial windturbines) days can be sold back to the grid. Even if it’s only for 5/6cents, in the future, it will earn you money when the price of solar/wind/batteries is right.
      On average, residential uses 10% of total electricity consumption (not counting total electrified heating and transportation). The average annual electricity use per home is about 7 MW. So total electricity use per home in a town would be 70 MW. If the average daily production is about 6 hours of 100% production (remember average, for the precition riders out there), that means you need on average a little less then 35 KWh per home.
      With residential/commercial (vertical)windturbines that is doable. Homes wouldn’t have to produce all that electricity, commercial buildings could take a lot too.

    • nakedChimp

      those more panels wont help you during night, you need some kind of storage. Now there is people with 2 left hands who will no doubt be better off with some sort of utility connection that will handle the kind of storage needed and take care of maintaining it.
      For all the others who want to have their OWN stuff, there will be fridge sized boxes with 10-200kWh to put into their garage/cellar/backwall – the Germans currently pilot this for mankind.

      Once the grid connection cost becomes too high for them they WILL go off-grid.
      And the more advanced this becomes the cheaper and less complicated it will become to maintain a system like that. Kinda like the evolution from mainframe to personal computer to tablet/smartphone.

      Also consider rural/semi-rural environments with all the poles&wires – I’m in that position. Utility doesn’t allow any further feed in (got 10kWp here on the roof which I can’t connect), so I have to go stand alone with my solar. Currently working on the battery aspect of things.. gonna end up with 10kWh of LFP for the next 2-3 years. ROI currently looking like 8-9 years for very simple napkin calc with lots of DIY.

      I also calculated that I will need 30kWp PV and a 200kWh storage for running a house + 1-2 EVs off-grid. So from my POV it looks like it will be payable/possible in about 5-7 years to swap my ICE for an EV.

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