The Power Grid Might Become The ‘Alternative’ — Off-Grid The Norm

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Originally published on Rocky Mountain Institute.
By Leia Guccione and Peter Bronski.

For years, low-cost solar-plus-battery systems were seen as a distant possibility at best, a fringe technology not likely to be a threat to mainstream electricity delivery any time soon. By far, the limiting factor has been battery costs. But thanks to a confluence of factors playing out across the energy industry, the reality is that affordable battery storage is coming much sooner than most people realize. That approaching day of cheaper battery storage, when combined with solar PV, has the potential to fundamentally alter the electricity landscape.

While grid-tied solar has seen dramatic recent cost declines, until recently, solar-plus-battery systems have not been considered economically viable. However, concurrent declining costs of batteries, growing maturity of solar-plus-battery systems, and increasing adoption rates for these technologies are changing that. Recent media coverage, market analysis, and industry discussions—including the Edison Electric Institute’s January 2013 Disruptive Challenges—have gone so far as to suggest that low-cost solar-plus-battery systems could one day enable customers to cut the cord with their utility and go from grid connected to grid defected.

But while more and more people are discussing solar-plus-battery systems as a potential option at some point in the distant future, there has been a scarcity of detailed analysis to quantify when and where. Until now.


Today, Rocky Mountain Institute, HOMER Energy, and CohnReznick Think Energy released The Economics of Grid Defection: When and where distributed solar generation plus storage competes with traditional utility service. Seeking to illustrate where grid parity will happen both first and last, the report considers five representative U.S. geographies (NY, KY, TX, CA, and HI). These geographies cover a range of solar resource potential, retail utility electricity prices, and solar PV penetration rates, considered across both commercial and residential regionally specific load profiles.

The report analyzes four possible scenarios: a more conservative base case plus more aggressive cases that consider technology improvements with accelerated cost declines, investments in energy efficiency coupled with load management, and the combination of technology-driven cost declines, energy efficiency, and load management. Even our base case results are compelling, but the combined improvements scenario is especially so, since efficiency and load management reduce the required size of the system while technology improvements reduce the cost of that system, compounding cost declines and greatly accelerating grid parity.

 The results of the report show:

  • Solar-plus-battery grid parity is here already or coming soon for a rapidly growing minority of utility customers. Grid parity exists today in Hawaii for commercial customers, and will rapidly expand to reach residential customers as early as 2022. Grid parity will reach millions of additional residential and commercial customers in places like New York and California within a decade (see Figures 3 and 4 above).
  • Even before total grid defection becomes widely economic, utilities will see solar-plus-battery systems eat into their revenues. Factors such as customer desires for increased power reliability and low-carbon electricity generation are driving early adopters ahead of grid parity, including those installing smaller grid-dependent solar-plus-battery systems to help reduce demand charges, provide backup power, and yield other benefits. These early activities will likely accelerate the infamous utility death spiral—self-reinforcing upward price pressures, which make further self-generation or total defection economic faster.
  • Because grid parity arrives within the 30-year economic life of typical utility power assets, the days are numbered for traditional utility business models. The “old” cost recovery model, based on kWh sales, by which utilities recover costs and an allowed market return on infrastructure investments will become obsolete. Utilities must re-think their current business model in order to retain customers and to capture the additional value that such distributed investments will bring.

The results are profound, especially in geographies like the U.S. Southwest. In this region of the country, the conservative base case shows solar-plus-battery systems undercutting utility retail electricity prices for the most expensive one-fifth of load served in the year 2024; under the more aggressive assumptions, off-grid systems prove cheaper than all utility-sold electricity in the region just a decade out from today (see Figure ES3 below).


Millions of customers representing billions of dollars in utility revenues will find themselves in a position to cost-effectively defect from the grid if they so choose. The so-called utility death spiral is proving not just a hypothetical threat, but a real, near, and present one. The coming grid parity of solar-plus-battery systems in the foreseeable future, among other factors, signals the eventual demise of legacy utility business models.

Though utilities could and should see this as a threat, they can also see solar-plus-battery systems as anopportunity to add value to the grid and their business models. The United States’ electric grid is on the cusp of a great transformation, and the future of the grid need not be an either/or between central and distributed generation. It can and should be a network that combines the best of both.

Having determined when and where grid parity will happen, the important next question is how utilities, regulators, technology providers, and customers might work together to reshape the market—either within existing regulatory frameworks or under an evolved regulatory landscape—to tap into and maximize new sources of value that build the best electricity system of the future the delivers value and affordability to customers and society. These disruptive opportunities are the subject of ongoing work by the authors, covered in a forthcoming report to follow soon.

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Since 1982, RMI (previously Rocky Mountain Institute) has advanced market-based solutions that transform global energy use to create a clean, prosperous and secure future. An independent, nonprofit think-and-do tank, RMI engages with businesses, communities and institutions to accelerate and scale replicable solutions that drive the cost-effective shift from fossil fuels to efficiency and renewables. Please visit for more information.

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19 thoughts on “The Power Grid Might Become The ‘Alternative’ — Off-Grid The Norm

  • Elon Musk understands, he is ahead of the curve investing in what end users will be ultimately satisfied with, rather than the transient fads. Cars that run on power produced at home and supply backup power. Independance from utilities that have not had your best interests in mind, etc… Dream on, then ask science how best to fulfill that dream. Invest accordingly. What a concept.

  • “Because grid parity arrives within the 30-year economic life of typical utility
    power assets, the days are numbered for traditional utility business models.” This is a key insight to remember. It explains why new capacity in the US is already almost completely renewable, even at low penetration rates.

    Where the utilities have a real point, which is not addressed in this post, is that even a largely off-grid consumer is still going to need the grid at times – a cloudy week in winter, say. The need is there for a large, rarely used and therefore expensive backup capacity to maintain even low American standards of service reliability. Ratepayers will have to pay for this somehow. The current political debate unfortunately mixes up this true point with special pleading by utilities to bail them out for bad investment choices leading to massive books of worthless stranded assets.

    • Once a grid is constructed it is not too costly too maintain, I think only requiring around a few percent of its total capital cost per year. So if things proceed more or less sensibly, I expect the existing grid will be maintained and people with a surpus will use it to sell their electricity and people will also use it to purshase. Where I am I expect electricity bought from the grid to be very expensive, but cheaper for households than using a diesel generator or purchasing a battery bank large enough to meet all their needs. I also expect there will be no supply charges so people won’t have an incentive to drop off grid.

      • I’m surprised to read this from an Australian solar expert. Interesting. The cost of Australian electricity, at something like 27c/kWh, it over twice mainland USA cost. I figured a chunk of this was due to cost of maintaining a similar area grid for a much smaller population size. Am I wrong about this? As I just wrote above, rule of thumb is usually roughly half of grid electricity cost is used to maintain the grid. If I’m living in Australia, I can’t see paying 13c/kWh for grid access if I can pay 5c/kWh or even 10c/kWh for night-time storage, plus deep backup like home generator or other low-cycle low-cost deep storage.

        I was interested to read this comment from “Gordon”:
        “Here in Australia (inland NSW where solar delivers an annual average of ~5kWh/m^2/day) it is quite possible to run a 21kWh LiFePO4 battery with 4kW of tracked PV (at a cost of about 20% of the above US cost) and meet 100% of electrical energy needs (admittedly using only about 2/3 of the somewhat wasteful ~18kWh/day Oz average usage through winter) right through the year with no backup generator. I know this as I have done it.”

        At this link:

        Makes me think the Utilities will still be there in densely populated, or higher latitude areas, but not in most other areas on the Earth’s more populated waistband.

        • It’s certainly seems likely in Australia that the grid will retreat from many rural areas, but the bulk of the population lives in large towns and cities and will find it helpful to use the existing grid to sell and purchase electricity and this will enable household solar and energy systems to be smaller than they’d otherwise have to be and will be very useful for people without access to roofspace and many manufacturers and other businesses. Currently it is a terrible waste when someone drops off grid because their surplus solar electricity isn’t cutting fossil fuel use during the day and any surplus storage capacity isn’t cutting fossil fuel use at night. The most effective way for homes with rooftop solar and energy storage to protect the environment is for them to stay connected to the grid. Unfortunately, with our current system of grid supply charges, people are punished for doing so and that needs to change.

          • Thanks Ron. Maybe you, James, and Matt are right and the grid will mostly still be there. It will be interesting to see what actually happens in the next decade or two.

          • I see I didn’t actually answer your question about why electricity is so much more expensive in Australia in the US. There are a number of reasons and some are good and some are not so good. Reasons include:
            Geography – it’s expensive to supply grid electricity to rural areas.
            Peakiness – Australias demand is very peaky with peak demand being much higher than baseload demand compared to the United States and that is related to:
            Climate – It gets hot here and everyone wants to turn on their air conditioners at the same time.
            Fewer Charges – People with the US seem to get hit with more extra fees than we do, although I don’t know how bad these actually are.
            Superior reliability – when power goes down due to a storm or other reason we can expect the damage to be repaired very quickly while I’ve heard some pretty horrible stories about delays in getting power back on in the US. But hopefully those are exceptions rather than commonplace.
            Higher cost of capital – If you want to borrow money to build powerlines in Australia it’s going to cost you a bit more than in the US.
            Overinvestment – Australia built a lot more transmission capacity than it actually needed because demand for grid electricity decreased instead of increased.

            And one very important reason why our electricity prices are so high is that we had a massive electricity privatisation and that appears to have been a major factor in our huge increase in electricity prices over the last several years.

          • Ron,
            Thank you for taking the time. Very interesting!
            First three reasons, seem like arguments for off-grid, or local micro-grid, reducing cost to me.
            Your last two reasons seem like a good reason to go off-grid for simple reasons of civil disobedience. To heck with Abbot and his entrenched big business plutocrats. I suspect Australia is going to have this happen, or a major change at the polls, in the next few years.
            I’m not sure what you mean about charges. New connections can be expensive. The state/utilities do not pay for those. The home owner does. Even in my area, Seattle where the sun don’t shine much in the winter, it can make sense to go solar/wind with a backup generator for winter, rather than pay for 10 miles of power lines …if you live that far off the main power line.
            Worst outage I’ve had here was over a week almost 30 years ago from a North wind/snow storm. If you have some wood heat to keep pipes/people from freezing it’s not a huge problem. I’m a ways off from the city here. I can’t speak to the rest of the country, but ice storms, hurricanes, tornadoes, and earth quakes can take time to recover from. DG from solar and wind will certainly reduce the time to recovery in the future.
            I don’t think HECO in Hawaii is fighting solar, like your some of your utilities in Australia (and some of ours like APS in Arizona, Excel in Colorado, Duke in the SE). I just think they haven’t figured out how to handle the problem. I certainly would not be patient with them if I lived there. I do think they’ll convert to mostly solar, some wind, some geothermal, and of course storage. The economics for renewables there are over-whelming. California will be next.
            We are already facing the Idiot-Abbot problem in Arizona, Ohio, Colorado, and the SE (others?). My view is individuals and communities will go off-grid where this persists and where it makes economic sense …which will be the entire southern half of our country. I can easily see this getting worse for us at the next presidential election, just as it did for you guys. The smart choice does not always win. The over-influence of the rich and entrenched large companies in both our countries is appalling.
            Sooo, I’m watching progress in Australia with great interest. Thank you again, mike

        • We need to be careful about taking data from one geographic location and generalizing.

          If someone lived, for example in Antelope Valley (Southern California) they would get about 360 sunny days a year. Going off grid with a modest sized battery bank would be feasible.

          Go a couple hundred miles away, into California’s Central Valley, and one can enjoy Tule fog in the winter. For a week or more in a stretch one has trouble figuring out where the Sun is in the sky. You’d need a large enough battery bank to carry you a couple of weeks.

          • So similar to what Ron is pointing out for Australia then. Areas like the Central Valley, may need the redistribution services the grid can provide. They may need to purchase power that Antelope Valley can provide at times. That means DG solar still needs the grid. That reduces a big chunk of the DG cost savings available if you don’t need the grid. Customers who use the grid are going to be required to help pay for it. That’s only reasonable and economically sensible.
            It will be interesting to see what happens with energy storage technology. Maybe it will be cheaper for Central Valley customers to use compressed air storage and have extra tanks for the month long period you mention. Maybe the grid will still be the cheapest way to meet that need.
            Very interesting. Thanks. mike

    • “The need is there for a large, rarely used and therefore expensive backup capacity to maintain even low American standards of service reliability.”

      I live in the Seattle area at the end of a long grid connection. Large Douglas Fir trees come down in the winter winds/snow taking power lines with them. Where I live it is common to lose power in the winter for a few hours to a day, or two, depending. We had a propane generator for those occasions at our last house. Only need to use it a few times a year. Cost is not great and not much fuel is used.
      If I live near the Mohave desert, or Australian desert, then I figure it would be about the same. Sun every day, use battery storage at night, use propane generator, NG generator, or other low cost multi-day energy storage like maybe compressed air for those few times a year when there is a few days of clouds. …and as economies of scale bring solar costs even lower, and energy deep storage costs lower, a connection to the grid is unnecessary in ever more areas.
      Grid will be necessary in densely populated areas, without space for solar/wind systems, not in most other areas. I’ve read a good rule of thumb is grid is very roughly half the cost of your electricity. That is not going to be able to compete. Use all that copper for something better. Just my opinion right now. Who knows?

    • @James, No real point for utilities. Why would off-grid customers need a grid from time to time? I’m off-grid and when I need a little extra power I fire up the generator. $500 down at Costco.

      • I’m off the grid as well. And my “$500 Costco” generator is running right now. It’s a lousy way to make electricity.

        Can you imagine a large scale suburban community with each house running a generator?

        Have you priced the electricity you generate with your generator?

  • Also there are segments of the market that will require the grid. For example, it will be a while before the offices in downtown NY generate they own power. So the wires will last a while.

  • Great article!

    I bet if you compare both Solar usage and installation charts for the last few years you will see an exponential rise that will only get more dramatic as the Big Four make Solars even a better deal by dramatically reducing the payback period of its installation:

    1. The cost of PV panels is dropping almost monthly

    2. The warrantees are getting longer as panel manufacturing improves

    3. Storage of generated energy vs grid pumping becomes commonplace

    4. eVehicles that allow “home” charging are now becoming mainstream.


    I’d add to your comment that we also need new storage technology to help local generation; I look to eVehicles and their batteries to help us in that direction!

    See comments :

  • Think ahead, not in the past – CaptD

    Where was solar just a decade ago vs where is solar now?

    Where was nuclear 4 decades ago vs where it is now…?

    We need to start looking ahead and building for the future, instead of trying to rebuild the past.

    Utilities are losing market share each and every time a ratepayers adds solar to their roof and they are doing so at ever greater rates (pun intended)! If Tesla and/or someone else develops a storage battery that is affordable then expect the Utilities to lose exponentially more of their current market share, especially if those same ratepayers buy a eVehicle!

    Tesla unveils details of massive ‘gigafactory’

    In CA, ratepayers pay a separate fee on their monthly bills for the Grid so any claims that the Utility is going to get “stuck” for something is just so much hot air; Utilities NEVER get stuck, their shareholders always come out ahead unless you are talking about Japanese owners of what used to be TEPCO, then yes they have lost big.

    There are going to be ever more eVehicles selling for all kinds of prices which will allow their owners to commute without using gasoline or diesel fuel, which will be recharged by the panels on their rooftops because the prices of PV and soon PV storage are falling monthly! Therefore using the $100,000 figure is yet another attempt to sidestep what is coming in the future. BTW: I know people that use electric bicycles to commute and anyone with credit can get a new Nissan Leaf for about $200 per month on a multi-year lease, so therefore using the $100,000 figure is yet another attempt to sidestep what is coming in the future. I’ll also mention that nobody needs to go 100% renewable at least at the present unless they live in a remote location or because they want to for some reason; for most ratepayers if they can pay only a fraction of what they are currently paying they will be overjoyed!

    As far as Utility Death s, please remember that President Carter put solar panels on the White House and that the World has really evolved since his term in office! One only has to think about the price/power of personal computer and/or mobile phones “back then” to see that we are living in a much different world in which, like personal computers and mobile phones, Solar (of all flavors) is now coming of age. This is a great thing for mankind, since the Earth does have limited resources which are now in demand by ever more people globally.

    The XL pipeline which will help Canada ship its natural resources to Asia is a perfect example of yet another limited temporary resource!

    Excerpts from

  • From the perspective of someone who is off the grid (and has been for a couple decades).

    Unless batteries become as cheap as dirt going off grid will not make financial sense for anyone who has reasonable access to the grid. Going off grid made sense for me because the cost of hooking up would have been $300,000.

    I have shaved down my electricity use fairly severely. All CFLs/LEDs with a ‘one light per person’ general rule. Efficient refrigerator, no dishwasher, no garbage disposal, no freezer, no hair dryer. Clothes washing is done on sunny days after the batteries are full and laundry is hung out on a line. Propane cooking and water heating. Low draw computers. Water pumped to elevated tanks on sunny days and gravity fed back to the house. Wood heat. No AC.

    Most people will not want to live that sort of lifestyle.

    Even when cutting my usage that much I can afford to store power for about three days. More than three days of poor input from the Sun and on goes the generator. Running a generator is not an option for people living in dense cities. Even finding a place for a battery system would be a problem.

    Running a generator is not kind to the planet. Running millions of small generators would be a disaster.

    What makes sense to me is to stay on the grid. Supply the grid with clean inputs – solar/wind/geothermal/hydro/tidal. All of those inputs are cheaper than running a generator and cleaner. Wind is now selling for 4 cents per kWh. Let the utility make a decent profit and they can still deliver cheaper power than an end-user can produce.

    Then install storage where it makes the most financial sense. I suspect we’re going to see the least expensive storage most appropriate at the utility scale. For example, Ambri’s liquid metal batteries are not something that would be appropriate for home owner use.

    Distribute storage around the grid. A big hunk of storage at each substation would keep that ‘neighborhood’ up and running for a while in the event of a transmission disruption.

  • As long as it cost less to run a wire from the local telephone pole to the home than the cost to buy a fairly large battery, the utilities will have an edge for individuals homes. Large businesses, campuses, and other micro grids have a fighting chance at going off-grid – but cutting off completely will always be a challenge.

    What I do see is sharp increases in the number of off grid users as well as more self generation. Combined, this will cut deeply into utility revenues, very deeply in fact. Not a good time to be a utility investor.

  • So are you saying that Solar batteries will be a good way to save energy?

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