Published on April 25th, 2014 | by Giles Parkinson


Rooftop Solar — Are The Grids Really Needed?

April 25th, 2014 by  

Originally published on Renew Economy.

Just over a week ago we reported on the anticipated moves by network operators in Western Australia and Queensland to ditch their reliance on poles and wires in favour of new technologies that would supply and store energy locally.

In Australia’s remote and distant outback, the development of micro and mini-grids – based around solar and battery storage – seems a logical step to take, even an economic one. But the bigger question for network operators around the world is whether those in more populated areas, even in the cities, will look to adopt similar measures.

At what point, for instance, will the ability of homeowners to buy the necessary equipment for power generation from their Home Depot Store in the US, or from Bunnings in Australia, challenge the future viability of the networks?

And at what point will it become possible for communities to pool resources and decide that it will be cheaper to look after their own electricity needs rather than stay on the grid. According to some groups in Australia, that point may not be so far away.

There are two technologies that will make this possible. The proliferation of rooftop solar, and its continued cost decline, is well documented. The second key element is battery storage.

As analysts from investment bank Bernstein noted in a recent report, the easiest way to dismiss battery storage and (by implication) distributed solar, has been to observe that efficient, low-cost energy storage has always been at least two years away… and to believe that it always will be.

But as the experience with solar PV has shown, this can change with the combination of capital, scale and motivation. Whether it be the mandated 1.3GW of energy storage in California, the 170,000 plug-in vehicles in the US, Tesla’s planned gigawatt battery storage plant, or the pull factor of frustrated consumers, the scale, the capital, and motivation is now at hand.

That will not just empower, quite literally, households and businesses, it will also remove the ability of distribution companies and retailers to dictate terms – and tariffs – once the sun goes down.

Competitively priced storage is likely to help put peaking power plants out of business, because there will effectively be no peak. But the bigger question is what happens to the grid, and the business models of the utilities that depend on it. How can it morph into what most see as inevitable – a plug-and-play facility – and how does it price its services?

The Bernstein analysts have provided a fascinating account of a recent conference they hosted in the US that introduced conflicting views of how this will play out.

David Crane, from NRG, the largest privately owned generation company in the US, believes that the grid is going the way of the post office; still trying to deliver letters as more and more people choose email and other forms of social media and technologies to deliver their communications.

The key to its future is in cutting costs, and making a gradual change of its business model, over the years. He recently wondered why the modern grid should be built around a hundred million wooden poles and wires. He says investing in centralised generation and distribution is futile. (His company owns more than 40GW of centralised generation, it should be pointed out).

Crane says the inevitable advance of distributed generation, the ability of consumers to meet their needs with a visit to Home Depot, and his preferred model of tying only to the gas grid (to meet the greater need for home heating in the US), means that the best option for the grid in the future is to act as a backstop source of reliable power.

But is that the future of the grid – just to act as a backstop?

Ted Craver, the CEO of Edison International, a California-based power distribution company, naturally has a different view. He told the Bernstein conference that utilities will remain a critical piece of the electricity puzzle.

He has several reasons for saying so: One is that many people simply won’t have the option to take their homes or even their communities off-grid, particularly those who live in apartment buildings, or the owners of shopping centres and office buildings. Even those who can provide a lot of their electricity from rooftop solar cannot meet the pre-dawn and post-dusk demand requirements (until the arrival of storage).

bernstein solar day

The second is the start-up loads of electric motors, such as those used for air conditioning and pool pumps, can be twice as high as the load of those motors when operating. Rather than double the size of their PV systems, and inverters, residential customers will find it more economic to draw power from the grid.

The third is that utility-owned assets will be needed to transport renewable power from remote locations to load centres, and even distributed solar would require grid upgrades to accommodate changes in voltage, as would the widespread deployment of plug-in electric vehicles, whose charging load is comparable to that of an average home.

According to Craver, the grid will need to evolve to a “plug and play” system capable of sensing and accommodating two-way electricity flows while maintaining constant grid voltage.

The problem arises on how to price that service. As utilities respond to the growing adoption of solar, they will seek to cover their fixed costs – but this in turn only enhances the attractiveness of distributed solar generation as an alternative to grid-supplied electricity, likely accelerating adoption and further eroding utility sales and revenues.

“The utilities thus face a vicious cycle where the growth of distributed solar generation forces rate increases that accelerates the growth of distributed solar,” the Bernstein analysts note. The utilities paint this as a growing cross-subsidy from those of their retail customers who lack distributed solar generation to those that do.

One option could be for the electricity utilities to embrace distributed solar distribution themselves – as the German energy giants RWE and E.ON are now proposing to do. As the Bernstein analysts suggest, utilities could one day achieve economies in customer acquisition, panel procurement, installation, maintenance and even financing that would make it difficult for competitors to match – such as the Home Depots or a local phone or cable company is offering energy (distributed power and storage) as a service along with broadband.

“How regulated utilities fare in the medium term will depend in large part on their ability to cushion the revenue impact of the growth of distributed solar generation,” the Bernstein analysts write.

“For those utilities with the highest retail electricity rates, and therefore the greatest expected penetration of distributed solar, this will require a rapid restructuring of their residential and commercial electricity revenues in favor of fixed connection charges.

“To the extent regulated utilities are successful in preserving their base revenues, while passing through to their customers the savings from avoided fuel and purchased power costs, it will be the revenues of competitive generators that fall by the wayside …. it is the competitive generation industry that will be squeezed between stagnant power demand and rising renewable supply.”

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About the Author

is the founding editor of, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.

  • JamesWimberley

    I suspect we are seeing an intellectual bubble forming. Remember rooftop wind? It turns out that big utility turbines were much cheaper and more efficient, and residential wind has stayed a tiny niche. Utilities have access to the whole range of storage technologies, from gigawatts of pumped storage hydro to the same lithium-ion packs households are thinking of. They will always be able to buy and install it cheaper. Home battery storage is a terrific threat to hold over utilities to keep them reasonable; but it will rarely make financial sense to carry it out.

    Separate point. The “start-up loads of electric motors”: is this fate or just poor design? Can’t we have electric motors that ramp up gradually rather than with a spike? Should be within the capability of a tiny modern microprocessor like ARM’s M0+.

    • Vensonata

      Yes, soft start has been here for years. Small pumps use a fraction of the brutes that are still being installed because they are “cheaper!” Example our well pump from 300 feet was a 2000 watt start then ran at 1250 watts per hour. We replaced it with grundfos. Start up is 250 watts and runs at 220 watts, brings up the same amount of water for 15% of the energy. The price of the pump is three times that of the old one, and still a good investment…especially if you are off grid. Europe is already far ahead of us.

    • Peter Gray

      I think you’re mostly right, except that wind turbines have strong economies of scale, while PV should be close to linear if we eventually bring install and permitting costs down to German and Australian levels. I suspect rooftops will always have some advantages over commercial PV that must occupy otherwise unused land.
      For many semi-remote locations, home batteries are likely to be more than just a threat. You can buy a lot of batteries for the cost of a mile of transmission line… But yes, even in dense areas, private batteries will function as a lid on grid prices.

      • Bob_Wallace

        A mile of transmission around here was over $80,000 about 15 years ago. ($16 per foot.)

        One can put in a very nice stand alone system for a third of that. Or an adequate system for less than a quarter.

      • Omega Centauri

        I think even after softcosts are decimated, that residential roof will still be about 2x of utility per KWhour. And if we need fancy storage plus smart electronics to manage this stuff, that will be better amortized on large installations. Two times isn’t a complete killer, since rooftop PV competes against retail not commodity power. But in the case of wind the difference is extreme (probably ten or a hundred times), so it becomes obvious that wind must come from a few large turbines rather than a gazillion small ones. Solar can support both modes (big grid feeders, and small).

  • jburt56

    You can see how 20 kWp on a roof could change the equation.

  • Matt

    I think the grid in some form will be around for a while yet. There is a large number of building that are not built any where near net zero (think large office/apartment). Efficiency will help but they will need extra power. Dense city with sky scrapers. NRG intense industry.
    But the idea that maybe my neighborhood of 30 homes would go to a micro grid and use a common storage (assuming larger will be cheaper at first). Then if in a place like Texas with cheap night time power, buy in bulk at night; charge all our EVs then. A controller at the micro to main grid connection lets us run even if the main grid is down.
    Same for a campus, or someone like Apple with a office complex “in nature” they have lots of parking lots they can cover. And almost all their energy needs are during the day.
    It will happen in phases. Become a interconnected island (microgrid) for energy security and saving reasons.

  • The grid will morph into the ‘Internet of Energy’.

    Just as we have seen the distribution of information change from the unidirectional, centralized model (think: publishers, newspapers, libraries, tv/radio stations) to the distributed bidirectional model of the current Internet.

  • Hans

    “The problem arises on how to price that service. ”

    In Germany the grid costs are paid for by a surcharge in the kWh price. I assume it is the same in many other countries. People with PV systems with storage will not consume so much electricity and thus will not pay so much, on the other hand they are still as dependent on the grid as people without PV. In Germany this argument is used to lobby against PV in general, but the problem is in the way the grid costs are paid for. The grid cost surcharge should reflect the actual grid costs made for that grid connection. Some mix of a fixed rate proportional to the rated power of the connection, a part dependent on the amount of electricity imported and exported to the grid, and a part dependent on the peak values of imports and exports will probably be a reasonable approximation.

    • In The Netherlands we pay a fixed connection cost, depending on the size of your grid connection (eg 3x25A, 3x35A, 3x65A etc). This is the same for everyone and should take care of the ‘PV owners are freeloaders’ argument. I pay my fair share of grid upkeep. Period.

      Isn’t there such a fixed charge in Germany? Hard to imagine.

      • Matt

        In US (at least in Ohio) the electric bill has fixed components and per kWh components.

      • Hans

        In Germany there is a fixed charge for a connection to the subgrid. The costs of the transmission grid and costs for balancing the grid are paid for by the kWh surcharge.

  • Doug Cutler

    First the “duck”, now this. We need a name. I’ll get things started with with “volcanic island” and “Honolulu wave”. . . .

  • vensonata

    off grid can be done now for about 20 cents u.s. kwhr. Batteries are 14 cents of that. The grid is not necessary for a house, a small back up (2kwhr generator) can absolutely guarantee power, at dark times of the year. If people trim their consumption by 50% they won’t notice an increase in electric cost at all.

    • Bob_Wallace

      How about showing us the math?

      Include generator and fuel in your model.

      • freedom

        Bull, you are off the grid, you can talk, just full of it.

        What about your generator, point the issue to your self, and stop your mad idea how its all to hard to live of the grid.

        • Bob_Wallace

          I am off the grid. I know the cost. I question vensonata’s claim. Either he/she is not reporting full cost or has figured out how to produce electricity cheaper than I can and I’d like to learn how.

          It’s not terribly hard to live off the grid. But it’s harder than living on the grid. One can make it easier than my system, but that costs more money (bulk fuel storage, self-starting generator) which makes it more expensive.

          Now, are you off the grid? Do you have actual experience or are you defending a fantasy?

          • Mint

            Laying the smack down!

            But on a serious note, I think we’ll see some people find it worthwhile to go off grid, because they’re getting charged >30c/kWh even though they don’t cost the grid even half of that. The difference is used to help lower the bill of the poor, to encourage conservation, etc.

            There’s another group that’ll find it worthwhile at 15-20c/kWh: those who already have solar, but then lose net metering. At that point, the panels and inverter are a sunk cost, so it’s just batteries and a generator to use the solar you’re already generating to go off grid. Total cost won’t be worth it, but the marginal cost will be.

            But for most people? I think you’re right, and it’ll stay that way for a long time, because I think this is inevitable:

            For those utilities with the highest retail electricity rates, and therefore the greatest expected penetration of distributed solar, this will require a rapid restructuring of their residential and commercial electricity revenues in favor of fixed connection charges.

      • vensonata

        ok Bob, but help me out if I go off track. Off grid formulas even from 4 years ago are no longer valid. the ratio of pv to battery to generator has changed. Now its heavy on the pv because its so much cheaper than batteries and diesel, and small on lead battery bank and tiny on gas or diesel. So here goes with the math: Pv example, one kilowatt array $1000, mounting $300, inverter/charger $1500, Agm maintenance free lead acid $200 per kilowatt @12 kw @ $2400. total

        $5200. throw in extras for wiring etc $800. Aproximately $6000. Total lifetime production for a 1 kw array is 1460KWhr/year times 35 year lifespan =51000 kwhr. $6000 divided by 51000 = 11.8 cents/kwhr! But not so fast! the inverter and battery bank will need replacing once so that’s another $4000. New total $10,000 buys 51,000kwhr so final price just under 20 cents kw. So that is ballpark. If we reduce consumption by 50% which is easy for the average american (that is California average is 50% of national average…also European average is 50%less than U.S. Now the annual bill has not risen above their previous bill at 10 cents kwhr (which is lower than national average). Now please have a go at.these numbers… I am here to learn, not to teach.

        • vensonata

          oops, forgot the generator. Here is the new revelation. generator is used so few hours per year that it sensible to buy cheap and small. 2 kw for about $600. expect to use about 50 hours a year 30 year lifespan. gas cost $.35 kwhr x 100 = $35 year. Yes, it is true, why go off grid? We have no choice, but the new technology etc has made it approximately equal economically to the grid. If you have a good grid stay on. If they refuse to allow you to feed in with solar then you might decide to go off as a point of priciple

          • Bob_Wallace

            I’m also off the grid because connecting was not something I was willing to pay for. ~$300,000.

            You’re not running your generator a lot. You must be in a sunnier location than I am. Or your electricity consumption might be a lot lower. Just checked the hour meter on mine. I’m running something over 200 hours per year.

            I agree on the cheaper/smaller generator. At one point I had a more expensive diesel but when it failed after about five years I spent over $1,000 getting it fixed and it broke again after a couple of months. I now treat generators as disposable. Shop rates are too high to bother with major repairs.

            That said, I’d be surprised if you get 30 years. The quality of generators might be a lot higher now, but over my ~20 years I’ve had generators give up after only a few years.

            One, for example, made it past warranty then the low oil shutdown switch failed (I didn’t realize that the motor had started using a lot of oil) and it threw a rod.

            I bought a more expensive Honda (excellent reputation) but after a few years it started using oil. It’s now my backup generator.

          • Bob_Wallace

            ” If you have a good grid stay on. If they refuse to allow you to feed in with solar then you might decide to go off as a point of priciple”

            I agree with the first sentence. If you can’t get credit for feeding in surplus then you should price out moderate amounts of battery storage. But unless grid use charges are high it’s hard to beat grid prices for deep backup.

            Assume $500 for a generator and a 10 year lifetime. (I’m not comfortable with 30 and have yet to have a gen last 10 years.)

            2 kWh generator output while burning a quart of $4/gallon gas. $0.50/kWh for fuel.

            I’m running about 200 hours per year. If my current gen lasts 10 years, that’s 2,000 hours. $0.25/kWh.

            Gen and fuel = $0.75 (very rough numbers). Full accounting involves hauling fuel home, refilling tank, shutting on and off, changing oil. Replacing starter battery ($70) after four years. So gen hour electricity approaches $1/kWh.

          • vensonata

            Bob, by the way if you are just increasing your solar pv and already have the batteries and inverter the investment is good indeed! Your batteries will last longer because they are on “float” more often, plus they will have a shallower cycle and a complete recharge after most cycles …that is huge. When batteries
            “hover” between 75% and 90% they start to reset themselves and their amp hour capacity diminishes over a few months by 20%. Sometimes equalizing can restore them but often not. Thats why the new formula is “go big with Pv, smaller with battery bank and try to kill your generator”

          • Bob_Wallace

            The falling price of panels is making big changes in the formulas. I’m not sure how to do the math but I suspect that doubling my array (to 2.4 kW or so) would largely eliminate my fuel use as well as give me charging for an EV.

            Once there are affordable 4wd EVs.

        • Bob_Wallace

          I’m not seeing labor and fuel costs. Even if you install yourself an accurate accounting prices that labor.

          AGM batteries. What cycle life are you using? On their web site the DoD/cycle chart gives ~1,300 cycles if you take them all the way down to 30%. The chart doesn’t give cycle life for shallow cycling.

          Trojan T-105 RE (what I’m using) claims 4,000 cycles (~11 years) if discharge is kept to 20% (down to 80% full).

          • vensonata

            Ah yes, Wet lead vs AGM. Our first 80 kwhr Wet lead bank lasted 7 years. Our second Agm 75 kwhr Agm is about 6 years old. I could write a book about the number of mistakes I have made. Don’t worry, I won’t. Here is the thing: life cycle is one thing, Wet lead is king. Efficiency is another Agm is king. A small Agm battery bank can accept a much larger charge in bulk up to about 95%. Wet lead is about .35% of charge acceptance of AGm. As well wet lead can only bulk to 80% so you are trickling in while the sun is shining full. Bad economics. Lifecycle is often a red herring, efficiency and zero maintenance, plus no dud battery which frequently occurs with wet lead, rarely with Agm. Cost comparison Wet lead premium $150 kwhr. Agm $200 kwhr. lifecycle agm about 80% of wet lead. efficiency and labour gives slight edge to Agm.

          • Bob_Wallace

            With earlier ‘wet lead’ deep cycle batteries I got 7-8 years. The new Trojan RE series has thicker plates and longer cycle life. I’m pretty careful with DoD so I should get 11+ years.

            Paid ~$125/kWh for this set.

            ” A small Agm battery bank can accept a much larger charge in bulk up to about 95%.”

            I’ll have to look into that. But since my present bank is only a few months old I suspect it will be the last set of conventional batteries I’ll purchase. A decade from now (if I’m still kicking) there should be some much better options.

            I’ve got a 1.2 kW array. With the low price of panels I’m thinking about adding more panels as a way of cutting fuel use. I’m not sure more panels would be cheaper, but it would cut down on labor and my carbon footprint.

          • vensonata

            Ah the joys of off grid living! I’ve been at it in various forms since 1964 (my parents had an off grid ski resort powered by a 5kw Onan propane generator. No one thought about battery banks then. Skip to 2001. Off grid community 10,000sq ft main house, yikes! Can’t connect to grid $160,000. !2 kw diesel Kubota, no battery bank. First year 8000 litres diesel! 5000 hours runtime per year. Prohibitive. Start to smarten up.. battery bank 80 kwhr $8000. Inverters * kw $16,000 (really!) diesel goes down to half. Run time 2000hours year. First set solar wth high price top of pole mount turnable 1.6 kwhr $ 18,000 (really). diesel goes down, run time goes down. Reducing, replacing inefficent appliances, lights etc. Demand goes down from 36 kw day to 18. Diesel doubles in price! Use less, costs more. Second set of panels 1.4 kwhr Diesel goes down. Batteries have been murdered through sheer ignorance New set Batteries have tripled in price! Yikes.No choice buy anyway. Much wiser, more careful. Still a little stupid, New bank wired in 4 strings parallel. Battery maker says “never wire in four strings, three strings max!” Too, late. Still the batteries last…just lucky. Generator runs 160 hours year 500 litres 350 litres diesel $500. Not bad! But still not good enough. Will increase solar by 6 kw. diy racks. Expect to gen hours to go to less than 10! Also reduce average daily elctric use to less than 10 kw. Price. Less than the cost of a new diesel generator. By the way the generator has 21,000 hours on it and will go many more. By diesel with 1800rpm last. But that is all history now. Back up is a little 2kw honda four stroke. because of tiny hours of use will outlast me.

    • Omega Centauri

      Lets say your math is correct, off grid for twice the price (or half the price but only use half as much). Some money saving! Wouldn’t it make more sense to just stay on the grid and get enough PV to be netzero. Let the big boys do the storage. They will be more efficient at it, and because of their diversity of both supply and loads, they will need less of it.

      If you are already on the grid, offgrid is for paranoids who think the utility will screw them if they have any connection.

      • Bob_Wallace

        Plus staying on the grid (with solar) means you’ll likely have a smaller carbon footprint.

        Coal plants are more efficient than small gasoline generators and a decent portion of your non-sunny power will come from low carbon sources.

        • Omega Centauri

          I agree. And whenever you are overgenerating, you are simply supplying neighboring consumers, with very little loss. Store and reuse from a battery and you have two trips through an inverter, and charge/discharge losses.

          The one case where I would be tempted to go offgrid in a building with a grid connect, would be to have a separate microgrid which serves certain dedicated functions, such as say pumping water into a large storage tank, pump when the sunshines, you make it offgrid so you can save money by DIY and avoiding soft-costs, like inspections and permits etc. In a hot climate I could imagine having an airconditioner directly powered by PV panels, no grid connect, no soft costs. Of course it wouldn’t be the only AC, but it could reduce the daytime load on the grid connected system.

        • The technology exists to create synthetic fuels out of thin air, by using CO2 and the electricity surplus that your solar panels create in summer. The technology is not ready to install your own methanol plant in the attic, and the roundtrip efficiency is too horrible to make this solution economically attractive compared to staying on grid. But I can imagine this becoming affordable.

          And of course, when staying on-grid, you can share your surplus with those living in apartments.

      • “….big boys….”

        We need to reign in the big boys. They have taken over our, ahum, ‘democratic’ governments.

      • vensonata

        Yes, avoid paranoia at all costs! Stay on the grid if you are on. But remember off grid opens new real estate. Land prices are cheaper etc. lots would like to move to the country if they could realistically make their own electricity.

        • Bob_Wallace

          That’s why I am off grid. I could afford a nice piece of land if it was far enough from the grid and outside a reasonable “commute to town” zone. And I got in before the growers caused prices to rise 4x.

          My land would have cost about $500k had it been on the grid. I got it for ~1/5th that and set up my system for less than $10k (including a diesel generator).

          • vensonata

            Yes, now we are talking “the big picture” The difference in land prices make off grid electricity production seem trivial. There are many facets to the larger discussion. Off gridders experience should not be ignored. Some of the university engineers who are tasked with “fixing” the great energy problem are now learning from off grid families and communities. We are part of a long term nitty gritty experiment that has valuable data to share

      • jeffhre

        Those are not all the costs. In California we have a lot of fees, costs and inspections to connect to the grid. If you are never on the grid the costs are avoided and a few thousand dollars in connection fees, meters and inspections would pay for a lot of kWh.

        If you design for solar from the start, you avoid all the retro fit charges, like drilling through walls and pulling heavier gauge wire, with about $200 of materials and an additional two hours of attention from the electrician that builds the home!!!

        Bolt on solar when you can afford it, add a charge controller and build up a battery bank over time for a robust system that slowly grows with your needs. Dang near free considering the alternative of connection charges, inspections, added meters and up to a mile of utility lines.

        • Omega Centauri

          That covers rural new builds. But most of the population lives in urban subburban areas, and won’t need much transmission line additions to connect to the grid. Solutions that only cover a few percent of the population are niche only.

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