Solar-Plus-Battery Systems Can Insulate Customers From Increasing Prices
Originally published on RMI Outlet.
By David Labrador
In the face of rising retail prices for grid electricity, investing in solar-plus-battery systems can insulate grid-connected customers from those increasing prices and effectively lock in a peak price that won’t continue to climb, according to a recent analysis by RMI. The result for customers across diverse geographies will be substantial savings relative to what they would have paid for a full-fare utility bill. For utilities and regulators this will be challenging—and present an opportunity.
RMI’s April 2015 report The Economics of Load Defection analyzed five U.S. markets out to 2050. It found that investing in combinations of solar and batteries will enable individual customers to contain electricity costs regardless of how high retail grid prices rise. Solar prices and battery prices are dropping and the trend is expected to continue for both. “The customer can now choose to install a solar system to lower their price. As the price goes down, they have the ability to install an even larger system to self-supply more power,” says Bodhi Rader, a senior associate with RMI’s electricity practice and coauthor of the report. In essence, customers can buy a smaller “starter kit” now and expand or upgrade periodically, as grid electricity prices rise and solar and battery systems grow steadily cheaper.
Solar-only systems are still exposed to rising retail electricity prices and favorable export policies and compensation from their utility; they export surplus daytime generation to the grid and buy back electricity at night when solar panels aren’t generating. But, Rader says, “where things really get game-changing is when you add in the batteries. Now you can directly use all the solar power you generate.” With batteries, a customer can store the solar system’s daytime surplus to use later and self-consume a greater percentage (up to 100 percent) of the output of the rooftop PV. Solar-plus-battery-system owners only require grid electricity during extended periods of bad weather or at times of very high demand, almost entirely insulating them from rising grid prices.
Economic in Every Market
RMI’s analysis looked at five electricity markets out to 2050 (see figure below). The markets—Westchester County, NY; Louisville, KY; San Antonio, TX; Los Angeles, CA; and Honolulu, HI—have varying grid electricity prices and solar resources. Even so, “you see solar-plus-battery systems having an economic advantage even in the parts of the country that have the lowest electricity prices, because entrepreneurs and innovators are driving the costs of these technologies down,” says Leia Guccione, a manager with RMI’s electricity practice and another of the report’s coauthors. “Solar is going to be incredibly competitive in 2020 and beyond,” she adds.
The cost of electricity to grid-connected solar-plus-battery owners rises little over time, and what little rise they see is mostly due to the portion of their load that they must continue to meet with grid electricity. So in sunny Los Angeles and Honolulu, the monthly cost to a solar-plus-battery owner will barely rise in the 20 years between 2030 and 2050. Customers in those markets who rely entirely on the grid, meanwhile, will see their monthly costs rise from $192 to $348 and $702 to $1,269, respectively, over the same period. (Honolulu suffers from some of the highest grid electricity costs in the country and customers there are leaders in solar PV adoption as a result.)
Likewise, the difference between the cost of grid-connected solar-plus-battery systems in the two markets is largely due to the price difference between the portions of their loads that are met with grid electricity: $0.18/kWh in Los Angeles versus $0.36/kWh in Honolulu, at today’s rates. “The cost of a solar-plus-battery system in these five very different places is really not that different,” says Guccione.
What is different is the abundance of sunshine. So while grid-connected solar-plus-battery owners in Los Angeles and Honolulu will see their costs rise only seven percent and four percent, respectively, between 2030 and 2050, customers in markets with longer spells of cloudy weather will rely more on the grid and be less insulated from rising grid prices. In Louisville and Westchester, the corresponding cost increases to solar-plus-battery owners will be 57 percent and 19 percent, respectively: from $150 to $236 and from $269 to $319. Again, this is due to the greater portion of their load that still must be met with grid electricity.
And make no mistake: even customers in cloudy markets will save greatly by adopting solar-plus-battery systems if recent trends of increasing retail prices continue. Those in Louisville and Westchester who rely entirely on the grid will see their monthly costs rise from $161 to $290 and from $359 to $649, respectively, over the same period.
An Easy Choice for Customers
RMI’s analysis shows that, by 2050, customers who invest in solar-plus-battery systems will save about $1,000, $2,000, $4,000, or even $11,000 every year, depending on the market. That’s a powerful incentive and it’s something that customers, utilities, and regulators will need to reckon with.
For customers, investing in solar photovoltaics and battery energy storage is “something that the customer really does need to think about. It’s becoming more and more mainstream every year,” says Rader, and after about 2020 it will be powerfully economically attractive. “Your own system is decreasing your reliance on a grid that’s getting more expensive.” Guccione adds: “These distributed energy resources are going to put another tool in the toolkit of families in America to manage their expenses.”
An Opportunity for Utilities
But while there is a clear benefit to customers, utilities are faced with a challenge—and a choice. As residential and commercial customers follow their economic interest and invest in solar-plus-battery systems, utilities can choose to discourage them or to integrate and utilize their systems (see figure below) There is still time for utilities to choose between these two pathways, but the window will close as more customers add solar-plus-battery systems.
If customers are discouraged with things like fixed charges and a lack of compensation for exporting surplus power to the grid, more and more of them will become true grid defectors, choosing to rely on their own systems. This would lead to excess investment in the electric system as a whole, among other inefficiencies. Stand-alone solar-plus-battery systems must be larger and more expensive than grid-connected ones, while electric utilities that don’t take advantage of the customer-sited, solar-plus-battery systems at their disposal will need to invest far more in grid assets, which may then be stranded by further grid defection.
There is another path for utilities, however. “There’s an opportunity for them to embrace this as a game-changing opportunity and play a major role—rather than fight the trends—and the utilities that do so will find themselves come out ahead,” says Rader. Guccione explains, “there’s an opportunity for utilities to create avenues for customers to offer their home energy systems to the utility in a way that can be advantageous to the whole system.”
Distributed energy resources like solar PV and battery energy storage can make grids more reliable, more resilient, and less costly to maintain, but only if they are grid-connected and intelligently integrated. Doing so, in turn, creates more value from the distributed resources: “In the sharing economy, people are making better use of underutilized resources, whether it be their homes through AirBnB or whether it be their cars through services like Uber and Lyft,” says Guccione.
Rader says that, in the same way, “Utilities can take an active role in making sure this transformation works to the best result for the grid as a whole.” They are in the best position to provide the coordination that is crucial to making distributed resources work in harmony, which is the essence of the utilities’ role as distributed system platform operators under New York’s REV proceeding. “A utility has a built-up relationship with the customer that’s unique to them. No other company out there, a solar installer, a battery installer, or any company has that,” says Rader. “At the very least, they can serve as brokers that help customers understand their options.”
Regulators Can Open the Door
But first, utilities will need an assist from regulators, says Guccione: “In order for utilities to fully take advantage of these distributed energy resources as they’re deployed on the grid, it’s going to require new rate structures and it’s going to require new business models.” Some states are experimenting with such advances in regulation, and not a moment too soon. “Right now there are no clear mechanisms and markets for utilities to work with customers who have highly capable distributed energy systems that can be used to provide services back to the grid. Regulators really need to revisit the rules of engagement between utilities and customers,” says Guccione.
The large and growing savings delivered by grid-connected solar-plus-battery systems will drive their adoption by myriad users. But to realize the full value of these systems, Guccione says, “Utilities have to be afforded the opportunity to leverage and, to some extent, guide the deployment of assets on their systems.” Much more is at stake than peak price for customers; the future of the grid is at a fork in the road.
Reprinted with permission.
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This is a very prescient article. As usual RMI is ahead of the curve. I am not sure if their numbers are inflation adjusted or not. Rooftop PV plus battery will actually beat grid prices sooner than they anticipate.
Here are my figures: Using NREL figures for all states (with a slightly lower interest rate…there’s is 7.5%… I think 5% or less is reasonable)
By 2018 PV will be installed at $2 watt without any rebates or tax incentives (Australia and Germany are already there) At that rate electricity production levelized cost ranges from 8 cents kwh in the sunnier states, up to 12 cents kwh in the cloudier states. Only Alaska will see 16cents kwh.
Battery storage at present best prices with the Tesla 7kwh powerwall is estimated by Morgan Stanley to be 10.5 cents kwh. That is at $428 per kwh for the complete battery unit. However we will see that drop to $200 per kwh by 2018. Note that Gm was quoted yesterday as saying their lithium cell price was now $145 per kwh. So I am being conservative. Tesla also has stated they expect cell price as low as $100 per kwh. So at $200 per kwh the battery will store electricity for 5cents kwh.
A PV plus storage system usually splits electricity at about 50% use directly while the sun is shining and 50% stored for night use and cloudy days. To get the averaged price per kwh add the PV price (say 8 cents) plus the combined PV and Battery price (8+5=13) together 8+13 =21 divided by two = 10.5cents kwh. Total levelized cost of power is below the national average of 12 cents kwh. In the sunnier states it is far below grid rates.
The other factor is the efficiency of panels (recently announced as about 22%. This reduces roof space required and so 8-10kw arrays are now quite easy to
accommodate. That sized array will produce between 11,000-15,000 kwh per year, everywhere in the U.S. which is more than the national average use in the U.S. (Europe is less than half of that!)
A modest battery will be adequate if one remains grid tied in order to produce and consume about 95% of electrical needs. Something like 14 -21 kwh is enough. If “defecting” entirely from the grid, the battery size goes up considerably, but not the cost per kwh. A larger battery for cloudy days etc, just cycles less and lasts longer. However the details of off grid living is a topic for another post.
I think you have the numbers right. What I will change is having about 60 kwh in a BEV, that can be charged remotely and used locally so that the extra is available for those cloudy days. I am willing to pay a substantial differential for those hours (less than 6% of the time) when that will happen.
The question will be what will the utility charge you to be connect to grid for backup? Even if not using it most months. My guess is some (many?) might push that charge up a lot. We are seeing utilities asking for $100/month if you install PV. So maybe it easiest will be a little extra PV and battery and a gas generator that you only run a little each year. It is one of those items that push people from path 1 to path 2.
My long term strategy was install solar and other renewables at the cheapest price. Switch over to electric driving miles for practically more than 90% of the time. And the last piece is to have battery energy storage. Then I can say that I am independent of the price fluctuation of electricity and gasoline.
I am just waiting for the tremendous drop in the cost of battery energy storage. Right now, they are pricing the system for as high as the market will bear, and that means calculating the price in its life time to have the customer just save off a few pennies and the system is paid for. But really if the price is low, you can save a lot more and I wanted to save more than what these battery energy storage companies are offering. Considering that my electric bills are close to zero, oftentimes negative net metering that I cannot claim back, and it costs me mere nothing to produce the electricity after the system will be paid off in a few more months, I can’t see no reason to purchase one when there is no price advantage for me.
But of course, I am still hoping to purchase a battery energy storage system, not because it will save me money right now, but because the laws of the land are unstable, especially with the utilities campaigning hard against net metering laws. Laws could change anytime. Better have the system before unfavorable laws go into effect.
Hopefully, when more EV batteries are decommissioned for second use as battery energy storage. I figured that the batteries for energy storage will have to compete with the cheap second-life batteries. I hope that there would be useful mods for these out of first life batteries, and that dealers won’t require you to return the batteries when you upgrade or purchase the next one and after you paid off your plug-in car.
Yes, I expect a cascade of dropping battery prices. It is hard to find anyone who does not predict this. If we can purchase lithium format with 5000 cycles for $150 kwh we are looking at 3cents kwh over its lifetime. And that lifetime will be up to 30 years because at that rate we will buy a couple of days worth of storage. That means that discharge rates at least double the 15 year 5000 cycle at full discharge lifespan. People who live off grid, like me, usually have battery banks that can carry you through at least 2 days without any sun, but a full week battery bank is not unusual. At present most “grid defectors” use clunky and inefficient overpriced lead acid batteries. Our lives are about to get simpler and cheaper soon.
Need to replace off-grid Batteries, immediately–Looking for best price, any suggestions ?
Right at the moment Balqon is actually available for lifepo4. Nicely packaged and in any size you need. Battery management included, no inverter. They are better than lead acid in price and efficiency.
I’d suggest you consider “placeholders”. Like a set of golf cart batteries that would hold you for 3+ years while things settle in.
I’m not suggesting that is what you do, just that you put the idea in the mix. I think in a few years we will have very superior options to what is available right now.
Ven can probably tell you what the best non-lead acid options are at the moment.
I replaced mine last year. Went with the Trojan T-105 REs. It might have been smarter to go with cheaper golf carts, but that won’t be clear for a little while.
We live in interesting times!
Driving an EV (Chevy Spark) and living in Palm Springs CA, I’ve assumed that solar and wind will gradually at first but then more quickly, take down the traditional ‘hard’ grid. Then along came these house sized battery systems (I’ve yet to see a real one) and that changed our whole energy plan for our retirement. Every switch on the network no matter how small (a mini-inverter/pv_panel, my Level II charging station, and the 20 kw+ battery pack I’ve yet to find) has to have an Internet Protocol address so it can all be integrated, monitored, tweaked and generally maintained properly.
I never imagined anything else evolving. My household network, perhaps a block sized community with common electric assets, commercial installations of various sizes, all basically supplying most of their own electricity where they are going to use it, and relying on remaining grid assets and batteries to fill in the gaps. It’s common sense really, think of a canal flowing by. Figure out how to use it without wasting any.
And it starts by saving energy, it’s easier than generating it. I changed all our bulbs to LED 2 years ago and since added some motion detectors and light sensors to the most used areas of the house. We rarely touch a light switch, that’s handled by Lutron. Just that cut our electric bill in half, the biggest draw is air-conditioning during the summer, and lights and appliances the rest of the year.
Our external lighting (outside the 4’6″ high wall) and the rolling gate are run by the sun, using about 200 kw of PV and two lead acid batteries. Everything is 12 Volt DC for that “off grid” circuit. Next year a pool with a swimming machine. (Current generator to swim against). What it costs to buy and run is paid back quickly by the fact that the water volume is reduced by half. The pool is now 17′ x 10′ rather than 34 to 40′ x 10′ to swim laps. The concrete, mostly in-ground pool will be insulated under and on the sides with R 12 rigid foam, and a ‘best in class’ insulated, mechanized cover will keep the water at 87F as if it were in a Coleman cooler. A ground source heat pump will squeeze heat from the top 12″ of ground, above a layer of rigid foam insul, buried at 1′ deep, during colder months, and will switch to pumping the water under the insul board where the ground is 10 to 15 degrees cooler at roughly 60 to 65 F, in summer when the pool could over heat.
2500 Watts of PV on a single axis, tracking pole will run the pool equipment, and a ground source heat pump, heating the pool in winter, and air conditioning the house in summer. Everything depends on the as yet missing battery pack that will go in the garage. Last year I upgraded the old main panel to 200 Amps and brought 3 cables in steel conduit, #0 (the fattest copper braided cable) 80 feet through the attic to a 100 Amp sub-panel in the garage. That’s to minimize main cable runs of upcoming equipment. I wish I was twenty years younger, this is nothing but fun and opportunities for businesses abound.
Energy is cheap apparently, if one can figure out the maze of options that are the management of it.