The Economics of Load Defection: How Grid-connected Solar-plus Battery Systems Will Compete With Traditional Electric Service, Why It Matters, and Possible Paths Forward

Rocky Mountain Institute
April 2015

[]  Utilities as we know them today have a maximum of about 15 good years ahead of them.

That is if they don’t shift their business models away from traditional fossil fuel sources before customer defections and stranded assets diminish revenues so much that they won’t even have the funds needed to reverse course with investments in technologies and load shifts, according to two separate studies being released today.

Rapidly-falling solar prices, along with technological advances in battery storage, are converging to make solar-plus-battery-storage likely to be the most cost effective and popular electricity option within the next 10-15 years.

“The electricity system is at a metaphorical fork in the road,” writes the Rocky Mountain Institute (RMI) in its new report on ‘The Economics of Load Defection,‘ which was produced with consultant HOMER Energy LLC.

The report marks a new chapter in the much-discussed possibility of a “utility death spiral” scenario, where sprawling power providers as we know them quickly lose market share and revenue to more disaggregated clean energy alternatives. At the same time, a new report by renewable energy provider SolarCity underscores increasingly favorable consumer attitudes toward a solar-powered future.

Based on a detailed economic analysis in which price elasticity and demand curves meet to favor solar and energy storage systems, RMI argues that utilities would be wise to invest in storage technologies and upgrading grids to accommodate customer shifts to solar — or otherwise expect to slowly become obsolete.

That dynamic is supported by two primary factors. First, prices for solar equipment are rapidly falling. At the same time, solar’s most glaring drawback — that the sun doesn’t always shine — is becoming a moot point as battery storage becomes a viable technology to store power generated by the sun or wind.

When combined, those variables have the potential to change the economic model for energy pricing…


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