01 September 2014 | Posted by Zachary
In the last article, I discussed how the growth of solar power and wind power are making energy storage more competitive, but the focus was on power plant owners selling electricity to the grid. In this article, I want to look at another side of the story -- how the growth of solar power and energy storage complement each other, and especially in a self-reinforcing spiral on the individual electricity consumer side.
In the case of retail electricity, there’s much more variation in how solar power producers are compensated and in the dynamics of their purchased retail electricity. Depending on the jurisdiction, a homeowner with solar panels on her or his roof may be able to sell excess electricity from their system back to the grid for the same price as they buy electricity (aka net metering), may be able to sell excess electricity back for a bit more or less than the retail electricity price (variations of net metering), may have a contract to sell all of the electricity they generate back to the grid for a set rate (aka feed-in tariffs), or may not be able to sell extra electricity back to the grid at all.
For utilities, as rooftop solar power and self-consumption grows (as is happening quite fast in some places), revenue from the sale of electricity is lost. As this revenue is lost, utilities often have to raise their rates in order to cover their costs while making the same profit. However, when they raise their rates, going solar becomes even more attractive to more people and businesses.
This isn’t yet where energy storage is important, but we’re getting there. At some point, as it was for wholesale power producers, it becomes cheaper for homeowners and businesses to store excess electricity and use it later in the evening or the next morning rather than pay for electricity from their regional utility. The more utilities are forced to raise rates, the more attractive getting an energy storage system becomes. Furthermore, the more that solar and energy storage grow, the more their costs come down, making them even more and more attractive options versus rising electricity prices from the grid.
But an important thing to remember is that there are very different laws in place in different jurisdictions around the world, some enabling this transition and some fighting it. Some places are making home energy storage illegal, while other places are incentivizing it. In either case, however, solar plus storage is coming. How it will come and what it will do to utilities is what is up in the air.
Image Credit: Rising S Bunker