How utilities will commit suicide by solar

Off-grid systems will be increasingly affordable for average households – so if grid operators continue protectionist policies to block homes from exporting solar, it will just force more savvy PV owners to disconnect.

It's inevitable that anyone with enough roof space will be setting their (solar powered) wheels in motion to leave the grid within the decade and in most cases not just one grid, but two. That's because solar is going to become, to put a new spin on an old phrase, "too cheap to have a meter". It just won’t be worth paying daily service charges to have a grid supplied meter and grid access.

Modelling by climate and energy solutions think-tank Zero Emissions shows that for an average household, that system is available now and its cost is rapidly dropping 

When it comes to the cost-benefit analysis on whether to quit the grid, homeowners are likely to take any deal that beats their current home loan in long-term financial benefit, which is exactly the deal they get when they ditch the grid. 

Today a typical household in suburban Melbourne pays around $2000 in electricity bills and another $1000 for their gas bill.

At home loan interest rates (~5% per annum) homeowners could divert their current $3000 annual spend (and soon to rise with rising gas prices) to finance $50,000-$60,000 worth of investment in energy efficient appliances and a fully autonomous solar system, that will replace $200,000 worth of grid power over its lifetime and add value to their property.

Source: Selectronics

As an example, for a typical household in Melbourne to easily ride through winter will require about 11-15kW of solar (~83 sq m of roof-space today, ~41 sq m with higher efficiency panels in 2024) and 60-75kWh storage battery capacity.

One path for getting off both the electricity and gas grids is the following:

1) Convert to all-electric, efficient (gas replacing) appliances such as: A Sanden water heating heat pump; Daikin Ururu Sara reverse cycle heater; and an induction cooktop.

2) Get an analysis done of a household’s smart meter energy use history if in Victoria (your power retailer has to provide this to you on request) compared with real solar production data which is available from PV Output. The tools for doing this comparison are being developed and will be available on the Zero Emissions' website soon.

Before a household leaves the grid they'll have to decide whether it is worth their while. At the moment, if they spent their money on a 11kW solar system with a small battery bank and stayed connected to the grid (to cover for the 10-15 days a year that sort of system wouldn’t provide for their needs because of extended periods of low sunlight) they could save a significant amount on batteries, but to be worthwhile they'd have to be able to sell their solar excess at a price which will exceed the fixed daily standing charge.

At current standing charges and power export prices of 8 cents per kilowatt-hour and likely to drop to about $0.06/kWh in 2015 remaining connected to the grid makes financial sense. The customer would get paid between $680 and $1080 per year for their total solar export which offsets the standing charge of around $200-$400 at today's prices.

However, if grid operators enact protectionist policies to block households from exporting solar – a tactic frightened networks are increasingly employing in an attempt to stop solar in its tracks – then the obvious move is to buy a bigger battery system and disconnect altogether. 

This would lead to needless waste – 8500-13,500kWh of zero emissions electricity, enough to run another household or two for a year, is likely to be generated excess to the household’s needs. If connected to the grid this can be exported for use by others. But it will be lost in a stand-alone system which will throttle back production by that much over a year to avoid damage to its batteries. It also means the household will incur unnecessary additional cost in batteries.

A perverse pricing regime that locks in a large fixed standing charge for connection will cause this perverse outcome. Even the Australian Energy Regulator is waking up to this fact. But it seems to have forgotten that it is a regulator and instead of telling the networks they cannot do such things, is instead “encouraging” them not to do so. Why allow such behaviour in the first place if you know it is contrary to the long term interests of consumers?

Ultimately, what solar and non-solar houses need to buy from the grid is import and export power capacity (similar to upload and download capacity for internet access). Selling power capacity should be the business of the grid operators in future. It will be more efficiently rationed, too, as solar households will only need 1kW of capacity instead of the 4-5kW that is allocated today.

The price for 1kW of capacity should not exceed $200, a major discount on what is charged currently.

If we were to see a situation where power companies were to be completely obstructionist, banning power exports or refusing to pay for them, then the only value provided by the grid will be a saved cost on battery capacity. Based on analysis by Zero Emissions, in such circumstances grid charges of more than $200 per kW would exceed the saving on batteries provided by the grid connection. Higher charges would then lead to savvy solar households quitting the grid in droves with potentially more households leaving the grid than on it. 

In short, grid attempts to fight solar rather than work with it are likely to result in a spectacular own goal by grid operators. An own goal they could avoid if they move into the business of selling power capacity and/or the virtual utility space of providing energy services.

So when will conditions be ripe for the great grid defection?

Well, that all depends on a critical price point for solar and battery modules, which we'll talk about next week.

Matthew Wright is executive director of Zero Emissions Australia, director technical sales at Efficiency Matrix and resident columnist at Climate Spectator.

Originally published under the title 'The Great Grid Desertion'.