Concern about grid defection are overblown, say Moody’s | RenewEconomy

Concern about grid defection are overblown, say Moody’s

Moody’s downplays threats of grid defection, but their analysis is based on assumption potential defectors will not change the way they consume electricity.


Greentech Media

Tesla_Storage_System_SolarCity_310_211Many years ago, utilities awoke to a threat that an industry trade group warned might cause “major disruptions” to electricity supplies.

Worries about the threat ran all the way up to the White House and Congress, where politicians predicted an unraveling of the electric system.

“I think we’re no longer at the point of asking whether or not there will be any power disruptions, but we are now forced to ask how severe the disruptions are going to be,” said Connecticut Senator Chris Dodd.

No, these warnings were not about a utility death spiral. They were about Y2K, the overhyped doomsday scenario for glitchy computers that never materialized.

A decade and a half later, a new threat is emerging that some predict will throw utilities into turmoil: grid defection.

As solar and batteries become cheaper while electric rates rise, economic models suggest that millions of consumers could decide to sever ties with their utility and go completely off-grid. Under such a scenario, leading utilities could lose millions of customers and investors could lose billions of dollars.

So is grid defection a real risk — or just another Y2K?

Analysts at the credit rating and research firm Moody’s aren’t buying the hype. In a new report on solar and storage — a technology pair that nearly every major investment firm is now modeling — Moody’s calls grid defection a “vague and distant” scenario for utilities.

“We do not foresee grid defection being a material risk to the utility sector because the barriers are currently too great and the probability of an abrupt and unexpected development is too remote,” concluded the five utility and credit analysts who collaborated on the report.

They argue that battery technologies are still too expensive and that most consumers aren’t psychologically prepared to leave the grid.

Battery costs have fallen more than 50 percent in recent years, but they’ll need to fall much further in order to ensure around-the-clock power for consumers. After modeling usage patterns across sixteen cities in California and Hawaii, they concluded that batteries would need to provide power for 63.7 days on average — adding a cost of 535 cents per kilowatt-hour.

Ravi Manghani, a senior storage analyst at GTM Research, called the 63 days of backup “unheard of.”

Why would homes need such big batteries?

The analysts assumed that people would use electricity off-grid like they do while connected to the grid — erratically. Assuming consumption patterns don’t change, the analysts say batteries will need to be an order of magnitude cheaper in order for grid defection to make sense.

“In our view, most grid defection studies published thus far have used broad and somewhat simplistic assumptions about power production and usage patterns based on monthly averages. We believe these substantially understate the amount of storage that is required for grid defection without also making substantial changes to power consumption patterns and lifestyles,” wrote the analysts.


The Moody’s analysts may be overestimating how many batteries households will need to leave the grid (a typical off-grid home only carries a few days’ worth of backup). But much lower battery costs still probably wouldn’t be enough to cause grid defection. That’s because people are far too dependent on the electric system — which itself is a giant battery.

The “lifestyle adjustments required will be unacceptable to most people. We believe that most people are too accustomed to the convenience and reliability of grid-supplied electricity and will not accept the constant need to be mindful of the battery charge levels and conserve electricity, as necessary,” wrote the analysts.

Even though many people complain about their utilities, very few are likely to separate themselves from the grid — even if the cost of solar-plus-storage systems fell far below the cost of conventional electricity.

However, utilities have never really been worried about outright grid defection. Rather, they worry about declining revenues as customers consume less electricity and use the grid as backup for their solar or storage systems. States like California, New Jersey and Massachusetts have already seen load growth cut in half by solar PV.

By 2018, GTM Research projects that the U.S. solar-plus-storage market will grow to around 320 megawatts by 2018, led by the commercial market.


Source: Greentech Media. Reproduced with permission.

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  1. WR 6 years ago

    Yes, people using 80 kWh/day, as shown in the graph, are unlikely to go off-grid. But those who are less profligate with summer cooling will find the idea much more attractive.

    • Goldie444 6 years ago

      Its a bit like the line in the film “Who Killed the Electric Car” – Electric cars will not suit 100% of the people in the USA, they will only suit 90%.

  2. David Osmond 6 years ago

    It appears that there’s a few flaws in this research. Looks like they’ve pretty much sized the PV system so that over the year, supply = demand. This has resulted in the massive 63 days of storage required. However it would be far more economical to oversize the PV system to reduce the amount of storage needed. An alternative would be to purchase a small generator to top up the batteries during the worst week or 2 of winter (more likely a combination of these two options would be most economical).

    And finally, as WR mentioned, 80 kWh/day is about 4 times the daily household average in Australia, so of course it will be far more expensive for such a wasteful house.

  3. Dave Keenan 6 years ago

    That’s right. All you nice little utility companies who still think the right way to make electricity is by burning stuff, you go on believing that mass grid defection is a vague and distant scenario. There there. Sleep now.

  4. Pedro 6 years ago

    More likely that people will buy a small amount of storage to supply part of the night time loads and maximize self consumption. Grid consumers will only defect if their supply costs and electricity prices go up significantly. Either way still painful for the utilities.

  5. coomadoug 6 years ago

    This requires a little bit of research to understand but the answer to these issues is a wonderful solution. Perhaps too good for some to accept.
    At the moment the wholesale market is on the grid at high voltage at the generator coalface. It will be moved to the consumer side of the meter.

    Retailers will become very aware of the individual character and loading/generation profiles of the customer. They will sell the management of energy lifestyle. This is only possible on that side of the meter. At the moment money is made by ramming energy down the customers throat in total ignorance of the needs.
    Doing this with modern technologies will promote efficiency and simplify stability management. With dispersed renewable energy, billions of dollars in infrastructure will be redundant.
    The entire transport industry could be swallowed by this system, creating even greater management ease.
    Also the threat of catastrophic large scale system black out will be a thing of the past.
    One major driver of this trend will be the provision of power to developing and the poorest populations. This will be done via dispersed small scale systems without grid base.

  6. Chris Fraser 6 years ago

    Moody’s are probably correct in the approximate timing for having a choice to reduce grid usage. Even if a certain battery chemistry that made them irresistable was discovered today, it would take 5 years to be able to buy an off the shelf system. And then retailers that provide, install and back the systems would need additional time to gear up.But they’re wrong about the 63 days. With an efficient house and a lazy $20K we could have a 24 hr cycle time and reduce our grid consumption 90%. They of course not having heard of efficiency.

  7. john 6 years ago

    Speaking from the Australian perspective.
    I know of 1 person who has gone totally off grid because the cost to get supply was 4 times the cost of going off grid a cattle station new house situation.
    1 person who is building a large house near the grid but is going to go off grid
    1 person paying $500 a quarter who is going to go off grid as soon as he retires to his rural retreat yes lots of pumps is the reason for large power usage.
    1 person who like the first one is going to do the same thing as his retirement house is going to be a fair distance from the grid and it is cheaper to go off grid.
    I think that flow batteries will only make this a more viable course of action sooner than one may imagine.
    As to the suburban situation I do not see a lot of take up of storage other than perhaps small flow batteries in the 8KwH size.
    Why flow batteries? Because they can be in any state of charge and not be effected where as small foot print LI batteries can only go to a small amount of discharge without damage.
    One aspect not even looked at is the gain by utilities of reselling feed in power that replaces loss of transmission by utilities.
    Sorry I know this is off topic however one should look at it.

  8. john 6 years ago

    As to Y2K I had a computer then; actually from 1981; and yes there were languages that only addressed 2 digits for the year and because it was possible that some old legacy programs may have used those languages programs to generate the day and year time it was possible that problems would arise.
    Because engineers and programmers did a through check of the systems they were running the change from 1999 to 2000 did not present; however it was a problem; when you consider if 99 and 00 were the year so that you got 00-99 =-99 and not 1 as we know it.

    • Vic 6 years ago

      Yes, sad to see Stephen Lacey appears to have swallowed the Y2K denial kool-aide, one of the favourite talking points of climate science deniers. The planes didn’t proverbially drop out of the sky because business leaders heeded the warnings and took the steps required to avert the problem before it manifested.
      I guess the thought of their companies collapsing on Jan1 next year seemed more important than the thought of their kids being killed 50 years from now.

  9. Mark Potochnik 6 years ago

    80 KWH per day? Look at the stupid chart.

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