Rooftop Solar: Does it really need the grid?

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The plunging cost of rooftop solar, the anticipated fall in battery costs, and the potential ability to buy a home energy system from the local hardware store, is causing a split between those that believe the grid will follow in the footsteps of the Post Office, and those that insist we can’t do without it.

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Just over a week ago we reported on the anticipated moves by network operators in Western Australia and Queensland to ditch their reliance on poles and wires in favour of new technologies that would supply and store energy locally.

In Australia’s remote and distant outback, the development of micro and mini-grids – based around solar and battery storage – seems a logical step to take, even an economic one. But the bigger question for network operators around the world is whether those in more populated areas, even in the cities, will look to adopt similar measures.

At what point, for instance, will the ability of homeowners to buy the necessary equipment for power generation from their Home Depot Store in the US, or from Bunnings in Australia, challenge the future viability of the networks?

And at what point will it become possible for communities to pool resources and decide that it will be cheaper to look after their own electricity needs rather than stay on the grid. According to some groups in Australia, that point may not be so far away.

There are two technologies that will make this possible. The proliferation of rooftop solar, and its continued cost decline, is well documented. The second key element is battery storage.

As analysts from investment bank Bernstein noted in a recent report, the easiest way to dismiss battery storage and (by implication) distributed solar, has been to observe that efficient, low-cost energy storage has always been at least two years away… and to believe that it always will be.

But as the experience with solar PV has shown, this can change with the combination of capital, scale and motivation. Whether it be the mandated 1.3GW of energy storage in California, the 170,000 plug-in vehicles in the US, Tesla’s planned gigawatt battery storage plant, or the pull factor of frustrated consumers, the scale, the capital, and motivation is now at hand.

That will not just empower, quite literally, households and businesses, it will also remove the ability of distribution companies and retailers to dictate terms – and tariffs – once the sun goes down.

Competitively priced storage is likely to help put peaking power plants out of business, because there will effectively be no peak. But the bigger question is what happens to the grid, and the business models of the utilities that depend on it. How can it morph into what most see as inevitable – a plug-and-play facility – and how does it price its services?

The Bernstein analysts have provided a fascinating account of a recent conference they hosted in the US that introduced conflicting views of how this will play out.

David Crane, from NRG, the largest privately owned generation company in the US, believes that the grid is going the way of the post office; still trying to deliver letters as more and more people choose email and other forms of social media and technologies to deliver their communications.

The key to its future is in cutting costs, and making a gradual change of its business model, over the years. He recently wondered why the modern grid should be built around a hundred million wooden poles and wires. He says investing in centralised generation and distribution is futile. (His company owns more than 40GW of centralised generation, it should be pointed out).

Crane says the inevitable advance of distributed generation, the ability of consumers to meet their needs with a visit to Home Depot, and his preferred model of tying only to the gas grid (to meet the greater need for home heating in the US), means that the best option for the grid in the future is to act as a backstop source of reliable power.

But is that the future of the grid – just to act as a backstop?

Ted Craver, the CEO of Edison International, a California-based power distribution company, naturally has a different view. He told the Bernstein conference that utilities will remain a critical piece of the electricity puzzle.

He has several reasons for saying so: One is that many people simply won’t have the option to take their homes or even their communities off-grid, particularly those who live in apartment buildings, or the owners of shopping centres and office buildings. Even those who can provide a lot of their electricity from rooftop solar cannot meet the pre-dawn and post-dusk demand requirements (until the arrival of storage).

bernstein solar day

The second is the start-up loads of electric motors, such as those used for air conditioning and pool pumps, can be twice as high as the load of those motors when operating. Rather than double the size of their PV systems, and inverters, residential customers will find it more economic to draw power from the grid.

The third is that utility-owned assets will be needed to transport renewable power from remote locations to load centres, and even distributed solar would require grid upgrades to accommodate changes in voltage, as would the widespread deployment of plug-in electric vehicles, whose charging load is comparable to that of an average home.

According to Craver, the grid will need to evolve to a “plug and play” system capable of sensing and accommodating two-way electricity flows while maintaining constant grid voltage.

The problem arises on how to price that service. As utilities respond to the growing adoption of solar, they will seek to cover their fixed costs – but this in turn only enhances the attractiveness of distributed solar generation as an alternative to grid-supplied electricity, likely accelerating adoption and further eroding utility sales and revenues.

“The utilities thus face a vicious cycle where the growth of distributed solar generation forces rate increases that accelerates the growth of distributed solar,” the Bernstein analysts note. The utilities paint this as a growing cross-subsidy from those of their retail customers who lack distributed solar generation to those that do.

One option could be for the electricity utilities to embrace distributed solar distribution themselves – as the German energy giants RWE and E.ON are now proposing to do. As the Bernstein analysts suggest, utilities could one day achieve economies in customer acquisition, panel procurement, installation, maintenance and even financing that would make it difficult for competitors to match – such as the Home Depots or a local phone or cable company is offering energy (distributed power and storage) as a service along with broadband.

“How regulated utilities fare in the medium term will depend in large part on their ability to cushion the revenue impact of the growth of distributed solar generation,” the Bernstein analysts write.

“For those utilities with the highest retail electricity rates, and therefore the greatest expected penetration of distributed solar, this will require a rapid restructuring of their residential and commercial electricity revenues in favor of fixed connection charges.

“To the extent regulated utilities are successful in preserving their base revenues, while passing through to their customers the savings from avoided fuel and purchased power costs, it will be the revenues of competitive generators that fall by the wayside …. it is the competitive generation industry that will be squeezed between stagnant power demand and rising renewable supply.”

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  1. Stan Hlegeris 5 years ago

    Shopping centres? Most of them are only one or two storeys, with acres and acres of roof space, most of it flat. There is NO technical barrier to making shopping centres independent generators of all of their own electricity.

    And there’s no financial barrier, as the cost of PV-generated and battery-stored power is already cheaper than what you get from the grid.

    The barrier is inertia. Shopping centre tenants either pay for their own electricity directly, in which case the owners don’t care, or they buy it from the owners, who buy it at wholesale rates and mark it up. In the latter case the owners stand to make a packet from generating and selling to their tenants, but property people tend to be very slow to adopt new approaches.

    Extensive, low buildings like most shopping centres are the first and best candidates for solar; please don’t suggest otherwise.

    The challenge is for taller buildings, which have a lot of floor space and relatively little roof space.

    • JonathanMaddox 5 years ago

      Agree with most of your points but it’s highly questionable that battery storage is already competitive with commercial electricity rates. That’s *still* at least two years away — maybe in two years that happy state of affairs will have come about.

      Also the “inertia” you mention is a well-understood split incentive. It’s rare indeed for tenants of any kind to buy power from their landlords; frequently even “centre management” is a tenant of a kind and purchases power for common facilities quite independently of its role as estate agent managing the other tenants.

  2. Roger Brown 5 years ago

    My local council dump (Brownsplains qld ) has a recycle shop , that has heaps of solar panels on its roofs , to cover the whole dumps running costs and no electricity bill.

  3. JohnRD 5 years ago

    Disconnection from the grid will require homeowners to have more daily solar power capacity than they need on average. And we are talking about capacity on a cloudy winters day, not capacity on a sunny summers day. Local interconnection will allow average capacity (and storage) requirements
    If a home has enough capacity to go off grid the surplus power being produced most days will be wasted. Worse still, this wasted power is power that costs almost nothing to produce. (Free power.)
    Logic says that, where practical, this free power should be fed into existing grid to reduce average power costs. There is no joy in wasting free, clean power that could be replacing fossil power.
    I am not arguing that it doesn’t make sense for remote communities and houses stay disconnected from the grid when the real expense is high. What I am arguing against is going off grid as a macho reaction to the collective insanity of some of our conservative politicians.

    • Stan Hlegeris 5 years ago


      Everything you say is correct. It only makes sense for an individual householder in a grid-served area to go off-grid if he faces stupid policies and regulations which are designed to delay and deter household energy production. Unfortunately, that situation applies to everyone in Queensland, at least.

      It will no doubt require some number of macho players with over-sized PV systems (I’m one) to convince the grid operators and regulators that people really will go off-grid rather than support a grid whose only management plan is ever-increasing consumption.

      • JohnRD 5 years ago

        It would be worthwhile being set up so that you can keep using power during blackouts. Also potentially worthwhile to have battery storage as a means of optimizing your return. (Assuming that Newman doesn’t try and block this too.)
        The conservative’s problem is that there are a lot of voters living in houses with solar. Perhaps you should see what supporting solar citizens will acheive before going all the way to off-grid.

        • stuart 5 years ago

          I agree with you that going totally off grid is a suboptimal solution for most households as it generally involves installing excessive generation and storage capacity. However the electric utilities need to realise that if they try to block PV and
          storage, which is on target to be very cost competitive, then householders have a third weapon, micro-cogen units, which could substitute for a grid connection. They are caught between a rock and a hard place. The smart move would be to embrace rooftop PV and batteries and start supplying these systems to complement flexible centralised generation capacity.

          Units like the Honda ECOWILL MCHP 1.0R use natural gas to produce 1.0KW electric output + 2.5KW heat output

          Overall efficiency is 92% running on natural gas with 26% electric energy conversion and 66% waste heat capture. My understanding is that these units can be installed in Japan for around $5-6,000. Not particularly cheap, but presumably there is scope for these costs to be reduced with increased

          One could envisage an Australian household with PV + battery + MCHP unit using the PV panels to produce all its power in summer and 1/3 of it’s power demand in winter. The MCHP unit would typically not run in summer, but would produce the two thirds balance of power in winter and of course would be available as backup on overcast days. In this household the PV panels would be optimally sized yet still produce the 2/3 of the year round power, the battery
          would only need to be sized for 1 days average demand. The home could be totally off the electric grid, but not off the gas distribution grid.

          SOFC micro-cogen units such as the Australian developed
          BLUEGEN units would be a neater fit with PV + batteries since their electrical conversion efficiency is close to 60% and thus would mate well with reverse cycle heat pumps to be used in heating mode. ( With the ECOWILL units with
          their lower electrical conversion efficiency one would also have to use radiators or underfloor heating). We also have a “problem” in Australia in that demand for heating is less than many other cooler countries.

          Unfortunately my understanding is that the 1.0KW BLUEGEN
          units retail for around $30K so they are very far from being economic today.

          The point I am trying to make is that electric utilities need to
          realise that there is an alternative to their main trump card ie. uninterrupted supply of power during an extended inclement period. The game has moved on and there is no going back.

          However I personally think it would be a much better solution for all concerned if the households with “right sized” PV + battery stayed grid tied and received the balance of 1/3 of their power from the grid rather than having to invest in
          MCHP units.

          It would be a shame to see all those centralised generation
          assets such as CCGTs, wind farms, solar PV farms, CSP stations largely “stranded” if large chunks of the population moved off the electric grid.

          For those that get slightly sniffy about all this talk of
          using gas please be aware there are plants in Germany using renewably generated electricity to produce synthetic natural gas (e-gas)

          The e-gas could be used in specially converted cars or far
          more efficiently in a MCHP unit. The e-gas production process itself is around 60-70% efficient.

          In Germany at least the gas network is so extensive that it
          effectively stores several months of energy ie offering inter-seasonal storage of renewable energy. However at this
          stage it is hard to see e-gas competing economically with natural gas in most markets.

    • Motorshack 5 years ago

      I have a similar design problem, but then it occurred to me that most of the “excess” power will occur right when I would most like to run an air conditioner, so it is not such a design problem after all. I should size the system for my winter needs, and then find ways to make reasonable use of the extra capacity in summer. AC is the obvious possibility, but heating a swimming pool is another, and there are probably lots more, if we were to think about it.

      As for prolonged periods without sun, that is what backup generators are for. A cheap generator that runs a few days a year is a far better deal, even with respect to greenhouse gas production than a grossly oversized system that really does produce an true excess of power most of the time. After all, there is embodied energy in the panels too, and burning a few gallons of gasoline a year might well do less harm to the climate.

      I spent my career as a software designer, and the general lesson that applies here is that you cannot assume that any one system state is “typical”. You have to look at all possible states independently, and only then can you determine the real conflicts and opportunities. Often the advantages of one state will counterbalance the disadvantages of another. So, best not to give up on the design without a very thorough analysis of all the possibilities.

      In short, at the retail prices for grid power in Australia, I should think that going off-grid would be a no-brainer. I pay considerably less here in New Hampshire, and it still makes good sense. You just have to get a little creative about some details of the design, and that in turn is dependent upon careful analysis of the real requirements – i.e. all the requirements, not just the ones that seem most obvious.

      Also, here is one other bit of design sneakiness.

      I want to take my office off-grid, and my landlord is okay with that, but he is keeping the building as a whole on the grid. So, to avoid complications for him there will be no connection between between my solar PV system and the building wiring. Anything I plug into the PV wiring will necessarily be unplugged from the building mains.

      However, if my batteries run down for lack of sufficient sun, I can still plug my stuff back into the building wiring, and track the usage with my Kill-O-
      Watt meter, so I can pay for my share of the power bill.

      In short, my landlord and I are both happy, and the power company is completely oblivious to what we are doing. So, no drama at all.

      What’s more, this is something that anyone could do. Run part of the house on off-grid solar power and part on the grid. Over time, as the money becomes available for the investment, more and more of the house can go off-grid. So, no fight with the power company, and no need to borrow money from greedy bankers.

      • JonathanMaddox 5 years ago

        Going off-grid is meant to avoid extra charges the utilities are threatening to oppose on solar PV owners, and to send a political message. I don’t think either is achieved by keeping part of the house on the grid, unless the utilities are prepared to take your word for it that your inverter is no longer grid-tied, and waive the solar surcharge.

        I think people are keen to avoid paying their utilities for anything whatsoever if they try to punish them for pushing power into the grid when it is most needed.

        • Motorshack 5 years ago

          Well, any dollar that I do not give to the power company is still a dollar I keep in my pocket. So, if enough people were doing that then the power company would still be seeing a significant drop in revenue.

          At the same time, I do not want to avoid giving a dollar to the power company by giving that dollar (or perhaps more than a dollar) to some bank. I don’t much like them either.

          Finally, if you go back and look at my original comment, you will see that I do not own the building, so I do not control such choices, except for my own office.

          However, what I do control is mostly coming off the grid, which means that I am doing exactly what you suggest – but only for the part of the building that I actually control.

          In short, we are largely in agreement, excepting only that I will not borrow money to go off grid.

  4. Ronald Brakels 5 years ago

    We have an existing grid. It’s here and it’s not about to grow legs and walk away. Maintaining exisiting capacity is quite cheap compared to building new capacity and if the cost of supplying grid power to remote areas no longer needs to be supported, then we know from past experience and from other more sane countries that the charges required to keep an existing grid operating are quite low. People in towns and cities will remain connected to the grid because we won’t be stupid enough to continue to give them an incentive to drop off grid as we do now. Supply charges will be dropped and people will simply pay for each kilowatt-hour they use. Electricity may not be cheap, but it will be cheap enough so that people won’t feel the need to rev up a diesel generator instead or add on another battery bank.

    • ALchemyst 5 years ago

      Maintenance of grids in Australia over the past 10 years has been an expensive and contentious issue. Hence it may not be easy for them to drop their prices. However, economic arguments and experience with telecoms suggest that people go for the cheapest and most convenient option. Thus if solar plus batteries is cheaper then grid, then the grip price must drop to match, and vice versa. That’s competition. This does mean of course that eventually massive asset value losses to distribution companies. They must use their current revenues to invest in diversifying their business into providing panels, batteries and new sales and marketing infrastructure for promoting these new services before this happens.

      • JonathanMaddox 5 years ago

        It’s not *maintenance* of the grid which has been expensive, but expanding it to handle increased anticipated load. Which was quite justified as people were installing large air-conditioners and the like. Total annual power consumption fell from 2007 onward, but the peak-hour demand continued to rise until the solar boom in 2011-2012.

        Utilities made the wrong call in assuming that both total consumption and peak demand would continue to grow indefinitely, but they’re not likely to keep making the same mistakes in future. Therefore network charges in future will just cover maintenance, not unnecessary expansion, and will return to more modest levels.

  5. Ben Courtice 5 years ago

    From the point of view of sustainability, easy consumer access to the means to go off-grid (cheap battery storage, basically) may not be great. In order to go off grid, you need to double or triple your PV array size (to harvest enough rays to wait out a few cloudy days); and you need the batteries to store that energy. Although mass manufacturing can make these items cheap, it’s resource intensive. In other words, the costs are externalised for things like using up finite resources, disposal of materials at the end of their life, and so on.
    However, in the bush – where many kms of poles and wires are required to link up relatively few (or just one) home, at some point, it starts to make more sense (in terms of resources use; whether it “makes sense” financially is unfortunately not particularly related to ecology in most cases).
    Sensibly, the electricity industry should take steps to ensure that the grid is set up to maximise the use of distributed solar generation, and make sure that solar generators are fairly paid for their premium electricity. That might include more off-grid homes in the bush, and micro-grids in some areas, but it is likely to be much more efficient to keep some centralised grid to share the benefits of distributed renewable energy generation (that generates more in some areas than others, on any given day).
    That kind of planning seems unlikely with shortsighted private operators running the industry. But it could in large part head off the pull toward going off-grid, and bring some rational decision making back into the picture – saving resources and money overall, as well as deepening the push into solar.

  6. Sean 5 years ago

    And what if people in coming years choose to install solar on the entire roofspace of their large house (10kw or greater) Would they like the ability to sell excess electricity to make a profit? (perhaps to offset their council rates)

    Direct access to wholesale markets is required to power a distributed generation revolution.

    • Chris Fraser 5 years ago

      Or even a separate market distinctly different to the wholesale market. The Embedded Microgenerators Market (incumbents not welcome as they don’t get it).
      This can be set up like an Exchange (requires a seller to be matched with a buyer) and monitored by AEMC.
      After your batteries are full you have energy to sell on the Exchange. Sellers can be found on a live list with priority given to microgenerators closest to point of demand. It is inefficient to send electrons long distances. The network manager also seeks to minimise distance as this will free up network capacity for somebody else. Long distances attract higher networks fees in cents per kWh and are a disincentive.
      Contracts are for full generation capacity over a set time or a set number of kWh, with a cut for the DNSP.
      AEMC keeps a record of the transaction, to monitor the growth of the market, to see how much energy is made and used locally, and to plan the dispatching of centralised generators – wholesale sellers could be a second priority to make up demand.

      • Sean 5 years ago

        buy dividing up the states into smaller network territories you would encourage local production and consumption, with network operators profiting when power was transferee long distance.
        e.g. Have separate zones based on high voltage substations, and prices instead of the whole of NSW being based on a imaginary point in the middle of sydney, based on real infrastructure.

        • Chris Fraser 5 years ago

          That is interesting because it may help simplify the system. Say if one HV Zone has more PV than its neighbour Zone, then at peaky times you could have a general migration of electrons from one Zone to the other. Assuming the system permits this (as I suspect the grid was designed using a one-way ‘hub-and-spoke’ mentality rather than permitting a cross-energising), then all we may have to do is account for energy loss over distance and make up the balance of demand with centralised (generally read as dirty) energy.

          • Sean 5 years ago

            hub and spoke to an extent, but also n+1 to allow for failures but keep the lights on. Even if it requires the ridiculous transmission all the way back to a coal power station to re route this will occur. (although this is incredibly unlikely as there are rings in most major cities, and it has been at least 30 years since we have had generators of a substantial size in our cities. The main roadblock is incumbent interference – and political red tape.

          • JonathanMaddox 5 years ago

            Sorry but this (transmission “all the way back”) won’t physically be happening. The steps down from high-voltage transmission grids to lower-voltage intermediate and distribution grids are almost all one-way. “Logical” trading of distributed power between regions might occur as suggested above, but if generation on one distribution-voltage grid ever exceeds local consumption, sending any of the excess back up to the high-voltage transmission grid is physically impossible without major changes to substations.

            This is probably not much of an issue in cities since the distribution grids aren’t all completely isolated from one another — power can in principle get right across town at the lower distribution voltage, though there may be bottlenecks here and there.

            The best opportunities in rural areas might be cross-linking the local distribution grid with a local transmission substation such as one at a utility-scale wind farm.

          • Chris Fraser 5 years ago

            I’m sure there would be a flaw in my plan. So, we are discussing a grid utility expansion that is somewhat different from a grid designed on pure grunt to get energy down from centralised generators to airconditioners. I hope the other solutions are more cost effective 😉

  7. John P 5 years ago

    We have been living “off grid” in the bush for the last 22 years. Even though batteries are expensive, the overall experience has been positive. Free electricity from the sun is cheaper than the grid variety, it is reliable, and with a thermally sound house, the demand is quite modest.
    If we were needing to move into town, I would certainly take us “off grid” again.
    These days, the consumer is required to support the profitability of the investors in the electricity industry, whereas in earlier times the electricity assets were there to supply a service to consumers. Times have changed thanks to economic rationalism.
    i prefer the earlier version of things.
    If the ‘economies of scale’ result in batteries becoming cheaper, I expect I won’t be the only one going ‘off grid’ in town.

  8. Colin Nicholson 5 years ago

    I would assume if we are to have modern DC storage, it would be high
    voltage at the GT inverter inverter input. ie for my 3.6KW 20 panel system 360v or so, which conveniently
    is close enough to 100 18650 lithiums which allowing for a bit under
    3AHr discharge (45%) is (conveniently) 1KWHr. The advantage being that for
    even a 1Hr 1KW discharge rate, then the current draw is low, and non
    tabbed batteries could be used in a conventional housing. That is
    $250. Put five 100 such battery arrays in parallel and we have 5KwHr
    of storage for $1250 plus a hi voltage DC charger controller. What is
    so difficult about that?

    • Mike 5 years ago

      I am thinking very much along the lines you are and would like to discuss.
      The best price I can currently get on LiFePo4 lithium storage is US$265/KwH.
      Please get in touch via email to discuss. Mike via [email protected]

  9. JohnRD 5 years ago

    Motorshack: Can’t say I look forward lots of generators running in an urban environment when there is prolonged lousy weather. It also sounds as though part of the plan is to use the surplus power for things you wouldn’t do if you had to pay for the power.

    • Motorshack 5 years ago

      In practice it is not a problem, and I am speaking from lots of experience.

      Here in New England we have ice storms that take out the grid on a fairly regular basis, and when that happens my whole neighborhood starts their backup generators. However, the machines are pretty well muffled, and often they are located in garages, with only the exhaust and air intake plumbed to the outside.

      Also, if you have storage batteries for the solar PV system, you don’t need to run the generator all day and night, but only a few hours a day to charge the batteries. So, you can do that in the middle of the day, when people are least likely to be disturbed.

      Frankly, if this is your only real objection to the ideas I laid out above, you really ought to consider going off-grid.

      Also, all this talk of using the grid as backup tends to make people in my neighborhood snicker. We know that it is the grid that fails in bad weather, and that we are the ones who provide the actual emergency backup.

      If you want a truly reliable power system you have to build it for yourself.

      Again, at the retail prices you folks are paying, I truly do not understand the hesitation.

  10. P Shaw 5 years ago

    The example of the house in the graph shows a very high use of power through out the day and night. Modern well insulated houses would be using a lot less power than this house. 3 kW an hour at two in the morning . Also high consumption in the middle of the day. I think the typical shown has an unrealistically high use of power. At night between 1 and 6 power use would be below 1 kW . In the middle of the day it would be even less.

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