Will the grid become optional? Solar and storage already at parity | RenewEconomy

Will the grid become optional? Solar and storage already at parity

Print Friendly, PDF & Email

A new report suggests that solar and storage is already at grid parity, with the potential to fundamentally alter the electricity landscape.

Print Friendly, PDF & Email

For years, low-cost solar-plus-battery systems were seen as a distant possibility at best, a fringe technology not likely to be a threat to mainstream electricity delivery any time soon. By far, the limiting factor has been battery costs. But thanks to a confluence of factors playing out across the energy industry, the reality is that affordable battery storage is coming much sooner than most people realize. That approaching day of cheaper battery storage, when combined with solar PV, has the potential to fundamentally alter the electricity landscape.

grid wiresWhile grid-tied solar has seen dramatic recent cost declines, until recently, solar-plus-battery systems have not been considered economically viable. However, concurrent declining costs of batteries, growing maturity of solar-plus-battery systems, and increasing adoption rates for these technologies are changing that. Recent media coverage, market analysis, and industry discussions—including the Edison Electric Institute’s January 2013 Disruptive Challenges—have gone so far as to suggest that low-cost solar-plus-battery systems could one day enable customers to cut the cord with their utility and go from grid connected to grid defected.

But while more and more people are discussing solar-plus-battery systems as a potential option at some point in the distant future, there has been a scarcity of detailed analysis to quantify when and where. Until now.


Today, Rocky Mountain Institute, HOMER Energy, and CohnReznick Think Energy released The Economics of Grid Defection: When and where distributed solar generation plus storage competes with traditional utility service. Seeking to illustrate where grid parity will happen both first and last, the report considers five representative U.S. geographies (NY, KY, TX, CA, and HI). These geographies cover a range of solar resource potential, retail utility electricity prices, and solar PV penetration rates, considered across both commercial and residential regionally-specific load profiles.

The report analyzes four possible scenarios: a more conservative base case plus more aggressive cases that consider technology improvements with accelerated cost declines, investments in energy efficiency coupled with load management, and the combination of technology-driven cost declines, energy efficiency, and load management. Even our base case results are compelling, but the combined improvements scenario is especially so, since efficiency and load management reduce the required size of the system while technology improvements reduce the cost of that system, compounding cost declines and greatly accelerating grid parity.

 The results of the report show:

  • Solar-plus-battery grid parity is here already or coming soon for a rapidly growing minority of utility customers. Grid parity exists today in Hawaii for commercial customers, and will rapidly expand to reach residential customers as early as 2022. Grid parity will reach millions of additional residential and commercial customers in places like New York and California within a decade (see Figures 3 and 4 above).
  • Even before total grid defection becomes widely economic, utilities will see solar-plus-battery systems eat into their revenues. Factors such as customer desires for increased power reliability and low-carbon electricity generation are driving early adopters ahead of grid parity, including those installing smaller grid-dependent solar-plus-battery systems to help reduce demand charges, provide backup power, and yield other benefits. These early activities will likely accelerate the infamous utility death spiral—self-reinforcing upward price pressures, which make further self-generation or total defection economic faster.
  • Because grid parity arrives within the 30-year economic life of typical utility power assets, the days are numbered for traditional utility business models. The “old” cost recovery model, based on kWh sales, by which utilities recover costs and an allowed market return on infrastructure investments will become obsolete. Utilities must re-think their current business model in order to retain customers and to capture the additional value that such distributed investments will bring.

The results are profound, especially in geographies like the U.S. Southwest. In this region of the country, the conservative base case shows solar-plus-battery systems undercutting utility retail electricity prices for the most expensive one-fifth of load served in the year 2024; under the more aggressive assumptions, off-grid systems prove cheaper than all utility-sold electricity in the region just a decade out from today (see Figure ES3 below).


Millions of customers representing billions of dollars in utility revenues will find themselves in a position to cost-effectively defect from the grid if they so choose. The so-called utility death spiral is proving not just a hypothetical threat, but a real, near, and present one. The coming grid parity of solar-plus-battery systems in the foreseeable future, among other factors, signals the eventual demise of legacy utility business models.

Though utilities could and should see this as a threat, they can also see solar-plus-battery systems as an opportunity to add value to the grid and their business models. The United States’ electric grid is on the cusp of a great transformation, and the future of the grid need not be an either/or between central and distributed generation. It can and should be a network that combines the best of both.

Having determined when and where grid parity will happen, the important next question is how utilities, regulators, technology providers, and customers might work together to reshape the market—either within existing regulatory frameworks or under an evolved regulatory landscape—to tap into and maximize new sources of value that build the best electricity system of the future the delivers value and affordability to customers and society. These disruptive opportunities are the subject of ongoing work by the authors, covered in a forthcoming report to follow soon.

This story was first published on RMI Blog. Reproduced with permission.

Print Friendly, PDF & Email

  1. MrMauricio 7 years ago

    The sooner the better!!! There is massive pent up resentment towards electricity and poles and wires companies!!An example is AGL sooooo worried that we might overshoot the 20% renewable target!!! Many of us are shooting for 100% at personal level first-but it will wreck their foolish business model that refuses to look to the future-things are going to be VERY DIFFERENT in the next 30 years whether they like it or not .They could,of course look to the future for a change-and massive opportunities!

  2. stuart 7 years ago

    It’s an interesting report, but certainly highlights the difficulty and expense of going exclusively off grid in a residential application. Is it really desirable to go into island mode when one is relying on a single diffuse and variable energy source? Traditionally RE proponents have favoured geographic separation to overcome the variability associated with wind and solar power.
    It seems to me that probably the next couple of decades,at least, it makes more sense to remain grid tied and use rooftop solar to produce the majority, but not all of the households power as the numbers from the RMI report illustrate.

    For their base residential case, RMI considered that a typical 2,500sqft house in certain parts of the US (New York, Texas, Kentucky) would need to be backed up by 220KWh of Li-ion batteries presumably to provide multiday storage. One presumes that the PV array is also oversized to provide 100% of the load on a typical winters day. At the (high) costs (ca. $4.00/W for PV systems plus $500/KWh battery) prevailing today in the States one is looking at $150K to install such a system ( that is the cost of the average house in many parts of those states!). With such huge systems the LCOE is a very high $0.8-1.2/KWh drifting down by 2050 to $0.33-0.60/KWh as PV system installation costs reduce to $1.50/W and battery costs to $125/KWh. With demand side reductions RMI project the costs of the systems and LCOE could be reduced by approximately 50%.

    None of the above looks very attractive at all to Australian consumers who today have the option of purchasing PV only systems for only a little more than A$1.50/W (bereft of subsidies) and consequently producing power for less than A$0.10/Kwhr.

    “Right sizing” a combined PV+ battery system would allow it to produce power at much more competitive rates. The system VECTOR ENERGY offer to some consumers over in NZ which typically has a much more modestly sized 11Kwhr Li-ion battery and a 3KWPV panel is adequate to produce over 50% of the households power ( 100% in summer and presumably around 30% on an average winters day) and operates today at a very competitive NZ$0.21/KWh .

    There are also potential gains for the utility in such an arrangement, it doesn’t need to oversize their generating capacity and distribution network and thus they can run their remaining “base-load” generating capacity at a reasonably high load factor.
    This base-load capacity could conceivably be other renewable sources ( wind-farms
    etc) or conventional thermal.

    Perhaps many people don’t like their utility, but as this study shows squeezing them out business and going it alone comes at a high cost.
    PV solar (+ storage) has a very bright future indeed, but it needs to be deployed in an appropriate manner if it is to fullfill it’s promise

    • Chris Fraser 7 years ago

      I agree with stuart. Caution is required – and the grid (in some form) is here to stay. Independence is less of an option in very cold climates – better hope the grid is working and maintained properly there. However by definition that allows more temperate and tropical climate people to go off grid for hours per day if not days at a time with very good LCOEs.
      The grid is utility. If yours truly moves into a house with paper walls, hot tile roof and draughty doors and windows then for a time he is grid dependent. The grid is then a necessity to permit proper use of the house. But when yours truly saves money, invests in insulation, thermal mass, efficiency, generation and storage, he is off grid for hours and days. This is sensible, low carbon impact, and a natural right of choice.

    • Gordon 7 years ago

      >>220KWh of Li-ion batteries, huge PV array, etc …looking at $150K to install such a system

      Here in Australia (inland NSW where solar delivers an annual average of ~5kWh/m^2/day) it is quite possible to run a 21kWh LiFePO4 battery with 4kW of tracked PV (at a cost of about 20% of the above US cost) and meet 100% of electrical energy needs (admittedly using only about 2/3 of the somewhat wasteful ~18kWh/day Oz average usage through winter) right through the year with no backup generator. I know this as I have done it.

      • stuart 7 years ago

        Interesting observation? RIM have obviously considered a prolonged period when the PV array is producing very little power to justify the huge 220 KWh battery they have postulated is required. In your experience what is the worst combination of low daily output and extended duration have you seen( presumably during an inclement spell mid winter)?

        • Gordon 7 years ago

          Hi Stuart, actually, summer can have long spells of poor solar charging weather as well, although they tend to occur more frequently in winter, with its short days. I’ve gone for around a week between a full state of charge condition a number of times since installing the LiFePO4 cells, getting as low as ~70% depth of discharge, most recently in mid February.

          That would be bad news with Pb-acid batteries, but Lithium is happy being around 50% SOC, in fact, that’s where they recommend they be stored. Some time ago I read a study of electric buses and the usage the batteries were subjected to, and one that regularly went to 90% DOD and was almost never fully charged had lasted over 15000 charge cycles, so operating at low DODs clearly isn’t a problem.

          LiFePO4 is able to accept charge more quickly than Pb-acid, and a lot more efficiently (I’m obtaining better than 95% charging efficiency, and my whole system is logged at 1 second intervals, so I have a good grasp of how it is performing).

          In even the worst weather, there will often be some solar radiation, so my recommendations to anyone who asks are that it is best to go oversize with the PV array in preference to a huge battery, which is the main expense in a system, and mostly underutilised. A small generator to charge the batteries when required makes much more sense economically.

          Of course some foresight about weather conditions and flexibility about what loads I run, and when, is required. Winter generally has lower refrigeration loads with the cooler air temperatures, which helps somewhat, but, for example, I don’t do any big welding jobs in extended cloudy weather periods, and will sometimes use gas for cooking instead of the induction cooktop.

          I run a fairly large aquaponics system, and the cooler weather means less aeration of the fish tank is required, so I can cut down on the fairly significant air and water pump energy use in winter somewhat too, if needed.
          Of course, if you live in the northern regions of the US where days are much shorter than in Australia, and cloudy periods may be more extended, then a larger battery would make more sense, but a larger PV array and a generator would be much less expensive than trying to have enough capacity to get through a very extended cloudy period.

          • stuart 7 years ago

            You make a very good point that rather than supersizing the battery pack it makes economic sense to utilise a small generator.

            Several commentators have stated ie that the RMI study seems to be very conservative indeed. ( See renowned Green Energy entrepreneurs Jigar Shahs comments attached to the following article)


            Admittedly Jigars comments are obviously for a grid-tied system, rather than a stand alone system. The point I was making was that adding modest storage to a grid tied PV system, to reduce the necessity to export power back to the grid, seems a more commercially realizable next step goal than a pure off grid solution. Talking about sizeable fractions of the residential population going off grid seems rather premature.(lets walk before we run)

            On another I was aware BYD claimed their LiFePO4 cells could last up to 6000 cycles at very DoD. It’s an eye opener that they have gone 15000 cycles- certainly massively reduces the cost of storage.

            If one could combine such a high cycle life with the low costs being espoused by Elon Musk as a result of the Gigafactory then the days of widespread adoption of storage can’t be far off


  3. JohnRD 7 years ago

    One of the attractions of solar and wind is that their operating costs are a fraction of those for fossil power, largely because they don’t use fuel. Once the capital has been paid off the power is almost free. There is also the related attraction that there will be times when surplus power is avaialble at almost zero cost.
    However, it would be difficult to take advantage of this cheap power at the household level for economics of scale reasons. You need a grid to really take advantage of cheap power and to reduce the size of the rooftop and storage installations required to give reliable power.
    We would have much cheaper power now if we had invested in targetted local power generation and storage instead of wasting money on grid and large scale fossil generation upgrades, At this point in time we should be talking about what has to be done to avoid grid upgrades rahter than scrapping the grid.

  4. Dartigen 7 years ago

    It would be highly attractive to rural areas here in Australia first – they tend to suffer the most from disruptions to power (bushfires and floods destroy power lines on a regular basis, then power to entire towns has to be turned off to allow emergency services to safely clear the affected areas of rubble before repairs can begin which can end up taking over a month) and I’m told many rural towns in the US and Europe advise residents to buy a generator because they suffer such frequent interruptions to power because of similar issues with flooding, fires or damaging storms and tornadoes.

    In urban and city areas, it depends – I can see it being popular where I am, in Adelaide, because we do get damaging storms quite a lot in winter and that means power interruptions again (not that most solar panel systems would handle large trees or tree branches falling on them much better, but I presume they don’t pose as huge a hazard to the community as downed power lines do) which, depending on the severity of the damage, can mean anything up to a week without power.

    Inner-city suburbs would probably be the last to adopt it and would be doing so purely because of trend, not for any reasons of practicality. (With that being said, I can see it being extremely difficult in many inner-city areas because I’m told that it’s not easy or cheap to set up solar arrays on high-rise buildings. But we can hope someone tackles this issue sometime soon.)

Comments are closed.

Get up to 3 quotes from pre-vetted solar (and battery) installers.