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Are we really all going to go off grid?

By Dave Elliott

In 2014, the US Rocky Mountain Institute (RMI) released a ground-breaking analysis of the potential for ‘grid defection’, looking at when and where it might be economical for customers to disconnect from their utility in favour of using on-site solar-plus-battery systems. With PV solar and batteries getting much cheaper since then, it has become a hot issue. However, fully off-grid options still seem unlikely to be attractive or needed for most people – a grid link allows you to top up when there is a solar input lull and your battery is drained, and to sell any excess at other times. In the US this “net metering” approach is quite widespread, although there are disputes about the prices paid by utilities. In the UK the FiT system has an export tariff. Will consumers be willing to forgo that? Would that be wise?

While some consumers clearly like the idea of being independent, and are willing to pay more for that, two-way grid interaction can be mutually beneficial for both consumers and grid companies. Indeed, the smart grid concept points in the direction of distributed storage – with consumers providing some storage capacity to reduce peak demand on the grid and the need for grid upgrades, and also possibly at times topping up the grid from their domestic batteries and maybe from their electric car batteries too, in V2G mode. Of course, utilities won’t like losing the sale of power they would have had otherwise, but they do make savings since peak demand, and grid upgrades, may be reduced. Upgrading grids is expensive. So is meeting demand peaks, although generators that offer this service can charge a lot!  So they won’t be happy. But consumers, relieved of this cost, may save overall, at some point, depending on the cost they face in running their own power and storage systems.

Exactly at what point it becomes economic for them to do this is the focus of much debate. A helpful recent article from RMI updated its position. Basically the RMI has shifted slightly from the view that full grid defection is likely and possibly valuable. Now the institute points to its more recent work which it says assesses ‘the present-day customer value of demand flexibility under real-world utility rate structures’, and ‘the potential to gain expanded value from behind-the-meter battery energy storage systems’. It says ‘we have found that these middle-ground solutions, stopping short of full grid defection, offer much better economics for the customer, and likely for the utility and larger grid as well’. So now it talks about ‘load defection’, not grid defection. Amen to that.

However, the RMI adds that these customer choices will continue to transform the grid outside the scope of utility planning processes and regulatory structures. The lowest-cost and most desirable outcome for all customers will embrace this dynamic and seek to keep these customer-sited technologies integrated with the grid, rather than apart from it’.

So the “bottom-up” model still lives. “Prosumers” can drive the system at least to some extent, but with RMI also saying that ‘reforms in electricity tariffs, utility business models and utility regulations are crucial to arrive at an integrated, resilient and cost-optimal grid’.

The situation on the ground (or roof!) is that about 40% of domestic grid-linked PV installations in Germany (the largest PV user so far) now have battery backup, and the market is building elsewhere. With costs falling, some see storage as carrying all before it. But some solar investors say it’s still too risky even at the usually more cost-effective utility scale – prices will have to fall even more.

However, it all depends on how the overall system develops. Adding bulk storage to a basically unchanged system is unlikely to be cost effective, but the situation will be very different as distributed generation spreads, with smart grid networks emerging to help balance the grid. Individual consumers may go ahead in any case, even if the gains are only marginal, seeking to insulate themselves from ever-increasing mains electricity costs. And as the system level advantages of smart distributed systems become increasingly apparent, utilities may also get more involved. Pilot schemes are already underway.

The current UK smart meter roll out is not going well, with plenty of glitches, but the advent of smarter meters, and also variable-price domestic “time of use” tariff deals, could stimulate more interest in home generation and storage, by alerting users to the high cost of energy and certain times of the day.

However, there is still a way to go on demand side response (DSR) systems like this. An earlier variable-price pilot project, based on using power from a local solar farm, found that domestic DSR was only able to shift limited demand away from the peak period – about 10%. And so the cost savings were not enough to compensate for the higher cost of the solar PV supply.

That was based on a simple “high price at peak periods” regime and does not necessarily mean that home PV/battery systems would not be viable but, unless PV/battery prices fall further, or better, more interactive, smart grid management systems are developed, there may be problems. Indeed, a US study has suggested that, although energy storage systems generally may cut peak power demand by up to 32%, and peak grid power injection by up to 42%, there are losses with home battery charging and discharging of up to 14%. It’s more efficient to use big utility stores.

None of this is likely to stop the overall move to smart power system development. As the use of renewables spreads that will become vital. The exact role that storage will play is less clear. It will probably involve a mix of larger scale utility storage and domestic storage, along with other balancing measures, all optimised at the system level, with the emphasis on new approaches to grid management and power supply. For example, UK Power Networks is developing a smart, flexible energy system to help keep costs down for both suppliers and consumers by managing networks in a new way. It currently supplies more than eight million properties in the UK, in the East, Southeast and London. The group is transitioning from a Distribution Network Owner (DNO) role to becoming a Distribution System Operator (DSO). That means instead of just managing the power flow in and out of businesses and homes, it will also manage a system of separate distributed generation (DG) networks. Around 8.5GW of energy from renewable DG sources has already been connected across UKPN’s service area.

Clearly the power system is changing, and it may yet change even more, with grids becoming more important, rather than less so. Storage, at various scales, may be part of this, but there is also much more going on. For example, Google’s Deepmind Artificial Intelligence system may even be used to help run the UK power grid, predicting consumer demand. Its use by data centres has evidently cut energy use by 40%.

Mind you the prospect of having an AI-run smart power system may terrify some!  But even if, in reaction, some head off-grid and buy lots of home storage, there can still be issues, e.g. over safety. With recent cases of aircraft fires and laptop/mobile phone battery explosions in mind, some worry about the idea of having a big stack of lithium ion batteries in their homes and garages. No doubt safety can be improved, but some say maybe it’s better all round to focus on larger, professionally-managed utility-run storage systems, accessed via the grid. While not everyone thinks that storage, at whatever scale, is the best balancing option, some do see grids as vital, including long-distance supergrids: see my next post.

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