How Solar+Battery Systems Insulate Customers from Rising Retail Electricity Prices

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In the face of rising retail prices for grid electricity, investing in solar-plus-battery systems can insulate grid-connected customers from those increasing prices and effectively lock in a peak price that won’t continue to climb, according to a recent analysis by RMI. The result for customers across diverse geographies will be substantial savings relative to what they would have paid for a full-fare utility bill. For utilities and regulators this will be challenging—and present an opportunity.

RMI’s April 2015 report The Economics of Load Defection analyzed five U.S. markets out to 2050. It found that investing in combinations of solar and batteries will enable individual customers to contain electricity costs regardless of how high retail grid prices rise. Solar prices and battery prices are dropping and the trend is expected to continue for both. “The customer can now choose to install a solar system to lower their price. As the price goes down, they have the ability to install an even larger system to self-supply more power,” says Bodhi Rader, a senior associate with RMI’s electricity practice and coauthor of the report. In essence, customers can buy a smaller “starter kit” now and expand or upgrade periodically, as grid electricity prices rise and solar and battery systems grow steadily cheaper.

Solar-only systems are still exposed to rising retail electricity prices and favorable export policies and compensation from their utility; they export surplus daytime generation to the grid and buy back electricity at night when solar panels aren’t generating. But, Rader says, “where things really get game-changing is when you add in the batteries. Now you can directly use all the solar power you generate.” With batteries, a customer can store the solar system’s daytime surplus to use later and self-consume a greater percentage (up to 100 percent) of the output of the rooftop PV. Solar-plus-battery-system owners only require grid electricity during extended periods of bad weather or at times of very high demand, almost entirely insulating them from rising grid prices.

ECONOMIC IN EVERY MARKET

RMI’s analysis looked at five electricity markets out to 2050 (see figure below). The markets—Westchester County, NY; Louisville, KY; San Antonio, TX; Los Angeles, CA; and Honolulu, HI—have varying grid electricity prices and solar resources. Even so, “you see solar-plus-battery systems having an economic advantage even in the parts of the country that have the lowest electricity prices, because entrepreneurs and innovators are driving the costs of these technologies down,” says Leia Guccione, a manager with RMI’s electricity practice and another of the report’s coauthors. “Solar is going to be incredibly competitive in 2020 and beyond,” she adds.

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The cost of electricity to grid-connected solar-plus-battery owners rises little over time, and what little rise they see is mostly due to the portion of their load that they must continue to meet with grid electricity. So in sunny Los Angeles and Honolulu, the monthly cost to a solar-plus-battery owner will barely rise in the 20 years between 2030 and 2050. Customers in those markets who rely entirely on the grid, meanwhile, will see their monthly costs rise from $192 to $348 and $702 to $1,269, respectively, over the same period. (Honolulu suffers from some of the highest grid electricity costs in the country and customers there are leaders in solar PV adoption as a result.)

Likewise, the difference between the cost of grid-connected solar-plus-battery systems in the two markets is largely due to the price difference between the portions of their loads that are met with grid electricity: $0.18/kWh in Los Angeles versus $0.36/kWh in Honolulu, at today’s rates. “The cost of a solar-plus-battery system in these five very different places is really not that different,” says Guccione.

What is different is the abundance of sunshine. So while grid-connected solar-plus-battery owners in Los Angeles and Honolulu will see their costs rise only seven percent and four percent, respectively, between 2030 and 2050, customers in markets with longer spells of cloudy weather will rely more on the grid and be less insulated from rising grid prices. In Louisville and Westchester, the corresponding cost increases to solar-plus-battery owners will be 57 percent and 19 percent, respectively: from $150 to $236 and from $269 to $319. Again, this is due to the greater portion of their load that still must be met with grid electricity.

And make no mistake: even customers in cloudy markets will save greatly by adopting solar-plus-battery systems if recent trends of increasing retail prices continue. Those in Louisville and Westchester who rely entirely on the grid will see their monthly costs rise from $161 to $290 and from $359 to $649, respectively, over the same period.

AN EASY CHOICE FOR CUSTOMERS

RMI’s analysis shows that, by 2050, customers who invest in solar-plus-battery systems will save about $1,000, $2,000, $4,000, or even $11,000 every year, depending on the market. That’s a powerful incentive and it’s something that customers, utilities, and regulators will need to reckon with.

For customers, investing in solar photovoltaics and battery energy storage is “something that the customer really does need to think about. It’s becoming more and more mainstream every year,” says Rader, and after about 2020 it will be powerfully economically attractive. “Your own system is decreasing your reliance on a grid that’s getting more expensive.” Guccione adds: “These distributed energy resources are going to put another tool in the toolkit of families in America to manage their expenses.”

Read the rest of the article at the Rocky Mountain Institute

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