Rumors of the death of utilities and the electric grid have been greatly exaggerated. Mark Twain didn’t say that. The American Public Power Association did in a report released on Monday (July 16).
The APPA analysis – “The Value of the Grid” – examines the trends in the electricity business that some claim will render traditional utilities and the grid obsolete, such as distributed energy resources, electricity storage, and energy efficiency – and concludes that predictions of the end of grid-based electricity are hyperbolic.
The report, written by Paul Zummo, APPA’s director of policy research and analysis, finds, “There is still tremendous value in both the electric utility and the electric grid in meeting these evolving customer expectations. Not only will the utility continue to play a role in the future, the grid and the utilities managing it are essential in navigating the evolution of the energy industry.”
APPA’s Paul Zummo
In a teleconference Monday, Zummo said that despite the growth of off-grid technologies such as solar and storage and energy efficiency, there is “still tremendous value in electric utilities and the electric grid. Complete grid defection is unlikely and counter-productive.” He added that electrification, such as growth in sales of electric vehicles, and the spread of more efficient technologies for heating water and heating and cooling buildings, runs counter to the rise of distributed, behind-the-meter technologies.
The APPA report notes, “Since 2008 electricity sales throughout the United States have stagnated. The recession that began in the late 2000s caused a decline in sales, and electricity sales have not rebounded in nearly the same way they have in the aftermath of previous economic downturns.” The biggest factor in the slow rebound, the report finds, is energy efficiency.
But outside of Hawaii, distributed generation has had “a minimal impact” so far, with less than a percent of national load served by distributed generation technologies such as rooftop solar. That’s going to change as solar economics have seen costs plummeting while electric rates are increasingly modestly.
Solar resources, the report notes, are not spread evenly across the U.S. “Mission Viejo, California, had the highest amount of suitable roof space at 88 percent, in contrast with only 18 percent of suitable roof space in New York and Washington, D.C.,” according to National Renewable Energy Laboratory data.
Even where the baseline economics of solar plus storage look feasible for grid defection, there are “other economic factors, especially the value of having the electric grid available as a backup battery,” the APPA report argues. In a location not entirely favorable to solar, it may require supersizing the solar array and battery storage capacity to assure the same level of reliable supply as available today from the grid, dramatically undercutting the solar and storage economics.
“The likeliest scenario for the future is some grid defection, and a great penetration of solar storage behind the meter, and most DER customers remaining tied to the grid because of the tremendous value of the grid as a reliable and valuable backup source of electricity,” says the APPA white paper.
APPA argues that non-profit public power systems are particularly well-suited to respond to these changes in perceptions and roles for utilities and the grid. “Changing customer expectations – and their ability to meet some of those expectations on their own – means electric utilities will have to reevaluate their business models,” says the D.C.-based trade association for government-owned electric utilities. “Public power utilities are well-positioned to adapt based on what their customers want because they have control and are answerable only to their local communities.”
–Kennedy Maize