The electricity “death spiral” has, for a long time, been a key risk facing electricity generators/distributors globally.
The “death spiral” arises when demand for power declines, due in part to customers taking up solar, leading to higher prices to cover fixed network costs. That is, the more people that take-up solar power, the faster decline in electricity demand, and the more fixed costs must be spread over a smaller volume of electricity, raising costs for everyone else.
Until now, solar power has suffered from one major drawback, namely that there is now way to store surplus electricity during daylight hours for use during the evening. In Australia, electricity suppliers offer solar users a “feed-in tariff” for surplus electricity fed back into the grid, but these are typically one-third to a quarter the amount charged for electricity off the grid.
Some utility providers, such as in Queensland, have also reduced the per unit charge for electricity, while raising fixed network charges, thereby making switching to solar even less financially beneficial.
As such, solar power doesn’t yet make financial sense for most people in Australia, in particular those that are usually away from home during the day (e.g. CBD workers).
All this is about to change, however, in what is shaping up as a major shock to electricity companies that could potentially spell their “Kodak moment”. Electric car maker, Tesla, has launched a battery pack for people’s homes that would enable solar users to store surplus electricity during the day for use at night, and enable them to disconnect from the grid entirely.
From ABC News:
US billionaire Elon Musk, a co-founder of PayPal, this month launched a lithium-ion battery called the Powerwall that is expected to sell in Australia next year for about $5,500.
It was developed alongside his revolutionary Tesla electric car, launched late last year…
“You can actually go, if you want, completely off-grid,” Mr Musk said of the batteries.
“You can take your solar panels, charge the battery packs and that’s all you use”…
“They come coupled with solar PV (photo-voltaic panels) that really enable consumers now to become their own new power stations”…
Australia is expected to be one of the Powerwall’s biggest markets due to the high take-up of residential solar PV rooftop panels.
Speaking to ABC’s 7.30 Report last night, Renew Economy editor, Giles Parkinson, said that he expected a massive response from Australians:
It’s going to be about as big a change as we’ve seen in the telecommunications industry with mobile phones…
It’ll happen quicker in Australia than it will happen anywhere else in the world because of the high retail prices. We pay so much just to boil a kettle in the city and now we’ve got a cheaper way of doing it…
All is not lost for electricity companies, however, with some retailers in Australia entering the solar power space for fear of missing out. Moreover, if Tesla’s electric car proves to be a huge success, then it will dramatically boost electricity demand, helping to offset any decline caused by solar.
Nevertheless, the emergence of home battery storage raises a big dilemma for regulators and social equity. That is, those that are most likely to install solar and battery storage are most likely to be the wealthy, who can afford the large upfront costs. This leaves poorer households and renters facing potentially large rises in their power bills as fixed network costs are spread across a diminishing pool of customers.
What might end up happening is that regulators will demand that customers leaving the grid pay some kind of disconnection fee (e.g. $1,000) as compensation to the other users.
Regardless, revolutionary technological change is coming to the electricity sector, posing a huge conundrum for power suppliers and regulators alike.
