Better energy storage and "grid defection" may soon upend utility industry

The use of rechargeable batteries – in everything from iPhones, TV remotes, and even cars – has become pervasive over the past few years, especially as they have become more affordable. So why can’t we use them to help power our homes and businesses, too?

The idea isn’t that complicated. But the cost of large-scale energy storage is still prohibitively high.

In select markets, such as Hawaii’s commercial building market, privately connected battery storage is already cheap enough, compared with utility rates, to warrant installation.

Other energy storage markets such as California and New York could reach the point of commercial viability in the next ten years – and not just for commercial buildings, but the residential market, too.

Tesla, of electric vehicle fame, is also capitalizing on such opportunities: Set to open in about three years, their proposed Gigafactory will be large enough to manufacture more lithium-ion batteries than the entire industry produces now.

These insights are fleshed out in the Rocky Mountain Institute’s ground breaking study, The Economics of Grid Defection. Essentially, this report says that once solar power and energy storage are at the right price, customers could leave the central electricity grid and their utility entirely – a process sometimes referred to as “grid defection.”

That gives utilities in select states about ten years to come up with new business models as they potentially start to lose customers.

Grid defection will make consumers more resilient

As reported by the Wall Street Journal in March, the latest Federal Energy Regulatory Commission suggests that the grid could be brought down if as few as nine substations were targeted in a coordinated attack. Increasingly extreme weather also plays a role in grid stability; Climate Central has noted a doubling in weather related outages since 2003.

Such events would not affect “grid-defected” customers who rely on their own generator and storage units.

What might keep customers on the grid?

Customers may choose to stay with their utility to maintain a link to the grid for selling excess electricity. And savvy utilities could choose to get in on the “solar plus storage” market, leasing both to customers in return for a form of electricity generation that the utility can control to help manage the overall electricity system.

Indeed, the chief executive of Sunverge, Ken Munson, sees this as an increasingly attractive business model. The choice to produce your own energy and leave the utility behind completely will be coming for a vast number of customers in the next 10 years and plenty more beyond that.

Fortunately, this presents a once-in-a-generation opportunity for utilities to reinvent their role in how electricity is generated, moved, managed and consumed.

A version of this post first appeared on our Energy Exchange blog.