Advances in technology have made it possible for some consumers to disconnect from the power grid, which was once only affordable for the wealthy or survivalists. A recent study reveals that the balance of economics has shifted, and now many families may be better off financially by cutting ties to the grid. However, this could have unintended consequences for poorer families and the environment. Renewable energy and energy storage technologies have become more accessible, leading to a surge in off-grid living, but regulators must consider the broader implications.
The Shifting Economics of Solar Power
Over the past decade, the cost of solar power has plummeted, reaching a point where it is now the lowest-cost power source in history. In 2011, the levelized cost of solar electricity reached grid parity, meaning people could have a net-metered, grid-connected solar system and pay the same for electricity as the grid costs.
This shift caused concern among some electric companies, as every new solar customer reduces their profit. Some companies tried to weaken net metering by increasing unavoidable charges for customers while decreasing the electric rate, making net-metered solar systems less appealing. However, as off-grid systems become more affordable, this strategy could push customers away from the grid entirely.
The Pros and Cons of Going Off-Grid
Our recent study shows that grid defection is economically advantageous for many families due to these rate structure changes. For example, a typical family in San Diego could pay 45% less for electricity by going off-grid, with their system paying for itself in just six years. Over the lifespan of the system, these families could save over $40,000 in electricity costs.
However, this trend raises concerns about potential “utility death spirals,” where as more customers leave the grid to save money, the ones who are left face higher electricity costs, prompting even more to leave until the utility is bankrupt. Additionally, the diesel generators used as back-up for off-grid solar and battery systems can cause significant pollution, even more than the grid in some locations.
Balancing the Needs of All Consumers
To prevent utility death spirals and increased carbon emissions, it’s crucial that regulators consider mass economic grid defection and implement rate structures that encourage solar producers to remain on the grid. The worst thing regulators can do is allow the electric utilities to increase unavoidable costs for their short-term profits, as this can backfire and lead to more customers leaving the grid entirely.
As solar and battery costs continue to decline, this problem is only becoming more urgent. Regulators must find a way to balance the needs of all consumers, ensuring that going off-grid doesn’t create a disproportionate burden on the poorest households or the environment.
