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The economics of grid defection

The economics of grid defection. New england Electricity restructuring roundTable 27 JUne 2014. Study background. “…one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent.”

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The economics of grid defection

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  1. The economics of grid defection New england Electricity restructuring roundTable 27 JUne 2014

  2. Study background “…one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent.” - Edison Electric Institute (EEI) Disruptive Challenges report, 2013 Study Goal: Establish a fact-base for where and when solar plus battery storage hybrid power systems compete with traditional utility service Study Partners: 2

  3. Analytical approach 2 Load Profiles Residential Commercial HOMER® software Hybrid System Results Levelized Cost of Energy Net Present Cost kWh/yr Replacement Costs ($/yr) O&M ($/yr) Emissions Technical Specifications Solar PV Batteries Inverter Generator* Cost Projections Solar PV Batteries Inverter Diesel Fuel* (*Commercial Profiles Only) Financial Analysis Model Financial Assumptions ITC Eligibility MACRS 3

  4. Geographies examined 4

  5. Cases modeled PV Sunshot Residential - $1.50/W Commercial - $1.25/W DOE Battery Goal Both - $125/kWh Accelerated Technology Improvement Base Case Combined Improvement Efficiency Measures Residential – 30% Reduction Commercial – 34% Reduction Demand-Side Improvement Demand Management Residential – 2% Commercial – None 5

  6. commercial parity timeline 6

  7. residential parity timeline 7

  8. Effects on customers and revenue In the Northeast by 2024 (Commercial) Base Case $0.24 Demand-side Improvement $0.17 Accelerated Technology Improvement $0.16 Combined Improvement $0.12 States included in the Mid-Atlantic region for this graph: CT, MA, NJ, NY, PA, RI 8

  9. Effects on customers and revenue In the northeast by 2024 (Residential) Base Case $0.92 Accelerated Technology Improvement $0.47 Demand-side Improvement $0.44 Combined Improvement $0.24 States included in the Mid-Atlantic region for this graph: CT, MA, NJ, NY, PA, RI 9

  10. The opportunity for grid connected systems • Ongoing analysis suggests grid connected solar-plus-battery systems reach parity much sooner than entirely off-grid systems Use Case = Grid as Backup DRAFT - PRELIMINARY >15 years earlier Grid-connected systems likely have improved economics, but additional regulatory and pricing uncertainty 10

  11. Key messages • Favorable defection economics will exist for millions within a decade under conservative assumptions; potentially a lot more sooner with either technology or offer innovation • Defection is suboptimal; economics favor maintaining a grid connection absent significant pricing changes but increasing customer empowerment is inevitable • The economics favor hybrid system adoption sooner if a grid connection is maintained, with high levels of self-generation optimal • The “traditional” utility business model is broken today – utilities are making investments on behalf of customers that may not exist in the future • There is emerging value in hybrid systems; unlocking it requires new approaches to encourage a two-way transactive grid 11

  12. Issues for electricity Market restructuring • How to understand hybrid system costs and benefits, particularly given the dynamics of shifting value over time • When and how to share these emerging sources of value between customer, utility, and service/product provider • How to regulate interconnection requirements for hybrid systems • How to allocate legacy costs among retained, departing, and returning grid customers • How to manage data transparency between all players in the emerging market 12

  13. Creating a clean, prosperous, and secure energy future TM

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