On-site renewable generation will be able to match the grid on both service and cost by the end of the next decade, according to new research by Imperial College London
The falling cost of solar panels and storage are set to create a “nightmare situation” for utilities as it becomes profitable for households in “relatively cloudy” London to go off-grid from 2030 onwards.
The Centre for Climate Finance and Investment at Imperial College Business School says existing energy pricing models have “systematically understated the potential of renewable technologies”.
Previous research has been underpinned by the notion of “grid parity” which describes a situation in which consumers generate their own electricity at a lower unit price than purchasing it from a supplier. However, the new study says this fails to provide an “apples to apples” comparison.
The centre has therefore developed a new framework called “firm power parity” which it argues paints a more accurate picture by charting the milestones at which on-site renewables deliver the same service – in addition to the same cost – as conventional energy supplies.
“The concept of grid parity does not capture the increasingly complex changes in the relationship between electricity producers and consumers, and is flawed on several levels,” said the centre’s director, Charles Donovan.
“Firstly, electricity generated from renewable energy is, by its very nature, intermittent. What’s more, different consumers face different prices for their electricity – with residential consumers paying the most. Finally, the price that consumers pay for their electricity is not necessarily static.”
He continued: “The new concept of firm power parity that we have developed is more suited to the competitive landscape that renewable technologies currently find themselves in.”
Unlike grid parity, the firm power parity framework encompasses the cost of grid services which consumers typically pay for through a standing charge on their bills.
The centre says the “disruptive force” of cheap battery storage presents “a potential game-charger” for utilities over the coming decade. It notes the potential for a feedback loop – referred to as the “utility death spiral” – whereby the mass adoption of on-site generation and storage leaves other consumers paying an increasingly large bill for use of the power grid – prompting further defections from the grid.
The government has a “big problem” on its hands, according to Donovan.
“Solar and storage technologies are advancing rapidly and will bleed revenues from the utilities sector, yet we need a financially healthy industry to enable large-scale investments in smarter, more flexible electric power networks.”
“The transition ahead is going to be messy,” he added. “For example, the expensive baseload power to be generated by Hinkley Point C may not even be needed if consumers make the profitable switch to onsite solar and storage indicated by our model.”
In April, the Green Alliance published a report urging the government to take action to prevent “a war of all against all” as some consumers decide to go off-grid and come into conflict with large-scale generators and other less engaged consumers.