Will Smartgrid Put Electricity Utilities Out of Business?

Or at least radically change their business model. This is an interesting argument that I have now come across from two or three different sources in the last little while.  And if they do survive they do so to supply large commercial and industrial customers or else as a deprecated peer-to-peer network. The argument goes like this: if the cost of micro generation continues to fall (think cost of solar panels and battery storage in particular) will houses start to leave the grid and become energy self sufficient?

The game changer in this respect may be electric vehicles(EV). Imagine that your house is running low on power so you pop down to the shop to charge up the car and when you get home you pump half the charge into your house to get you through until the sun shines again or the wind blows. Or maybe you get home delivery battery swap for your house, delivered by EV of course.

Admittedly this is still a long way off by which I mean more than five years away but depending on a number of factors this could be well under way shortly after that time.  The factors that I believe will influence this are as follows.

Battery Technology

There have been a number of claims in recent times about improved battery life and lower manufacturing costs. It is true that costs have been falling. One report I have heard recently indicated that EV batteries have fallen 20% in price in the last four months, but this is driven I expect by scaling up production in anticipation of greater demand rather than improvements in technology.  I have recently come across two apparent breakthroughs which hold some promise: one is a way to improve the performance of lithium ion batteries which may prove to be a bridging technology. The other is more promising – using nanotechnology to create a whole new battery technology. But there is still quite a degree of scepticism which is justified.

Cost of Solar PV Panels

This is one of the biggest hurdles people face in terms of entering micro generation. I believe prices are being driven down again by a combination of scale of production and improvements in technology. There is no better example of this than Google closing down its solar concentration project. Subsidies aside, it may yet again prove the folly of being an early technology adopter for those that have paid very large amounts of money for their solar arrays.

Energy and Network Price Trade Off

If energy and network costs continue to rise then the relative household financial benefit to going off grid will continue to rise. This is a well established assumption behind the growth of electric vehicles but what if it is also the beginning of the end for the grid? It is likely that emission trading schemes and taxes will contribute a little to increasing prices. Micro generation costs will perhaps be driven down by the energy self-sufficiency policies of the US and China.

Global Recovery

The big one which will enable all of the above will be the pace and timing of global recovery especially in the emerging economies combined with continued population growth. This will provide the environment for increased R&D, faster time to market and scaling of production all of which will improve the technological feasibility and lower the costs for large numbers of consumers going off the grid. New housing will be important in this as self-sufficiency will need to weighed up against building out the existing network rather than retrofitting. Economic growth will again put pressure on traditional energy sources and increase global carbon output and the foot will then again be applied to global accelerator. And if global recovery is the main driver of the demise of the grid, then it is a question when and not if.


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