The Rocky Mountain Institute (RMI) has published a fascinating analysis of the economics of leaving the grid. The central thesis is that solar PV and electricity storage enables consumers to leave the grid completely.
Solar PV has already reached grid parity in about 10% of the U.S. and declining PV prices suggest that this trend will continue. However, without the ability to store electric power, consumers with rooftop PV still require the grid for nights and cloudy days.
The development of combined solar PV and batteries from Tesla and others promises to make solar + storage accessible for increasing numbers of consumers. These consumers could form their own microgrid, either by themselves or with their neighbours and disconnect from the grid. Alternatively they could become a source of dispatchable power and become an energy provider. Increasingly they could find that either of these options is economically advantageous. This has serious implications for local utilities because if this trend develops it could seriously erode the traditional utility revenue base. It could also lead to a completely decentralized grid comprised of many microgrids. From an operations perspective it increases the complexity of managing the grid compared to the centralized model in use today.
Jon Wellinghof, previous chairman of FERC, thinks that the writing is on the wall and it is being driven by customers wanting more control of their energy. He said
"Advances in technology and the desire we are seeing at the consumer level to have control and the ability to know that they can ensure the reliability of their system within their home, business, microgrid or their community. People are going to continue to drive towards having these kinds of technologies available to them. And once that happens through the technologies and the entrepreneurial spirit we are seeing with these companies coming in, I just don't see how we can continue with the same model we have had for the last 100 or 150 years."
Over the past decade,distributed generation, especially solar photovoltaic (PV), consumer demand response programs, and other flexible distributed resources of electric power has grown dramatically. Until now, with a few exceptions such as Germany and Hawaii, distributed intermittent resources have represented a relatively small proportion of total power generation. However, as we face the prospect of scaling the use of flexible distributed energy resources including affordable energy storage batteries, attention is focussing in many jurisdictions not only on the economics of distributed energy, but also on the control system that will balance intermittent micro-generation resources and consumer demand and the rapid evolution of new consumer devices, aka the Internet of Things. This has led to the concept of transactive energy.
Transactive energy refers to the combination of economic and control techniques to improve grid reliability and efficiency. These techniques may also be used to optimize operations within a customer’s facility. The Department of Energy has supported the GridWise Architecture Council in developing a conceptual framework for developing architectures, and designing solutions related to transactive energy.
A virtual power plant (VPP) is a cluster of distributed generation installations and demand response programs which are collectively run by a central control entity. VPPs rely on existing utility grid networks to provide electricity supply and demand services for a customer. VPPs are intended to add value for both the end user and the distribution utility. As a practical application of transactive energy concepts, virtual power plants represent a way of integrating technologies including demand response, distributed generation systems, and advanced energy storage into a network supporting sophisticated planning, scheduling, and bidding of DER-based services.
For example, RWE Deutschland AG and Siemens carried out a trial project with hydro power plants, combined heat and power units and emergency power systems. The pilot project demonstrated the technical and economic deployment feasibility of virtual power plants. Since February 2012, the electricity produced by RWE's virtual power plant is traded on the Energy Exchange (EEX) in Leipzig.
A recent report from Navigant Research forecasts that total annual virtual power plant vendor revenue will grow from $1.1 billion in 2014 to $5.3 billion in 2023.