Will Natural Disasters Boost the Case for Grid Defection?

By: Emma Foehringer Merchant, GreenBiz Group

Read the article on GrenBiz Group's website here.

Clean energy companies note an increased appetite for off-grid solutions, while utilities fight to stay connected.Grid defection is a very controversial topic in energy. Utilities think it's an absurd idea that doesn't make economic sense. Many distributed energy companies say it's inevitable. Analysts are conflicted.The debate started in 2014 when the Rocky Mountain Institute wrote a report warning of a “spiral of falling sales and rising electricity prices” from grid defectors using solar and batteries. It later changed the term to "load defection" — acknowledging that customers didn't need to fully cut themselves off from the grid to destroy electricity sales.In 2017, a Rochester Institute of Technology (RIT) study highlighted the economic limitations of grid defection, noting that an off-grid system in an average U.S. location would cost nearly double that of a grid-tied solar system. RMI struck back in a piece for Greentech Media, arguing the RIT study didn’t consider future cost declines or additional benefits like consumer empowerment.Extreme weather is now influencing the debate. In Puerto Rico, where Hurricane Maria left hundreds of thousands of homes and businesses without power for more than half a year, grid defection is an attractive idea for an increasing number of citizens.With storms like Hurricane Maria stoking the debate anew, unresolved questions about economics haven’t been able to drive away investments in off-grid solutions. Instead, many clean energy companies are viewing off-grid as an increasingly important market.Actual deployment of off-grid systems remains relatively low in the mainland U.S., but interest in defection is growing in the wake of natural disasters and falling battery storage costs.Clean energy companies — and the utilities that may lose their consumers — are still thinking through the consequences.

“We’re not anti-grid”

In an interview at Intersolar North America, Enphase’s Vice President of Marketing and Pricing JD Dillon said the appetite for off-grid systems is becoming “huge."“Puerto Rico, to me, opened up the developed world to what Mother Nature can do to us and what can happen when you can be in a really nice house, and the power is down — you can go months,” he said. “We’re not used to that.”Chris Johnson, COO at energy storage company Blue Planet Energy, noted that most customers are just beginning to understand that off-grid is an option.“It’s still not commonplace knowledge that you can be totally grid-independent,” he said.But Blue Planet Energy and Enphase, by making self-consumption an important piece of their business models, are both banking on that changing. While Blue Planet has framed itself as an off-grid specialist, Enphase’s next generation Ensemble series demonstrates its growing interest in the space.According to Enphase, the use cases for off-grid systems aren’t just for doomsday preppers or isolated vacation homes owned by rich people like Richard Branson. Instead, its technology could help provide power in remote areas of India or for expanding industries that want to be independent, like marijuana growers in California. (Incidentally, marijuana growers were some of the original solar customers.)“I absolutely believe that the remote pot growers [are] going to be a huge market,” said Dillon. “For off-grid high-usage, high-powered demand...it’s tailor-made. We could keep coming up with, over and over, different, neat ways that off-grid can help people.”Microgrid startup Go Electric focuses on commercial, industrial and military installations. While its systems are often grid-tied, President and CEO Lisa Laughner said she has also seen increased interest in grid-independence.“We haven’t found a customer yet that isn’t annoyed when their power goes out,” said Laughner. “Last year was a very telling year, wasn’t it? With the weather and the amount of outages and the damage that all of the extreme weather caused. I don’t think that’s going to get any better. So, we can be better prepared.”Laughner said she’s agnostic about whether a company stays on the grid or leaves it; she’s just there to sell the resilient solution.Blue Planet Energy's Johnson said off-grid makes more economic sense for the company because of the untapped market. Enphase also said its investment in off-grid is practical rather than political.“We’re not anti-grid,” said Dillon. “There are people who are. And they’ll be able to buy it, too.”

“Everyone wants battery storage”

That anti-grid sentiment is proliferating in Puerto Rico, where Hurricane Maria demolished transmission and distribution and cut off virtually every utility customer from the central system.According to solar and battery installers there, that’s led to a spike in interest for off-grid systems and battery storage. David Portalatin, CFO at local solar contractor Pura Energía, told Greentech Media earlier this year that now “everyone wants battery storage.”Johnson said installers he’s worked with are “cranking” to keep up with demand. His company opened a fulfillment center on the island that’s made it easier to distribute products, but ships carrying Blue Planet batteries take at least 45 days to get from Hawaii to Puerto Rico. The company is now considering a production facility in Puerto Rico or on the mainland to shorten the process. At times Blue Planet has resorted to using expensive air freight.The lessons learned in Puerto Rico are framing how the company approaches other possible markets.“Seeing that there are other island economies and island nations we can take that to — it’s definitely a vision we want to see happen,” said Johnson.

“Paddling in the same canoe”

Utilities that make their money from infrastructure upgrades aren't as enthusiastic. But they're thinking about change.So far, utilities say they’ve had few consumers leave the grid altogether, even as interest in microgrids grows. Consolidated Edison and Hawaiian Electric, utilities serving states with relatively high electricity rates where off-grid solutions could make sense, say interest in off-grid remains on the fringes.The 2014 RMI study on grid defection noted that Hawaii — where Blue Planet Energy is based and where Go Electric does a good bit of business — was the only state where the economic case for defection made sense. New York could become a viable market for commercial systems by 2025. (Large amounts of defection in leading markets could come sooner.)Hawaiian Electric spokesperson Peter Rosegg said the utility has noticed a growing interest in grid-tied microgrids, which it has “long advocated” for as long as the systems don't undercut service for other customers. But Rosegg said via email that the utility, which serves five of the state’s islands, has seen little interest in permanently islanded systems.For systems that have “significant self-generation” and are connected to the grid through net metering, Rosegg said Hawaii has the highest levels of any U.S. utility. That, along with Hawaii’s clean energy goals, has pushed the utility to get creative.Hawaiian Electric hopes flexible and progressive programs will encourage consumers to stay connected.Rosegg said the utility’s initiatives, including community solar, time-of-use rates, and its Smart Export program that gives customers credits on their bills for exporting power, are all designed to give customers more options in an evolving electric landscape.Allan Drury, a spokesperson at Con Ed, said interest in microgrids and the ability to sell excess power back to the utility “all points out the need for a well-maintained grid.”Both Hawaiian Electric and Con Ed said grid defection could have bad consequences for customers. Rosegg suggested defection, which pushes the cost of maintaining the grid to those who can't afford distributed energy, would likely hurt low-income residents.“We often say in Hawaii, we are all paddling in the same canoe — that is, we’re all in this together. If those who are able to do so leave the grid, whether to pursue renewables or other fuels, we cannot achieve our clean energy goals,” he said.“The fewer customers supporting the cost of maintaining and operating the grid, the greater the share those left behind must bear,” Rosegg added. “Even as renewables become less expensive overall, costs of the grid to deliver that electricity remains.”The systemwide economics of grid defection aren't positive. But with equipment costs still falling and extreme weather getting worse, customer self-interest may trump the collective good.