(...) But there is a far greater risk that dovetails with the threat of these new technologies – their own short-term greed. This is nothing new. Every industry that has faced such momentous transition has faced the same issues. Just ask the print media. Just ask Kodak. Just ask the motor industry. Executives are driven by short-term profit incentives, few are prepared to cannibalise existing earnings in order to position their business for a different business model. (...)
And therein lies the problem. As the costs of solar and storage continue to fall – and we have seen some dramatic falls in the last year alone, and an even more dramatic reduction this week in the US – the potential for them to lose consumers grows ever stronger.
Consider what SA Power Networks predicted just a few months ago – that the combined cost of solar and storage for consumers would fall to just 15c/kWh within a few years. In many parts of Australia, that is equivalent to what consumers are charged for just the network component of the bill, let alone the surging cost of wholesale electricity and the retail margins.
Battery storage is going to become more prevalent very quickly. Morgan Stanley predicts a million homes with battery storage by 2020. BNEF predicts 40GW of distributed energy behind the meter by 2040. Even the networks themselves predict 80GW of local solar and 95GW of battery storage by 2050.
The batteries I have do not operate as a stand-alone power system, and I’m happy to be connected to the grid because it is a social good, and a pretty effective way of trading and sharing electricity. But the issue here is how much should the consumer pay for it? At what point does it cease to become economically attractive?
The threat of grid defection is underlined by the networks’ own research that shows half of all demand will be met by electricity that is distributed, or behind the meter. In other words, the power will lie in the hands of the consumer. This completely redefines the dynamics of the energy market and the role of the networks.