Grid parity, not the widespread adoption of energy storage, will be the death knell for traditional power utilities, RenewEconomy suggests in a post this week. And if present trends continue, the bells will begin to toll in 2018.
Grid parity, the point where unsubsidized renewables cost no more than conventional electricity generation, “is a clear short signal to innovative traders that the 100-year-old electricity delivery model is about to rapidly unravel,” writes consultant Leon Bateman.
The initial hype around storage in 2015 was followed by a dose of reality earlier this year, when customers calculated the 17-year payback for a home solar system with a 7-kWh Tesla Powerwall battery, he notes. But the immediate future looks very different, given Bloomberg New Energy Finance’s report last year that solar+storage costs had fallen 20 to 25% per year. If that trend continues, the payback on solar+storage will fall to a much more manageable four to six years by 2018-2019.
And at that point, the finance and investment scene could change very quickly for traditional utilities. “Once a ‘whale’ trader gets a sniff of this once-in-a-lifetime opportunity, the herd will all pile in, crashing utility valuations around the planet in a matter of hours,” he writes. “Make no mistake: this event, which is perfectly foreseeable, poses serious global systemic risk.”
In fact, for commercial and industrial users, digital technologies have already brought paybacks on solar+storage down to the three- to six-year range. “This should be truly terrifying to any incumbent Gentailer [generator-retailer] CEOs and their shareholders,” Bateman warns. “Yet worldwide, most of the individuals managing these soon-to-be-stranded assets are either in extreme self-denial, consciously lying to preserve shareholder value until they have developed a new revenue stream, or just oblivious to the disruptive technology on their doorstep.”
But those responses won’t slow down the rise of new technologies that could be truly transformative for the power sector. “Unless incumbent utilities radically transform their businesses in less than 10 years, they will be relegated to the dustbin of history.”