Former U.S. Energy Secretary Steven Chu isn’t mincing words these days – and he offers some advice to help power companies avoid a “death spiral”.
The “death spiral” refers to the phenomenon where high penetration and low cost of renewables erodes the value of coal and gas fired electricity generation facilities.
It’s not something that may happen one day – it’s already occurring. German utility RWE lost more than $3.8 billion last year due to unprofitable fossil fuel power generation plants.
RWE isn’t the only utility in Germany feeling the pinch. E.ON, Germany’s biggest utility, recently stated it would shut more than a quarter of its power plants in Europe in response to a rise in renewables.
In Australia, mains-grid supplied electricity demand has been decreasing; partly due to the uptake of home solar power and commercial solar systems. The Australian Energy Market Operator says demand for 2013-14 financial year will again be lower than the previous year.
The death spiral could have been avoided if utilities embraced solar instead of resisting it in an effort to maintain their old-school and strong-arm approach to energy. While it’s not too late, Big Energy needs to change how it views the threat it sees in small-scale solar; instead considering it an opportunity.
In an interview published on Forbes, Mr. Chu lashes out at utilities attempting to maintain the old status quo and curtail the growth of solar using tactics such as introducing extra charges for solar households or claiming grid stability issues. Mr. Chu states the latter is a ‘bullshit argument’ where solar hasn’t yet reached 20% saturation.
He suggests utilities start embracing solar under a new model; one where they buy solar panels, batteries and associated equipment and partner with solar installation firms to install systems at utility customer homes. The customer pays nothing for the system – the utility owns the equipment and sells the electricity to customers at a much lower rate.
Utilities companies would benefit from a distributed electricity generation network installed “where they need it the most, at the end of the distribution system, for grid stability,” says Chu.
New Zealand network operator Vector has already embarked on similar program with its SunGenie initiative. It provides installation of solar and storage, with the customer pays a fixed monthly cost.
“As a network operator, we see a lot of benefits in homes being able to make and store part of the electricity they use,” states Vector.
“One of our big challenges is balancing load across the network at peak times. Homes that have solar electricity stored in batteries reduce the load on the grid, which is good for everyone.”
Image credit: Stanford University