Despite falling battery costs, consumers unlikely to defect from utilities

Despite falling battery costs, consumers unlikely to defect from utilities

The continuing drop in cost for batteries poses little risk that residential customers will defect from US utilities, says Moody's Investors Service in a new report, "Batteries are coming but utilities are not going away."

Batteries have yet to become cost-effective for most consumers, says Moody's. This will deter residential customers from becoming energy self-sufficient and severing ties with their utility, in a practice known as "grid defection." Massive grid defection would transfer the fixed costs of the grid onto remaining customers, creating challenges for current utility business models and threatening utility credit quality.

"We believe the cost of batteries in a solar-battery system is still an order of magnitude too expensive to substitute for grid power," says Toby Shea, a Moody's Vice President --Senior Analyst.

"The capital cost of batteries today is closer to $500-600/kilowatt-hour (kWh)," the report says. "Thus, when we say that battery costs need to be lower by an order of magnitude, we effectively mean costs in the range of $10-30/kWh."

Based on analysis that uses data on actual consumer usage, Moody's finds that the size of battery necessary to leave the grid is much larger than is commonly believed. Most other studies on battery size do not adequately consider the extremely volatile nature of electrical usage.

Besides cost considerations, solar generation is required in a solar-battery combination. Although growing rapidly, the number of households with rooftop solar is very small and the vast majority of them rely on net energy metering economics, which requires a grid connection.

Moreover, the lifestyle adjustments required will be unacceptable to most people. Moody's believes that most people are too accustomed to the convenience and reliability of grid-supplied electricity and will not accept the constant need to be mindful of the battery charge levels, and then to conserve electricity as necessary.

Source: Moody's

SMART GRID Bulletin March 2017

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