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SolarCity flips the switch on the future

Avatar for Ben Zientara
Updated 02/29/2016

Way back in May, 2015, we wrote about the possibility of going off-grid with a combination of solar panels and Tesla Powerwall home batteries. At the time, we told you, the economics of that arrangement didn’t work unless you lived in Hawaii.

Well… SolarCity just announced its Smart Energy Home program for Hawaiian homeowners, which began taking pre-orders for solar panel+Powerwall+smart appliance packages late last week.

Called it.

How it works

Under the Smart Energy Home program, SolarCity would install panels on your roof, Tesla Powerwall batteries to store excess energy, and special water heaters and Nest smart thermostats to help ensure that your home is powered almost entirely by the sun. Here’s how they put it on their site:

Notice we said “powered almost entirely by the sun.” That’s because the Smart Energy Home program keeps your home connected to the grid in case you ever need more electricity than your panels can produce.

Grid Defection

Grid defection is the practice of making a home or community completely self-sustainable, with solar, wind, or some other energy source—plus batteries to store any excess energy—replacing a connection to the electric grid. And it isn’t economically viable anywhere other than Hawaii, and something that isn’t really practical anywhere. Yet.

SolarCity’s new program isn’t exactly grid defection, but it’s close. The Smart Energy Home project keeps you connected to the grid, but using as little grid power as possible.

SolarCity is run by shrewd business people, who can see which way the wind is blowing (or the sun shining?) in the United States and want to get ahead of the trend. You see, states all over are changing the game when it comes to solar; increasing monthly charges and shutting down net metering, like Nevada and Hawaii did just last year. In fact, more than half the country is studying changes to net metering, which, if big corporate interests get their way, might make solar much less economically viable by changing the way solar owners get paid for the electricity their panels produce.

But even if net metering were the law of the land across the country, the price of solar panels and batteries is decreasing so rapidly that the economics of grid defection will favor solar in many places in the U.S. in just a decade or two. But don’t take our word for it. The Rocky Mountain Institute published a study in late 2014 called “The Economics of Grid Defection,” in which they found a 10-to-30-year timeline for solar+storage to be a better deal than the grid. Check out the chart they included in the study:

What the chart shows is, considering price increases for electricity and price decreases for solar and batteries, the latter will become more economical than the former in places all across the country between 2025 and 2047. The places where electricity is more expensive (New York, California) will be first, and places where electricity is cheap (Kentucky, Texas) will come last.

What about reliability?

Economics are just one hurdle in the way of grid defection on a wide scale. Any replacement for the grid has to be as reliable as the grid—and the grid is very reliable. Simply put, the U.S. electric grid is the most complex, most effective, and most brilliantly-designed machine ever built by humans. In fact, even including extreme weather events, the average downtime for customers all over the country is on the order of minutes per year.

Add to that the fact that solar+battery systems large enough for a typical house to go off-grid would have to be huge to compensate for differences in energy supply day by day, and you can see it may not ever be easy for Americans to go completely off-grid.

So what’s SolarCity up to?

Dig a little deeper into Hawaii’s cessation of net metering, and you find some interesting things. See, Hawaii has committed to 100% renewable energy by 2045—the most aggressive goal in the United States—which means it’s going to need a lot of solar, wind, and every other kind of renewable to come online before then. And though eliminating net metering might seem like a silly thing to do if you want to encourage new solar development, what Hawaii replaced it with is interesting, to say the least, and basically cleared the way for SolarCity’s new program.

Hawaii Electric Company (HECO) calls its two “net metering lite” programs “Customer Grid Supply” and “Customer Self Supply.” Both are designed to allow homeowners to go solar easily and reduce their electric bills, but one replaces net metering, and one encourages the kind of program SolarCity has proposed.

Under “Customer Grid Supply,” homeowners can still have solar panels connected to their home energy meter, with electricity going to the grid whenever more is being produced than the home needs. For that excess production, the solar panel owner gets a credit, which varies based on the island on which they live. These credits aren’t nearly the retail price for electricity, making solar not as good of a deal as it had been, but all are well above the average price for electricity in the U.S., meaning Hawaiians are getting some of the best solar deals out there.

Rates under HECO’s Customer Grid Supply program

The “Customer Self Supply” plan allows a home to have solar panels and be connected to the grid, but does not allow the homeowner to send excess solar electricity to the grid. That means the homeowner will need some way to store solar electricity for later use, but still gets to rely on the grid for any power above what’s generated by their panels. So with this plan, the door was wide open for SolarCity to step in and set up exactly these kinds of systems, with the promise that they will get you as close to your usage as possible.

Under the Customer Self Supply plan, the customer is eligible for an expedited and streamlined interconnection process, and a can reduce their electricity bill to a minimum of $25, and we’re betting SolarCity is designing systems that will get a homeowner as close as possible to that number. In fact, what the company promises is a system that “uses the battery, smart electric water heater and controllable Nest Learning Thermostat™ to automatically modify energy usage based on how much solar power is available to prevent energy from being exported back to the grid.”

Is this the future of solar?

In our post on the Tesla Powerwall, we wondered if SolarCity was going to “start leasing home solar with Powerwalls and become your new electric company.” And that scenario still seems possible, considering the big changes coming to solar owners’ electric bills. But given all the challenges of producing and storing exactly the right amount of electricity for your home, not to mention the inconvenience of curbing your usage to avoid a blackout if your solar panels can’t keep up, it may not be very likely.

Instead, we might see small communities or even neighborhoods become their own micro-grids, with renewable generation and battery systems all tied together, so that everyone in a specific geographical location can share the generation and usage of a larger system. But in that scenario, there would still need to be a way to quickly ramp up electricity production if demand exceeds supply, whether because of a cloudy day with no wind, or any other failure of the renewable generation equipment. At this point, it’s hard to envision a future without some sort of energy generation and transmission infrastructure.

Much more likely is the idea that states might carve out exceptions for “customer self-supply” like Hawaii has. That option would be much more likely to win broad support than a national 100% net metering standard. It would allow solar owners to retain the protection of the reliable, convenient grid for a nominal fee, while reducing their demand on that grid to near zero. SolarCity might be one company to set up systems under such a scheme, but it is highly unlikely they’ll ever replace your electric company altogether.

Last modified: February 29, 2016

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