Why Elon Musk's Batteries Frighten Electric Companies

JoeyRox writes: The publicized goal of Tesla's "gigafactory" is to make electric cars more affordable. However, that benefit may soon be eclipsed by the gigafactory's impact on roof-top solar power storage costs, putting the business model of utilities in peril. "The mortal threat that ever cheaper on-site renewables pose" comes from systems that include storage, said physicist Amory Lovins. "That is an unregulated product you can buy at Home Depot that leaves the old business model with no place to hide."

Comments

Are they really that scared?

[Mr D from 63]

So, what evidence is there that electric companies are scared? Sounds like just the contention of a greeny.

Re: Are they really that scared?

[Anonymous Coward]

How much money they spend on protecting their status quo.

Re: Are they really that scared?

[disposable60]

Apart from the handful of nukes and hydro installs, the electric companies are a segment of the fossil fuel industry.

Re: Are they really that scared?

[Aighearach]

My public utility is totally behind renewables and if they could reduce the demand from the community they would.

They are "greenies," as are most Americans.

So both the claim that utilities are scared, and the claim that greenies think they are scared, these are both dubious to me.

Demand won't actually shrink, growth will flatten. Greedy companies will freak out, public utilities will breath a sigh of relief.

Re:Are they really that scared?

[slew]

As I understand it, most of the power company's objections to solar is being forced to buy the power back and subsidize it.

Maintaining the lines to your house is a fixed cost and they are recovering that cost using amortization over periodic billing based on usage. People who go solar are essentially the freeloaders in this system as they pay less of the overhead for the amount of transmission service they receive. This is not unlike the gasoline tax for highway funding debate or numerous other situations.

Governments tend to attempt to make things simpler for consumers by mandating "tariffed" service to avoid "skimming" by the providers. Unfortunately that generally doesn't work as governments generally attempt to use these regulations for subsidizing service for some by burdening others and the companies just get smarter about skimming. Unfortunately, some customers discover the workarounds to freeload for a while (e.g., internet VoIP w/o universal service fund fees, or solar panels with forced power buyback, or electric cars that pay no gas tax). They claim their microeconomic observation about their freeloading is the new economic reality and people should just wake up and smell the coffee.

Unfortunately, when there are too many freeloaders them, then the model just breaks down and need to be fixed so that more people pay full freight. Often, the freeloaders then discover that paying full freight isn't makes the it much less attractive (but at least they got theirs whilst the getting was good). The result is generally simply a different reality than the previous, but generally not much different.

For example, the power company would much rather demand be totally flat. Provisioning for more power is a big capital cost (building power plants, increasing transmission capacity, etc.) that they can only recover by amortization. This is the reality that the power companies lived in the 80's with nuclear power decommissioning. Sadly, we have a big nasty habit of kicking the can down the road on these things...

At least when you collect a welfare check directly from the government you are being honest with yourself...

Re: Are they really that scared?

[lgw]

Can you really not distinguish between sellers and buyers? Electric companies have no love for any particular means of generating power, they just want it cheap, and for most of them their primary concern in life is the NIMBY problem.

Electric companies, at least in some latitudes, are certainly worried about practical rooftop solar eating into their business, but for reasons that have nothing at all to do with love of fossil fuel.

Re: Are they really that scared?

[Maxo-Texas]

Electric companies have a huge investment in their current physical plant.

Any plant built in the last 10 years won't be paid off for another 10 to 20 years.

Solar and wind power combined with durable, inexpensive batteries has the potential to be "cheap enough" that people will avoid electrical companies and the "network effect" that benefits them will be lost.

You see it with AT&T now. When everyone had a landline, prices were lower. As fewer people have a landline, the per customer cost of maintaining the physical lines goes up.

I.e. if the fixed cost of serving an area is 1 million a year (for workers and materials) (either electrical or telephone) and 100,000 people in the area use your service, the cost per customer is $10. Your utility bill is $50 in the winter and $150 in the summer. If that drops to 50,000 customers- the fixed cost is up to $20. If that drops to 25,000 customers- the fixed cost is up to $40.

Where you "rolled in" the fixed cost before-- now you either need to raise rates or raise your fixed cost.

But as your rates increase to $90 in the winter and $180 in the summer-- it makes more sense for people to go to solar and wind power. As you drop to 10,000 customers in the same geographical area-- you are up to $100 per customer in fixed costs and now the monthly bill is $150 to $250 and it really makes sense to go to solar.

add to that the fact that solar has dropped from 10x the cost of generated power to 4x the cost of generated power in about the last 12 years alone and the future trend is solar power fundamentally cheaper than generated power. Plus there is already 2x cost solar panels-- it's just that germany has bought current and future production two years out for their industrial scale solar plants.

And yes- electrical utilities are starting to lobby very hard against solar. Removing subsidies, adding costs, adding regulations to make it more expensive to go solar, and altering laws so they can break out the fixed cost so grid tied solar customers will pay their full share of the fixed costs (which are currently partially held in the variable rates).

Re:Maybe I'm missing something

[MickyTheIdiot]

Again, I don't understand why the arguments assume there has to be ONE winner, or that one way wipes out the other way. If we cut BACK on dead animal fuel it will be an improvement. There is room for more than one way to fuel a house.

best thing for electric companies

[bigmo]

Electric utilities would in fact love local storage for solar rooftops. The big technical problem for them is that when a cloud goes over an area, all the electricty being pumped back into the grid suddenly drops drastically and the power company has to have generation capacity to add in within seconds to avoid brown outs. By having even 30 minutes worth of storage in the home, the batteries could fill in for the local drop and ease the imapct on the power company.

This is becoming a very big problem in Germany now and there are companies whose sole business is to supply incredibly expensive (thousands of dollars per kilowatt hour in some cases) electricity within a few seconds notice. I believe there was even a bloomberg article on this a few months ago.

Re:Is Bloomberg the New Buzzfeed?

[M_Hulot]

What the hell is up with the title of this article? Nowhere did I find any indication of anyone being "scared" or "frightened."

The threat that the article explains is that cheaper, better batteries makes going off-grid easier. Of course, electricity utilities aren't going to release a press release stating that they 'are afraid of this new technology and will try to kill it'! You may have doubts about how much of a threat batteries are to electricity companies and how that potential loss compares with the gain from electric cars, but the article is clear on the risks, in my opinion.

Re:Liberals will regulate it away

[marian]

You must mean that notoriously goddamn liberal hotbed of politics called Texas. They really don't like that whole goddamn liberal free market direct sale model. If only they could learn from that famous bastion of conservative thought that started the whole mess: California. Let's not cloud the issue with facts. They're terribly inconvenient.