If Solar Prices Go Much Lower, It’s Going To Wreak Havoc On The Grid
At the moment, we’re in a happy place. Solar technology is getting cheaper and becoming more accessible to those with high disposal incomes to spend on solar roof installations. Great. But there’s a problem: all those people switching to solar power are affecting those who still rely on the grid.
The Problem For Traditional Power Companies
The underlying problem goes something like this: as people switch from grid power to independent electricity generation, there are fewer people left over to pay for all the fixed costs of the regular coal- and gas-powered electricity supply. And when fewer people are paying, each person has to pay more.
You can quickly imagine the problems that this situation might create in the future for grid power if the economics change. Not only will cheaper solar be more enticing to people on middle and low incomes, but grid power will become less attractive, forcing many to switch. We could end up with a runaway situation as grid power prices rise as each person abandons it for solar power generation.
Load management software will, of course, take care of part of the problem, namely the constant fluctuations in energy demand. But there will be times when the sun doesn’t shine, and the wind doesn’t blow, and people will need to rely on grid power to some degree.
Knowing exactly how this whole thing will play out is difficult. The runaway scenarios outlined above is a possibility, but it is limited by the ability of solar power companies to supply new units to homeowners and businesses. If the price of grid power starts rising because people leave it en masse in favor of solar panels, the solar panel industry may not be able to keep pace. If that happens, then the total cost of solar installation will rise, making grid power attractive once more – at least in the short term.
A Way Out For Traditional Power Companies
Traditional power companies love to spend lots of money on big infrastructure projects, believing that is the way to get the cost per unit of electricity down to competitive levels. But if solar continues to fall in price, the industry may have to change its tactics and instead opt for smaller, more distributed networks of solar power generation.
To be fair, we already see this. Many of the regional monopolies in the US are announcing plans to expand their renewable fleets while committing not to build new fossil-fuel-fired power stations in the future. But they need to come up with a way of making the grid pay, even if they do end up switching to renewables wholesale, as many analysts predict. The only way to do that is to use economies of scale, deploy solar in large installations, and undercut electricity prices offered by solar roofs.
The grid may also try to sell itself as offering support during peak demand or when people run out of their own electricity. But with things like home batteries, that doesn’t look viable long term.
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