Rooftop Solar + Storage Can Make America’s Energy Transition Nearly $500 Billion Cheaper

In the wake of Hurricane Ida, which has resulted in at least 89 deaths in the United States alone, President Joe Biden has come out big against climate disruption and for solar power. Biden has called for the U.S. to generate 45% of its electricity from solar power by 2050, an increase from about 3% today.

That’s a huge commitment and will require an investment of $2 trillion or more. A lot of that clean energy will certainly come from big solar farms, which can produce at scale.

But if Biden wants his climate spending plan to make a bigger impact, should he emphasize rooftop solar and small-scale batteries? A leading energy researcher, Chris Clack, says a local solar-storage plan could save hundreds of billions of dollars as America transitions to 100% clean energy.

Clack, a respected data modeler based in Colorado, wants government regulators to keep requiring utilities to install large solar installations mostly located in rural areas. But while they do that, Clack also wants more distributed energy resources (DERs), starting with rooftop solar power combined with batteries located on and near buildings where people use electric power.

Putting solar panels on homes, schools and businesses; connecting those panels to batteries; using more data; and then updating the electrical grid from an old-fashioned one-way street to a modern two-way network will efficiently move clean power from big and small power generators alike when and where it’s needed. Doing all this could save Americans $473 billion while creating 2 million additional jobs by 2050, according to Clack’s computer model of the nation’s electricity system, a model that Clack claims is more accurate than more commonly used ways of modeling the electric grid.

Clack applied his new data model to produce a report on the value of distributed solar to America’s electrical grid. And his findings will be surprising to many.

Rooftop Solar with Storage Can Replace Expensive Peaker Plants

Conventional wisdom is that utility solar is cheaper and that rooftop or smaller scale solar costs more for the amount of electricity produced.

On a levelized cost of energy basis, the method used by utility planners and state electricity regulators to determine the cheapest source of new power generation, that’s often true. But Clack’s analysis suggests that this approach is outdated, mostly because it fails to consider the role of buildings (and now, electric vehicles) not merely to take power from the grid but also to add power back into the grid.

Clack’s data model allows him to focus in more detail on local behavior than the older models used by utilities and regulators. Traditional models rely on building extra capacity to cover “those five days a year when you need extra transmission to send power from Arizona to New York,” as Jigar Shah puts it in a recent podcast from the Energy Gang.

To ensure that the power stays on when demand peaks during a few hot days each summer, utilities have traditionally built “peaker” plants, usually powered by natural gas, that can be turned on quickly to provide power to meet peaks or spikes in customer demand. But because these plants are only used on those few days when demand is highest, most of the time the plants are sitting idle. To cover the costs to build and operate power plants on standby 24/7 all year, the power sold by peaker plants must be very expensive.

Who pays the costs for peaker plants and expensive power they sell? All the ratepayers in the territory of the utility that owns those plants.

For example, in the past decade, peaker plants cost ratepayers an estimated $4.5 billion in the New York City area alone just to be on standby, and are utilized for only a few hundred hours a year, according to a local coalition of environmental justice and clean energy advocates opposing new peaker plants in the area.

Putting in more rooftop solar with batteries could allow the electric grid to meet high demands for peak power without the need for expensive peaker plants, saving all ratepayers money. Using clean solar power instead of running dirty natural gas plants will also cut pollution in local communities too, an issue of equity for people of color and low-income families who overwhelmingly live near peaker plants.

Utility Regulators Need Better Data to Assess the Value of DERs

Using a new tool like Clack’s model could allow state energy regulators to better understand the role of distributed energy production. It may sound obvious, but with rooftop solar installed, buildings and electric vehicles don’t just consume energy as they did in the old days. Now, buildings and cars also can produce and store energy. If regulators can consider this more accurately in their planning, then they can assign the correct value to distributed solar and storage.

Clack built his own computer system to handle the software required to run his model. His company Vibrant Clean Energy makes the system available to utilities and energy regulators. But will they use it?

So far, utilities have employed consultants relying on outdated models that cannot value distributed energy resources. Those models take into account a small amount of energy efficiency upgrades to reduce demand, but the models don’t accurately represent power supply coming from utility customers. If they continue with this old-fashioned approach, utilities may continue to look at increasing demand for power from homes and businesses and think that the only way to meet that demand is to build new power plants and new power lines.

Traditional electric utilities may object to including more distributed energy resources that they don’t control and whose installation will cut into their profits. After all, state laws allow utilities can make a guaranteed profit of 10% or more on building new power plants and putting up new wires. But the cost of capital to build distributed solar with storage can be as low as 5%, according to Jigar Shah, making distributed energy resources a much better deal for ratepayers.

Since utilities probably won’t update their own computer models, it may be time for state utility regulators to adopt Clack’s system.

Regulators want to have the best information to make decisions. But right now they don’t have the necessary modeling tools to accurately understand a modern energy system, so they have little choice but to rely on information from the utilities that they regulate.

Shah explains that utilities “avalanche public service commissions with information when they say all these people are installing electric vehicle chargers with Teslas and it’s going to overwhelm the grid. And here’s our latest submission of $800 million worth of distribution system upgrades which we need to do to make sure that people can charge their Teslas, turn on their air conditioner and cook with their Instapot at the same time.”

While not optimistic that utilities will adopt Clack’s more accurate modeling, Shah hopes that other participants in utility planning proceedings, such as the solar industry, can challenge utilities’ claims with their own information provided by Clack’s model. Such modeling could show that utilities could meet customer demand for power with 90% less expense, which would certainly please groups like the AARP that lobby to keep electric rates down.

Rooftop Solar Can Enable More Utility Solar

Because “distributed energy resources make everything on the grid work better,” according to David Roberts at Volts, “DERs enable more utility-scale renewables.”

That is, distributed energy resources like batteries can store power from utility solar and wind farms when they’re producing. Then, when renewables are not producing because the sun isn’t shining or the wind isn’t blowing, distributed batteries can sell power back into the grid. This will allow the grid to host even more solar and wind farms while still providing power that’s reliable 24/7.

The battle between centralized and distributed energy is a bogus one, writes Roberts. The more rooftop solar power is installed on homes, schools and businesses, as long as it’s connected to batteries, then the more solar and wind farms that utilities can install.

Small-scale Solar Makes Power Cheaper for Everybody

To make our own contribution to this discussion, Secure Futures has been conducting research on the value of distributed resources to bring down the cost of grid power. In our case, we’ve found something very interesting.

Even without batteries, if only a small percentage of customers in any utility’s service territory go solar, it helps reduce the cost of power for all ratepayers of that utility by also reducing the need for utilities to source costly peak power.

Yes, that’s right. No batteries required. By themselves, solar panels on some homes and businesses make grid power cheaper for everybody, including electricity customers who don’t have solar.

This finding overturns the traditional claim by some utilities that solar customers are “free riders” who use the grid to store the power they generate for later consumption, but don’t pay their fair share to maintain the grid by buying much or any power from that grid. To cover this alleged unpaid cost, some utility companies assess “standby” charges on solar customers. Such fees can eat up all the savings from going solar, and act as a serious disincentive to installing more clean energy.

If our research is correct, that’s all wrong. Solar customers don’t in fact cost the electric grid money. Instead, solar customers actually help the grid operate more efficiently, which saves money for non-solar ratepayers. This means that utilities should never charge solar customers any extra fee. Instead, it should be the other way around. Utilities should pay solar customers for shaving the whole system’s peak demand.

We modestly believe that this finding will surprise many people, and we look forward to sharing the results of our research in the coming months.