Soon everyone will be an electric company

Experts predict the amount of electricity homes and businesses produce through distributed generation could double over the next 25 years.

By MSN Money Partner Jul 7, 2014 3:48PM
Credit: © Manuel Balce Ceneta/AP Photo

Caption: Solar panels seen on a the roof of a home in Chevy Chase, Md.By Bill Sanderson, MarketWatch

In the not-too-distant future, everyone could be an electric company, selling power into the grid just like the owners of giant generating plants.


The idea of powering the electric grid from a multitude of sources is called distributed generation. Homeowners can already buy solar generators and furnaces that simultaneously produce heat and electricity. On the horizon are home battery systems that could let homeowners store solar power generated during the day for use at night.


Distributed generation isn't pie-in-the sky -- the know-how exists to build these systems. But the technology is held back by cost and by regulations that don’t allow for tiny contributions to the power grid. 


Federal energy experts figure costs will drop and regulatory issues will be overcome, and that the amount of electricity homes and businesses produce through distributed generation could roughly double over the next 25 years. That's not enough to replace big generating plants, but enough to have a big impact.


Here's a rundown of the three main distributed-generation technologies.


Solar

This is the big story for residential consumers. Prices for home solar systems have dropped 10 percent a year for the last five years, according to Sanford C. Bernstein Research. Home solar installations already compete on price with utilities in Hawaii and Washington, D.C., Bernstein says. It also says home utility customers in parts of California, the Southwest and the Northeast will find solar increasingly practical because of the rising price of natural gas used to run big generating plants.


Solar City (SCTY), a California-based company, installs solar panels on homes in 15 states, including New York, California and Texas. Its 100,000 customers pay via a leasing plan with monthly payments. “We can offer many homeowners power at a lower rate than they pay their utility,” said company spokesman Will Craven.


Sunrun, another player in the solar market, says its panels can produce electricity at a cost of 10 cents to 13 cents per kilowatt hour -- competitive with the 2013 national average residential electricity price of 12.12 cents per kilowatt hour.


Sunnyvale, Calif., resident Louis Gray installed Sunrun panels on his family’s home in March. Instead of paying by the month, Gray opted to pay $17,000 up front for a 20-year lease. Sunrun installed, owns and maintains the system. Gray’s bill from PG&E, the local electric utility, has dropped from $200 to $300 a month to about $20.


"We estimate we will save $60,000 in the 20 years," said Gray, who is married and has three children. "It's probably the best decision we've made all year financially. There's only so many ways you can take costs out [of your budget] every month, and this has been a great one."


You don't need to live in a perpetually sunny climate to use solar. Germany -- which gets about the same amount of sun as Washington state -- is the biggest user of solar energy in the world. On a national holiday in June -- admittedly a low-power use day -- solar generated half of Germany's electricity.


In the U.S., solar now provides just 0.2 percent of all electricity. Bernstein foresees rapid growth in solar in the coming years as the price of solar panels continues to fall. Eventually, the company says, home solar will take a sizable amount of business away from operators of big electricity generators.



Solar City, Sunrun and other solar companies make money by leasing or selling the solar systems they install. They say once installation and maintenance costs are figure in, many customers will end up spending less on electricity. Customers may also benefit by selling their excess power back into the electric grid.


Combined heat and power units

The home versions of these systems -- called microCHP for short -- use the same heat that warms your home to generate electricity. Japanese residential electric customers operate 155,000 microCHP units, and Europeans operate 45,000 of them, says Mike Cocking, a microCHP consultant in Wisconsin.


Only a few hundred microCHP units operate in the U.S., but Cocking expects the number to grow. In simple terms, microCHP units are home furnaces with electric generators attached. 


The energy that heats your home also turns a turbine that makes electricity. "The whole value proposition for this technology type is that you have to heat your home anyway," Cocking said. "What happens is, you are heating with this device, and electricity comes along as a free byproduct."


A microCHP unit installed in 2009 in a 56-unit Bronx, N.Y., apartment building provides hot water and electricity, and saved its owner $17,000 in electricity costs in its first year. Cocking says a Dover, Mass., family with a microCHP system has used the system to heat its home and generate power at a cost of 15 cents per kilowatt hour when the local utility’s going rate was 23 cents.


A downside of the units for owners of single-family homes is that in warm weather, the heat they produce can go to waste. So in the residential market, microCHP is mainly practical in big houses with some need for heat year round. The Massachusetts home Cocking cited uses microCHP as a swimming pool heater in the summer. Cocking says engineers are working on microCHP heating/cooling systems that will be more broadly practical.


Electricity storage systems

Home battery systems are still being developed by electric vehicle maker Tesla Motors (TSLA) and others.


Solar City and Tesla are marketing home battery systems in parts of California, and hope to offer them nationwide by the end of the year. The system can store enough electricity to work like a backup generator and "keep the lights on and fridge cold in a power outage or natural disaster," Solar City says on its website. Attached to the grid, the systems could also let people gain from utilities' time-of-use pricing plans by letting them store electricity bought when prices are low for use when prices are high.


University of Delaware program does something similar with electric car batteries. Willett Kempton, a professor of electrical engineering and computing and director of the university's Center for Carbon-free Power Integration, is overseeing studies of a fleet of electric cars that make money by providing stability to the power grid. When grid demand is low, the cars' batteries fill up with electricity. When demand is high, the cars' batteries pump the stored electricity back into the power grid.


Grid operators will pay for the stability provided by the cars' batteries. Kempton says a car plugged into the system can earn its owner $90 to $100 a month. "It's an advantage to be paid for having your car sitting in the garage," he said.


Kempton doubts Solar City, Tesla or other companies will come up with a home-storage system better than the battery in an electric car. He sees no need for electric car owners to invest in home electricity storage. "If you buy an electric car, you have a very large storage device," he said. "Why would you buy a second large storage device?"


The Delaware program is backed by the local utility and power grid operator -- but regulations keep it from spreading. "We can't offer this throughout the United States yet," Kempton said. But the technology is here. "This works on its own. It's just a matter of getting different areas of the country to change the rules."


Bill Sanderson blogs about New York-area utilities at www.nypowerandlight.com.


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1Comment
Jul 7, 2014 7:20PM
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Big Energy is terrified of Progress, that's whey they are always trying to Stop It. Big Energy will soon go the way of the Dinosaurs, the sooner the better.
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