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.
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This is the big story for residential consumers. Prices for home solar systems have dropped 10% 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, 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% 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