Utility Grid Model Sees Tenuous Future on Solar Growth

U.S. energy consumers have long relied on utility monopolies that deliver fossil-fuel electricity from centralized stations over centralized grids. With high electricity costs in some areas, consumers are turning to microgrids — computer-controlled systems that let users balance the generation and consumption of locally-produced energy.

Published Aug. 22, 2013

High grid electricity costs
leave an opening for alternatives

The average retail price of U.S. electricity jumped
45 percent from 2000 to 2012. Costs remain low in some states, such as West Virginia and Kentucky, where coal is plentiful. Prices have increased in some states to the point that many utility consumers have invested in rooftop solar or other renewable energy, a trend that could threaten the traditional utility model.

A shift to solar

Solar power is cheaper than electricity from the grid in Hawaii, Arizona and parts of California. Some markets in high-cost states in the Northeast will reach grid parity within three years, and the majority of states in 10 years. In May, the average retail price of electricity in Hawaii was 33.15 cents per kilowatt hour, the highest in the U.S. and almost double the next highest state, Alaska. The average monthly residential utility bill was over $200 in Hawaii in 2011.

Average retail price of electricity in May 2013

Price, in cents
per kilowatt hour

Cheap natural gas backing up solar power helps lure customers off the grid

Solar installations have increased exponentially since 2000 on decreased costs. Cheaper natural gas has helped propel solar's growth: microgrids can rely on solar energy during the day and cover intermittency through a backup generator. Coal consumption has fallen since 2010.

New solar capacity installed in the U.S.

In megawatts

U.S. natural gas electric power price

Price per thousand cubic feet

U.S. coal consumption

In tons of oil equivalent1

Microgrids let consumers act as mini-utilities

Critical facilities, like hospitals, have started to develop microgrids in event of an outage from the traditional grid. The microgrid could have solar panels producing daytime electricity, with batteries absorbing excess power for use at night. Natural gas generators back up the system.

Homeowners are using solar panels to generate power for their house. Excess power generated by the solar panels can be sold back to the utility, or homeowners can purchase additional electricity from the grid if they need it.

1 — The amount of coal required to match the energy produced by burning one metric ton of oil.

Sources: U.S. Energy Information Administration, European Photovoltaic Industry Association, BP Statistical Review, data compiled by Bloomberg