Energy Defect

For those of us in the northern hemisphere, summer is in full swing. Each weather report seems to mention a heatwave that is either coming or going. While our nearest star is high in the sky, my energy levels wane and electricity bill soars. Misery loves company, and utility executives could be suffering right alongside me, only their issues may just be getting started.

For those of us in the northern hemisphere, summer is in full swing. Each weather report seems to mention a heatwave that is either coming or going. While our nearest star is high in the sky, my energy levels wane and electricity bill soars. Misery loves company, and utility executives could be suffering right alongside me, only their issues may just be getting started.

Recently, a large power outage impacted 140,000 homes and businesses in Southern California, during one of the hottest days of this year. Electricity is an interesting consumable because it has been historically difficult to store, meaning most of it gets used immediately after it is generated. This ephemeral quality requires consumers endure inconveniences such as sweltering heat when grid components like transformers explode.

Some believe these burdens will be diminished in the not-too-distant future. Electricity providers are already competing with solar panels installed on homes; these users have lower demands on traditional sources of power, but producers have fixed costs meaning other customers must split a larger share of these expenses. These higher costs make other technologies even more competitively priced. Advances in energy storage only complicate matters for the firms.

According to research from the McKinsey Global Institute, battery storage will soon reach price and capacity levels which could further disrupt the current power grid system. As Americans become more able to store the power generated at home, energy grid defectors will increase. This is already happening in places like Hawaii and Australia where electricity costs are high. Some users are able to produce and store 80-90 percent of their requirements. However, they remain connected to the grid for the rest of their needs. These lower revenue streams to energy providers mean their share of the fixed costs is lower than that of traditional users.

Costs of solar power generation and storage may not be plummeting fast enough to cause full energy defections just yet, but the day may come. Only then will we begin to fully understand the costs of changing our energy source. Accounting costs are easy to see, they end up in various financial reports, but there is no such thing as a free lunch. Time is needed in order to see the unintended consequences of the energy defect.