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Retail
Louisville, KY
Westchester, NY
San Antonio, TX
Los Angeles, CA
Honolulu, HI
$1.40
$1.20
$1.00
$0.80
$0.60
HI
PRE-2014
$0.40
NY
2025
KY
2047
CA
2031
$0.20
2047
TX
$0
2014
2016
2018
2020
2022
2024 2026
2028
2030 2032
2034 2036
2038
2040 2042
2044
2046 2048
2050
Louisville, KY
Westchester, NY
San Antonio, TX
Los Angeles, CA
Honolulu, HI
BC
BC
DSI
DSI
ATI
ATI
BC
CI
CI
BC
DSI
ATI
CI
ATI
DSI
PRE-2014
CI
BC
DSI
ATI
CI
2015
2020
2025
2030
2035
2040
2045
2050
3. Because grid parity arrives within the 30-year economic life of typical utility power assets,
it foretells the eventual demise of traditional utility business models. The old cost recovery
model, based on kWh sales, by which utilities recover costs and an allowed market return on
distribution networks, central power plants, and/or transmission lines will become obsolete.
This is especially profound in certain regions of the country. In the Southwest across all MWh
sold by utilities, for example, our conservative base case shows solar-plus-battery systems
undercutting utility retail electricity prices for the most expensive one-fifth of load served in the
year 2024; under more aggressive assumptions, off-grid systems prove cheaper than all utilitysold electricity in the region just a decade out from today (see Figure ES3).
Though many utilities rightly see the impending arrival of solar-plus-battery grid parity as
a threat, they could also see such systems as an opportunity to add value to the grid and
their business models. The important next question is how utilities might adjust their existing
business models or adopt new business modelseither within existing regulatory frameworks
or under an evolved regulatory landscapeto tap into and maximize new sources of value that
build the best
electricity
system of the future at lowest cost to serve customers and society.
FIGURE
ES3:
These questions
will be the subject
of a forthcoming companion
piece. SCENARIOS
U.S. SOUTHWEST
2024 SOLAR-PLUS-BATTERY
COMMERCIAL
VS. ESTIMATED UTILITY RATE DECILES
[Y-Axis $/kWh]
$0.24
Los Angeles
Analysis Scenarios
$0.20
Base Case
$0.19
$0.16
Demand-Side
Improvements
$0.14
Accelerated Technology
Improvements
$0.12
Decile 10
$0.04
Decile 9
Decile 8
Decile 7
Decile 6
Decile 5
Decile 4
Decile 3
Decile 2
$0.08
Decile 1
$0.12
Combined Improvements
$0.09
$0
States included in the Southwest region for this graph: AZ, CA, CO, NM, NV, UT
The Economics of Grid Defection is the work of Rocky Mountain Institute, CohnReznick Think Energy, and HOMER
Energy. Rocky Mountain Institute thanks Fred and Alice Stanback and the Rudy & Alice Ramsey Foundation for their
generous support of this work.
For more information on The Economics of Grid Defection, please contact Jon Creyts ( jcreyts@rmi.org)
or Leia Guccione (lguccione@rmi.org).