Debunking the Myth of the Electrical Utilities Death Spiral

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With the drop in price of distributed energy systems (mainly solar PV), the cost of energy for some prosumers becomes lower than the one provided by the grid. They are then tempted to severe their tie to the network to escape its cost. The burden of the cost of this mutualized infrastructure would then have to be socialized onto fewer customers, pushing more of them to leave their electric utility to become autonomous prosumers. This is called the “utilities death spiral.”

But it misses the point. The grid brings much more than just kilowatt hours to its customers.

• First, it brings reliability, thanks to mutualized back up that could only be matched on an independent energy system with overly costly generator redundancy.
• Second, the grid can supply the inrush current some equipment needs to start, for example, motors. Relying only on local energy generation requires oversizing it for only those few seconds when the fridge or air conditioning compressor kicks in.
• Third, the sheer size of the electrical system enables the grid to provide high-quality voltage and sinusoid that modern equipment requires. In autonomous systems, harmonics that harm the lifespan of machines and electronics are difficult if not impossible to dampen.
• Fourth, the overall efficiency of the electrical system is better if generators connected to the grid can merge all their outputs, given the fungible nature of electricity, while running at their best efficiency ratio. Any local generator would have to run close to the profile of the loads connected to it, thus often operating out of its ideal efficiency range. For example, a Combined Heat and Power system (CHP) will not run at its optimum if heat and electricity are needed at the exact same time.
• Last, being connected to the grid gives the ability to engage in energy transactions. Obviously, an islanded system has neither access to energy markets nor any possibility to sell its excess power.

The grid brings so much more than kilowatt hours that it is here to stay. There certainly is an issue in the way utilities pass on the cost of the grid to its prosumers, but it’s the regulators’ mission to find ways for fair payment of the grid’s value.

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