Grid Defection: Environmentally Unjust and Bad for Renewable Energy in the Long Term?

By Casille Systermans, Policy Extern

Image Credit: NREL

Solar power is a rapidly growing industry with the potential to provide significant environmental and economic benefits to society. One solar technology option that is becoming more affordable and more widely available is solar-plus-battery systems, which allow home or business owners to install solar panels with a battery back-up on their property. These systems have the potential to allow energy customers to produce all the energy they need on site. This in turn gives customers the option to disconnect or “defect” from the electricity grid entirely. While increasing the amount of solar-plus-batter systems providing energy in the United States is certainly a positive thing, grid-defection is a separate issue and it is important to consider the major environmental justice concerns associated with large-scale grid defection, as well as the potentially negative consequences large-scale grid defection can have on the long-term goal of achieving an entirely renewable energy grid.  

When customers defect from their utility, the utility company loses a customer and ultimately sells less energy. If grid defection becomes wide spread and utilities lose a large portion of their customer base, they will likely end up having to raise rates for the customers that remain to pay for their stranded costs. As rates rise more and more, more customers will be financially incentivized to defect from the grid, causing the utility’s customer base to shrink further and rates to rise even more. This is commonly referred to as the utility death spiral.

The problem with this scenario is that the customers who remain with the utility are more likely to be low-income customers who cannot afford the up-front cost associated with solar-plus-battery systems. Low-income communities and families already have disproportionately high energy cost burdens and are more likely to be negatively impacted by the pollution associated with traditional fossil fuel energy sources. Transitioning to a renewable energy system should not exacerbate environmental justice concerns by placing the burden of this transition on marginalized communities. Large-scale grid defection has the potential do just that by leaving the poor with the bill for large fossil resources and grid infrastructure that were built to benefit everyone.

It is possible to mitigate the economic harm to poor communities caused by large scale grid defection by charging customers to defect, requiring the utility to absorb their stranded costs rather than raise rates or adopting other mitigation policies. However, the impact on poor communities is not the only potential problem associated with large scale grid defection. In the long-term, large-scale grid defection could lead to a sub-optimal energy system.

Solar-plus-battery systems have the potential to be hugely beneficial in facilitating a transition to a fully renewable energy system and expanding use of solar-plus-battery systems does not require grid-defection. Instead, solar power and battery power should be part of comprehensive energy reform.  Distributed generation is essential to achieving an 100% renewable energy grid and instead of viewing solar-plus-battery systems as a threat to traditional utilities, they should be treated as a key part of a larger renewable energy transition plan.

Renewable energy advocates and utility regulators need to consider environmental justice concerns when they choose which policies to pursue and how best to encourage a renewable energy transition. Poor and minority communities are more likely to be affected by pollution and environmental degradation and it is unfair to ask those same communities to pay higher energy rates so that others can defect from the grid. Solar and battery power are only going to become more prevalent and it is essential that the energy community encourages and manages that growth in a just manner.