Former US energy secretary Steven Chu has claimed battery storage technology used in combination with solar could be “as disruptive to electricity distribution and generation as the internet”.

According to Chu, in order to remain competitive, utilities need to respond by applying a new business model to prepare for the likely coming of cheap solar power and falling prices of residential storage batteries.

Speaking at a University of Chicago event earlier in the month, the Nobel Prize-winning physicist gave an often light-hearted and humorous talk on “energy, innovation and global climate change”, in which he discussed the changing energy landscape of the USA and the world.

Chu explained that as the cost of PV modules plummeted and battery prices also fell, it was possible to envisage a situation in five to 10 years where homeowners could be 80% ‘self-sufficient’ and off-grid with a US$10,000 to US$12,000 solar-plus-battery system.

He went on to suggest a business model where utilities could continue to operate in such a scenario.

“This technology could be as disruptive to electricity distribution and generation as the internet. So I was telling utility companies, ‘This is coming down the line. Let’s think of a business model where you can profit from this’.

“Here’s the business model: utility companies get to borrow money as inexpensively as just about anyone in the United States. They’re [utilities] in a flat-to-shrinking business and as solar and batteries especially get cheaper and cheaper, they’re going to see their customer base of their best customers do this [go 80% off-grid].

“They may get ‘Fed-Exed’ as the Post Office got Fed-exed, they took away their best customers first, the ones who pay their bills because they have the capital.”

Chu’s suggested business model would see utilities borrow money to be able to purchase the systems, to then partner with appropriate companies that could figure out how to install systems cheaply. Chu called it the ‘telephone system’ model, where the utility company, in partnership with a private company owns the modules, batteries and leases residential rooftops in exchange for supplying the homeowner with cheap electricity.

According to Chu, this system would provide homeowners with electricity security including blackout resistance while utilities can put batteries in protective environments at the point where it is most needed, “at the end of the distribution system for grid stability”. Solar on rooftops in distributed generation would also reduce the infrastructure costs incurred by utilities, such as the cost of putting in transmission networks to interconnect to the grid, Chu said.

Chu said he had raised these issues two years ago and found utilities to be resistant to change. He cited examples of utilities which had responded to the changing situation only by trying to raise grid charges, which Chu argued is an unsustainable business model as solar and battery costs fall.

Sustainability and ecology research centre the Rocky Mountain Institute recently produced 'The Economics of Grid Defection', which it described as the first detailed analysis of ‘defection’ from grid networks using storage combined with solar power.

On the other side of the same coin, Chu talked about the greater need for energy efficiency, citing the example of set-top boxes for cable television as a consumer good which could consume just a tiny fraction of the energy used in current models.

Chu also spoke about the need to fund innovations in technology R&D and the difficulties of getting new ideas about technological development past the political process to the funding stage.

Steven Chu's University of Chicago talk:

Storage and solar are covered extensively in 'Put up or shut up time for storage,' a feature article in the latest volume of Solar Business Focus, available online now.