Emerging economic viability of grid defection in a northern climate using solar hybrid systems

High demand for photovoltaic (PV), battery, and small-scale combined heat and power (CHP) technologies are driving a virtuous cycle of technological improvements and cost reductions in off-grid electric systems that increasingly compete with the grid market. Using a case study in the Upper Peninsula of Michigan, this paper quantifies the economic viability of off-grid PV+battery+CHP adoption and evaluates potential implications for grid-based utility models. The analysis shows that already some households could save money by switching to a solar hybrid off-grid system in comparison to the effective electric rates they are currently paying. Across the region by 2020, 92% of seasonal households and ~75% of year-round households are projected to meet electricity demands with lower costs. Furthermore, ~65% of all Upper Peninsula single-family owner-occupied households will both meet grid parity and be able to afford the systems by 2020. The results imply that economic circumstances could spur a positive feedback loop whereby grid electricity prices continue to rise and increasing numbers of customers choose alternatives (sometimes referred to as a “utility death spiral”), particularly in areas with relatively high electric utility rates. Utility companies and policy makers must take the potential for grid defection seriously when evaluating energy supply strategies.