Despite falling battery costs, consumers unlikely to defect from utilities


The continuing drop in cost for batteries poses little risk that residential customers will defect from U.S. utilities, according to a Moody’s Investors Service report, “Batteries are coming but utilities are not going away.”

Batteries have yet to become cost-effective for most consumers, the report states. This will deter residential customers from becoming energy self-sufficient and severing ties with their utilities, in a practice known as “grid defection.” Massive grid defection would transfer the fixed costs of the grid onto remaining customers, creating challenges for current utility business models and threatening utility credit quality.

“We believe the cost of batteries in a solar-battery system is still an order of magnitude too expensive to substitute for grid power,” said Toby Shea, a Moody’s vice president and senior analyst.

The capital cost of batteries today is closer to $500 to $600 per kilowatt-hour, according to the report.

Moody’s believes costs need to fall to $10 to $30 per kilowatt-hour until grid defection because of the credit risk for utilities.

Based on analysis that uses data on actual consumer usage, Moody’s finds that the size of battery necessary to leave the grid is much larger than what is commonly believed. Most other studies on battery size do not adequately consider the extremely volatile nature of electrical usage.

Besides cost considerations, solar generation is required in a solar-battery combination. Although growing rapidly, the number of households with rooftop solar is very small and most rely on net energy metering economics, which requires a grid connection.

Moreover, the lifestyle adjustments required will be unacceptable to most people. Most people, according to Moody’s, are too accustomed to the convenience and reliability of grid-supplied electricity and will not accept the constant need to be mindful of the battery charge levels or conserve electricity as necessary.

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