Demand destruction is what coal mining companies, utilities, and anyone who benefits from a centrally controlled power grid dreads. Why? Demand destruction represents an existential threat to the entire business model of these entities.
Consider the state of Iowa’s electricity generation mix and my recently installed solar photovoltaic system. Iowa’s electricity generation mix breaks down like this for April of 2017:
In Iowa non-hydroelectric renewables usually equals wind given the relatively low penetration of solar photovoltaic generation. Another caveat is that the wind tends to blow strongly in the spring and demand for electricity has not spiked with the onset of the summer air conditioning season.
Now consider the impact of a solar photovoltaic system, mine or someone else’s. When that demand leaves the grid, so to speak, what generation sources do you think will be curtailed? In order I think it would be coal, nuclear, natural gas, and finally wind. Why? Wind turbines do not have a recurring fuel cost, so the cost to retire them does not include a perpetuity of fuel cost baked in which can be a significant driver for an asset with a long life.
In other terms, do you keep generating power by paying to burn a fuel or just harvest the wind for free? In business school the number one lesson I learned in marketing was to not compete with free. You will lose every time.
So, as demand disappears from the grid as a result of distributed residential solar the traditional fossil fuel sources are forced to compete with installed and cheap wind power for a dwindling number of customers. I exaggerate to some degree to get the point across, but in Iowa this may not be such a moot point given the plans for wind power development in the next three years.
Depending upon how you measure it Iowa has more than 6,900 megawatts of wind power providing anywhere from 35% to 40% of the state’s electricity. This is great news in and of itself, but the state’s two major utilities—MidAmerican Energy and Alliant Energy—have announced investments for an additional 3,000 megawatts or more by 2020. Just with these additions—barring any additional activity by other energy players—would bring Iowa nearly 10,000 megawatts of wind power and give the state the capacity to produce more than 50% of its electricity from the wind. This is without a significant portion of the state’s electricity demand being displaced by distributed residential solar or energy efficiency.
As you can see from the chart that when the wind blows heavily, which it tends to do in the spring, wind is already the largest source of electricity generation in the state. That trend was true for February, March, and April of 2017. This is only going to grow in the future.
Our homes can be the drivers of change for a cleaner and greener world.