When Elon Musk combined SolarCity Corp. with Tesla Motors Inc., he created an integrated renewable energy company. Not only can he sell solar panels to homes and businesses around the world, he can also sell them the batteries to store the power those panels produce. There’s just one problem. As Cassandra Sweet noted in the Wall Street Journal, Musk has to create a market where virtually none exists. In 2015, only about 450 U.S. homeowners installed batteries for storing homemade electricity.
True, the Federal Government offers incentives. But Musk will have to practice intentional imagination to identify the environments with built-in incentives for storing solar energy. One promising possibility—the garages of homes where there is already an electric vehicle. Often these vehicles need to be charged at night. A house with a south-facing roof will provide more than enough energy if there’s a way to store it.
More than? Yes. Direct current—the kind generated by solar cells and stored by batteries—creates a dividend. Unlike alternating current—the kind delivered by most utilities—direct current does not have to be “inverted” for use in batteries. Inversion itself takes energy, about 10% of what’s delivered. Have you ever noticed how the little black box on your phone charger is hot after it’s been plugged in? That heat is the energy that’s lost in converting the alternating current delivered by the utility (AC) into the direct current (DC) that can be stored in your phone’s battery. If there’s no conversion to AC, that energy isn’t lost.
In addition to sidestepping the cost of inversion, creating an environment in which DC is generated, stored and used avoids transportation costs. For a typical utility and its typical customer, costs associated with generation represent less than half the total price of the product. Greater costs are incurred in transmission and distribution — miles and miles of wire and voltage regulators, along with the expense of constructing, maintaining and managing them.
Other environments could also benefit from DC. Think about the typical grocery store. Using chipped ice to keep produce and meat cool costs money. So most managers keep the store at a low temperature. A self-contained DC environment could provide air conditioning at a lower cost. And what about designing hospitals to use DC? They too could benefit from the dividend created by self-contained DC power systems.
And once homeowners have solar arrays on the roof and electric cars in the garage, it’s not a huge leap to imagine that they would want to expand that array so it can power their phones, readers, tablets and electronic games, not to mention their refrigerators, ranges and battery-driven lawn movers.
The social integration that undergirds the production, transportation and use of electricity has worked well in the past. Now, however, Mr. Musk has an opportunity to introduce a new, more efficient integration that will sidestep the costs of the current power grid. No doubt about it. Energy-intense environments will be much more efficient when they generate, use and store their own supplies of direct current power.