“Grid Defection,” a term popularized by the Rocky Mount Institute in their report Economics of Grid Defection, has caused some trepidation among utilities executives taking a long-term look at their industry. However, little has materialized to date that gives reason for major concern. Instead, we are starting to see some selective defection during certain points of the day, specifically among non-residential customers. A term for this more near-term threat might be “Peak Defection.” Driving this movement are the improving economics of large scale energy storage, more sophisticated energy management systems, and legacy tariff structures. An additional tailwind is that intermittent renewables and energy efficiency measures are further driving up peak prices in many areas of the US (EIA).
Why is this phenomenon important? One reason is that uncoordinated Peak Defection could cause more problems for the grid and make an efficient distributed energy future harder to obtain. Another reason is that a lot of utility revenue is at stake, and tough changes to how they recoup that revenue may be necessary. However, if regulators and utilities work with their large customers to the benefit of both parties, Peak Defection can both lower power costs and increase grid stability.