One of the challenges of renewable integration that often goes undiscussed are the “death spirals” that are associated with adoption. We’ve been thinking a lot about these issues at Caltech over the past few years…
Two motivating stories
To highlight what we mean by a “death spiral”, let us first consider an example of consumers in Southern California who use a lot of power from the power grid. They clearly have an incentive to install rooftop solar since the price you pay for each incremental kilowatt-hour you consume increases with the total amount that you consume. That means that if you consume less you fall into a lower tier in which the price of the next kilowatt hour you consume is low; whereas if you consume a lot, the corresponding price you pay is high. This convex price structure is an incentive for high consumers to reduce consumption; it is also, however, an incentive for installing rooftop solar so that the consumer’s net consumption falls into a low tier.
But what are the consequences of the fact that incentives for adoption are much stronger for high consumers?