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US investment banking giant Morgan Stanley has predicted that the major utility companies are going to have some tough years ahead. The reason? Tesla, and the increased affordability of rooftop solar.

The predictions were made in a series of three reports that have been published over the course of the past year. The first of which makes the case that in the foreseeable future, consumers may start to leave the grid in favor of generating their own electricity.

The first report attributed this to the maturation of consumer solar products, in addition to better and cheaper battery products that can capture and store excess generated energy.

The other two reports that were subsequently released affirm the previous predictions made in the first report, which was simply titled “Batteries and Distributed Gen. May Be a Negative for Utilities”.

Morgan Stanley expects the per-watt cost of solar installations to fall precipitously, from ~$2.00 per watt generated, to just ~$1.75 by 2018. This is partially due to the cost of installation dropping significantly, particularly driven by the experience and scale of large solar service providers, such as SolarCity.

They also expect Tesla’s upcoming GigaFactory project – which will revolutionize how high-capacity batteries are manufactured – will also have a profound impact on the costs associated with storing excess energy generated by solar.


A major financial institution thinks that the next few years may see us all disconnecting from the grid en-masse. But how will this come about?

The Struggles Of Solar

Solar has a lot going for it. It allows the clean generation of electricity, using a source that is guaranteed to never run out in our lifetime – the sun.

Despite the promise of infinite, clean energy, there remains a number of issues What Is Solar Energy And Why Hasn't It Taken Off? What Is Solar Energy And Why Hasn't It Taken Off? What's the big deal with solar energy? If it's really as important and necessary as so many claim it to be, why hasn't it taken over the energy industry yet? Read More that have prevented solar energy from having the same level of ubiquity as fossil-fuel based energy sources.

Firstly, solar cells The Energy of The Future, Today: How Do Solar Panels & Heliostats Work? The Energy of The Future, Today: How Do Solar Panels & Heliostats Work? Renewable resources. It’s a problem that we face every day whether we realize it or not. With every pump of a gas handle, with every press of a car’s accelerator, with every plug of our... Read More only generate power during daylight hours. In the Winter months, this means that electricity isn’t being generated during peak time. This tends to be around 5:30, as people leave offices, return to their homes, and turn on lighting as daylight fades.


Which brings us on to the next point. Retaining surplus energy is incredibly difficult and expensive. This leaves consumers with two options. They can either sell their surplus electricity back to the power grid, or invest in some battery storage.

There are a wealth of products on the market that accomplish this task, but they’re not cheap. They also need to be installed by a trained professional, which drives costs further northward.

As a result, solar power has never really replaced conventional methods of generating electricity. However, there are a number of upcoming breakthroughs that look set to change this.

Meet The GigaFactory

This February, Tesla made a big announcement: the Gigafactory. This large-scale battery fabrication plant is the combined efforts of Elon Musk’s electric car titan, and Japanese electronics giant Panasonic.

Costing $5 billion, the aim behind this ambitious project project is to allow Tesla to meet the soaring demand for its cars, whilst simultaneously reducing costs by producing one of the most expensive and complicated components in large scale.

In a subsequent press release, Tesla indicated that they will provide and manage the building housing the GigaFactory, while Panasonic will provide the manufacturing equipment used to create the high-capacity lithium-ion cells.

When construction finally concludes in 2020, the GigaFactory will be one of a small number of factories in the world that can pump out high-capacity batteries in very large quantities. Although there’s no word on Tesla making batteries for non-car applications, it seems likely the battery business will eventually cater to home solar panel users.


Morgan Stanley agrees, and sees this as a tool to allow consumers to eventually ditch the power company. In their report, they wrote:

“… given Tesla’s Gigafactory and the potential to reduce battery production costs to $125-$150 per kilowatt-hour of storage capacity, and perhaps lower, we see the potential for customers to decide to move off-grid.”

In short, Morgan Stanley thinks that Tesla has already fixed one of the problems holding solar energy back. But what about the other problem – making it a financially attractive and affordable option for consumers?

Making Solar Cells More Efficient

Another major issue with solar energy is that on a watt to dollar basis, it’s a relatively inefficient medium of creating electricity.

One of the issues that prevent solar energy from becoming a truly cost-effective medium of generating energy is that it comes with some impressive upfront costs. It’s not unheard of for these systems to reach into the tens of thousands of dollars.

As previously mentioned, Morgan Stanley thinks companies that specialize in solar installations – such as SolarCity – can drive down the cost of installation through sheer economies of scale, as well as procedural efficiencies.


There are also efforts to improve the cost effectiveness of solar energy by improving how solar cells are manufactured, as well as changing the material used in favor of one that is cheaper, and significantly more efficient.

Researchers at the University of Sheffield in the United Kingdom have worked out how to produce solar cells using a new spray-on technique. This ensures that a minimum of material is wasted when creating the cells, as well as allowing production at a larger scale using novel new materials like perovskite Efficient. Cheap. Awesome. Here's Why New Spray-On Solar Cells Matter Efficient. Cheap. Awesome. Here's Why New Spray-On Solar Cells Matter The cost of solar energy is set to drop precipitously after a team of scientists working at the University of Sheffield in the United Kingdom announced development of solar cells using a spray-on process. Read More .

But why does the material used to create solar cells matter? Well, even the best silicon-based solar cells will only convert about 20% of sunlight into electricity. This compares unfavorably to hydroelectric power plants, which get about 95% efficiency, or coal, which gets around 50%.

Perovskite is a new material that looks set to make solar energy competitive with traditional energy sources. Although it is still very early in its development, it’s already surpassing traditional silicon cells, and is forecasted to eventually reach 50% efficiency. This could potentially see households getting 100% of their energy from a single source – the sun.

Your Solar Future Is Almost Here

Paying your utility bill is a necessary part of modern life. But what if it wasn’t? What if one day, you could phone your electricity provider and cancel your contract, choosing instead to go it alone.

Morgan Stanley thinks this is a possibility, and is predicting the massive disruption of traditional utilities companies, due largely to the advent of super-efficient solar energy, and new advances in battery technology and manufacturing.

But will you be going off the grid? Let us know! The comments section is below.

Photo Credit: Tesla brings the rainbows (Steve Jurvetson),

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