Why Distributed Solar Power is Better than Coal in Modern Power Grids

18th Jul 18

Written by James Doyle

Coal has been the main electricity source in Australia for decades, and it still holds the largest share of the market. However, it is losing ground to renewable sources at a fast pace. Traditisonally, coal has been considered the cheaper option, but this is not a fair comparison: many existing coal power plants can deliver electricity at a lower cost than solar farms and wind turbines, but new coal power is not competitive against renewables. In fact, you can combine renewable sources with energy storage for power output stability, and the business case is still better than that of new coal, in spite of the added cost of storage.

Coal power is characterised by a constant output, which ensures a continuous power supply at any time of the day. However, the output of coal power plants is also inflexible, and this is a limitation in modern power grids. A coal power plant cannot reduce the output to compensate for surplus production from wind turbines and solar arrays, and it cannot ramp up the output to meet sudden peaks in grid demand.

  • Natural gas offers much more flexibility than coal, while having around half of the greenhouse gas emissions.
  • Hydroelectric power plants are also highly responsive, but very demanding in terms of site conditions.

Solar photovoltaic systems and wind turbines have been considered “unreliable” because their output cannot be controlled, but this is changing now that the cost of batteries is decreasing. As demonstrated by the Hornsdale Power Reserve, a 100-MW / 129-MWh battery system from Tesla, batteries can stabilise networks for a much lower cost than gas-fired power plants.

From Centralised to Distributed Power

Distributed solar power systems cannot deliver grid stability services by themselves. However, their value comes from the synergy they can achieve with batteries, which have high potential for providing grid ancillary services. There are many reasons why commercial solar systems are excellent for combination with batteries:

  • Solar arrays and batteries both have a modular design, which means installations can be configured with just the right capacity for each building. It doesn’t matter if you need a 5-kW system for a home, a 100-kW system for a medium-sized business, or a megawatt-scale installation for a large industrial facility; photovoltaic modules and batteries can adapt to each case.
  • Both technologies are flexible and adaptable in terms of site conditions. Solar panels are viable as long as you have a suitable area and sunlight, and batteries can be deployed practically anywhere. Other generation systems such as wind turbines and hydroelectric power plants are much more demanding in site conditions, and fossil fuel generation requires fuel deliveries and storage.
  • Batteries can be easily linked together, even if they are spread among thousands of buildings. There is a virtual power plant project under development in South Australia, where 50,000 installations combining solar power and battery storage will achieve a generation capacity of 250 MW and a storage capacity of 650 MWh.

A new coal power plant involves a massive capital expenditure upfront, while distributed solar power systems with energy storage can be deployed incrementally. Also consider the public opinion, since Australians have a very positive perception of solar power; a large investment in coal generation may get backlash, while renewable energy investments are normally applauded.

Distributed Solar Power Depends Less on the Electricity Grid

Electricity tariffs in Australia are among the highest in the world, but the energy itself actually has moderate prices. Power bills have risen dramatically because the Australian electricity network is very expensive to own and operate – for many energy consumers, network costs and retailer margins represent more than half of the power bill.

New coal power plants are not only expensive themselves; they also rely on power network upgrades because their capacity is concentrated. Therefore, large investments in coal generation would most likely cause upward pressure on kilowatt-hour prices.

The outlook is much more favorable for distributed solar power and batteries, since generation is not concentrated in a single point – you can add hundreds of megawatts of capacity without burdening a specific point of the power network.

Another important consideration is the distance traveled by electricity to reach the end user. With conventional coal power plants, energy must travel through high-voltage transmission lines, then through substations, then through a distribution network, and finally through transformers that step down the voltage to a suitable level for homes and businesses. All these network elements have losses, which are minimised when you deploy a solar array close to the point of use.

Centralised Energy Systems are More Vulnerable to Faults

Another limitation of centralised energy systems is the risk of losing hundreds of megawatts of capacity if an important component suffers a fault. For example, if harsh weather damages a key transmission line, a large area can suffer an extended blackout.

Distributed energy systems do not have specific “weak spots” because capacity is spread across many locations.

  • If you have a 250-MW coal power plant, a major fault can take all that capacity offline in an instant.
  • On the other hand, if you have 250 MW distributed among 50,000 systems with solar arrays and energy storage, an individual fault only removes 5 kW of capacity, which is negligible.


Distributed energy systems are more flexible and resilient than centralised installations. In great part, this transition has been possible thanks to commercial solar power, which offers project scale flexibility and adaptability under variable site conditions. Distributed energy systems also offer opportunities for innovative business models, since the benefits are split between energy companies and consumers. For example, a homeowner can participate in a virtual power plant program in exchange for cheaper electricity and battery backup, while the utility company improves the reliability of its power supply.

Consider there are also emerging technologies that could increase the value of distributed energy systems such as rooftop solar arrays. For example, the same blockchain technology that is used by cryptocurrencies could enable free energy trade among homes and businesses with generation systems, and the Internet of Things can make appliances of all types smarter, including commercial solar systems.

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