Hmm, at first I'm not real crazy about Tesla owning a utility. But the existing utility is basically in bankruptcy and is hard pressed to replace 40 year old generators. So maybe there's a real need here. It would be interesting to see how a Musk directed company would handle retiring a aging fleet of oil and coal plants. Imagine the irony of Tesla running such a fleet for so many years. But still Tesla could demonstrate how to manage a necessary transition.
Maybe Tesla would just divest power generators to independent power producers. Tesla would focus on the distribution network and power management through batteries and microgrids. The microgrids could operate as micro markets trading power internally and accessing a island market through transmission between microgrids. The IPPs would trade in this network of markets. But all power producers from a coal plant to a solar roof top could trade equally in local markets. This would encourage investment in distributed generation assets. Consumers could select from rate plans that allow them to buy at market prices or have fixed rates. In fact, third party finance companies could provide the fixed rate plans. They would intermediate between the local markets and a consumer who wants a particular rate plan.
So this would be a radically different approach to what a utility does, but I think Tesla could pull it off, assuming political support. By facilitating micro markets within microgrids, you harness the financial efficiency of a dynamic market. This actually minimizes the capital required to meet the needs of ratepayers. Traditional utilities have been enormously capital intensive. But when you harness the ability of certain ratepayers to own generation assets, you can lighten up the utility balance sheet. The utility thus does not have to be compensated for sitting on those assets. Rather through trade, the owners of generation assets are rewarded.
To make this sort of trading possible in micromakets, the utility only needs a certain amount of battery capacity to act as a local market maker. I actually have a formula for this. A batter offers power at a price depending on its state of charge, S :
Ask = Ask_50 + b×log ((1-S)/S)
Bid = Bid_50 + b×log ((1-S)/S)
So the spread is always Ask_50 - Bid_50. These are the Ask and Bid prices at 50% state of charge. At lower SOC, the prices go up. At higher SOC, the prices go down. Thus, the market maker is able to put a price on surpluses and deficits and physically balance the local micro grid. Suppose someone owns a gas generator and is willing to sell at 18 c/kWh. When the SOC is low enough the Ask price will reach 18 c/kWh and start buying from that generator. Likewise, there make be a solar roof with a certain amount of excess power to trade. Its willing to accept the Ask price from the battery market maker. As the battery fills up, this price drops. As thr price drops, other generators turn off. So the market market just needs to know what available bid and ask prices there are at a given moment, and it will trade/dispatch those trades in real time. The market maker also handles frequency and voltage regulation, which is part of how it earns its spread. Additionally, a power consumer simply buys at the current bid price. If the ratepayers wishes to have a fixed rate. There is a financial intermediary that is willing to swap a variable price from the micromarket for the fixed price that the ratepayers agrees to. So the intermediary will earn a premium for exposure to variable prices in the market. That intermediary may want to have a few energy resources within the microgrid to limit potential market losses. So this also induces them to help finance things like home batteries and local solar. If you have a good trading platform, then lots of players can participate.
