I think this article is overly simplistic. However, the really key point is that we need power consumer that can respond to price signal. Just formulating some alternative pricing plans can lead to some surprising results.
For example, most retail customer are paying a flat12c/kWh rate. The flat rate transmit no real-time price signal. So the customer demands power whenever they like. Let's suppose the price breaks down to 5c/kWh for distribution + 6c/kWh avg generation cost + 1c/kWh profit. Thus, mostly fixed overhead is 50% of the rate.
Now, consider variable rate plan that simply marks up the real-time generation cost by 50%. So if a customer has the same avg consumption behaviors, their average price is 12c/kWh just like the guy on the flat rate plan. But suppose the several hours each day the price generation price is below 2c/kWh and several hours above 10c/kWh. Suppose this customer does have a PowerWall. They can charge at less than 4c/kWh and discharge for self-consumption at 20c/kWh. Thus, they make a spread of 16c/kWh for time shifting. This actually goes quite a long ways toward paying for the battery. A battery with 5000 cycle life would net $800 per kWh capacity minus the cost of the battery, installation and financing. So this is easily a money making opportunity and require no capex investment from the utility. The customer can also charge their Tesla Model Y at lower prices and avoid unnecessary consumption when prices are higher. So this customer can totally reduce their power bill below 12c/kWh. The utility also avoids needing to invest so much in peak generation capacity. The utilization of distribution and generation assets is also improved. So even though the 50% mark up may be less in c/kWh, these efficiencies make up for that. Moreover, this sort of customer might well consume more power total. The PowerWall and Model Y is incremental consumption. So it is entirely possible that profit per customer can go up.
Now if this utility felt it was giving away too much battery opportunity to customers under the variable plan, the simple solution is for that utility to invest more in its own batteries. That would narrow the spread that the customer makes, rather than 16c/kWh maybe 12c/kWh. If that spread goes too low, then few customers will install their own home battery. Additionally, if the utility want to build out more wind and solar and spill the excess, that excess takes the lower prices down to 0c/kWh. This increases the spread back up to 16c/kWh or so and induces more customers to buy EVs and home batteries.
So the point here is that when customers get strong price signals, the utility can avoid lots of capital investment. Rather customers will make capital purchases that take advantage of price signals. And this points us the fundamental problem of utilities. Utilities have no strong incentive to avoid capital spending. They generally get to make a near guaranteed profit on assets. So they actually prefer the flat rate plan because it justifies building out more assets. More assets, more money. As a regulated monopoly they have a perverse incentive to be very capital inefficient. That is the problem.
