"The same advantages that make a business model favorable can also flip when people start leaving. If you don't plan for that, you can wake up in a situation where the math that used to protect you is now what's hurting you."
"In power, there's a grid with fixed costs. Wires, maintenance, capacity planning, all the stuff that has to exist even if demand is a little lower this month. Retail electricity bills typically include some mix of a fixed charge and a usage-based charge."
"When more people stay on the grid, those fixed costs get spread across more people, and it's easier for the system to work. Now introduce solar and batteries. The customers who can afford solar and batteries can reduce their reliance on the grid or leave it more aggressively."
"The off-grid problem: the system gets worse for the people who stay because the people who leave were helping amortize the fixed costs."
Economies of scale and network effects can benefit businesses, but they can also become liabilities when customers leave. Fixed costs remain constant and become more burdensome as the customer base shrinks. The 'off-grid problem' illustrates this dynamic, particularly in the energy sector, where fixed costs are spread across fewer customers when some opt for alternatives like solar energy. This leads to higher costs for those who remain connected to the grid, highlighting the importance of planning for customer retention.
Read at Entrepreneur
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