And that just encourages development of an automatic switching system such that power generated on site is always used on site. It never goes out to the grid until after 100% of local demand is met, and all local storage devices are topped up.

And that, in turn, would encourage those customers to just go completely independent from the grid and either find some other flexible use for excess power or shut down excess production.

Pretending that local power is using grid infrastructure does not make it so. People can and will disconnect from the grid to disprove that lie.