The Smart Grid – When Is it Smart? Part 4

Last week’s blog revealed Smart Grid Rule #3:  You know you have a Smart Grid when the transmission and distribution portions of the grid are optimized for distributed energy generation/storage.    

Now we’ll look at distribution, and formulate a rule for when this portion of the grid is smart.  Distribution is the part of the network and associated equipment that deliver electricity to a meter.  Referring to the Smart Grid Dictionary definition for the Distribution Network, it includes power lines, transformers, meters, and wiring.  The wiring refers to wiring going to the meter, not wiring inside the building. 

The present-day distribution network is configured to handle electricity in one direction – from the substation to a meter.  But the Smart Grid will accommodate a bi-directional flow of electricity (as well as information) as distributed generation deployments grow in popularity.   There are two primary challenges to the electrical distribution network becoming a truly distributed generation network.  First, there needs to be some new equipment introduced into the grid to allow a flow of electricity back to the utility.  Then, regulations must be addressed to ensure that both utilities and the customers deploying distributed generation solutions have investment protection.

While some of the technologies to optimize the grid for distributed energy generation and storage were mentioned previously, it is important to note that utilities must add equipment to the distribution network to support any buy-back or reverse flow of electricity.  One important component is the utility-interactive inverter (or grid-tie system).   This equipment converts the DC power generated by your solar, wind, biomass or other renewable source into AC power so it is compatible with the distribution grid.  Self-supporting, off-grid sites have used similar equipment for years, but it is not as commonly found within the traditional electrical grid.

Net metering and Feed In Tariffs are two of the regulations enacted by state PUCs (public utility commissions) that encourage distributed generation.   According to the website, 42 states and the District of Columbia have some form of net metering today.  Net metering basically calculates the “net difference” between the meter spins to determine if the customer with the renewable generation source has a positive or negative balance from the previous read.  In California, excess generation can be carried forward for up to 12 months, and then reverts back to the utility.  In some other states, you may receive a payment from the local utility if you supplied more energy than you used.  This structure has worked well for many situations in which motivated homeowners invest to supply energy for their own homes and only rely on their local utility when their renewable energy source is unavailable. 

Feed In Tariffs (FiTs) require utilities to purchase power generated via renewable energy sources.  The catch is the price at which the electricity must be purchased.  In the past, some utilities would purchase electricity at a wholesale rate instead of the retail rate that the utility charged its customers for electricity.  The California Public Utilities Commission (CPUC) recently proposed a  FiT for 1-10 MW of generation that would set the purchase price based on an auction mechanism that addresses approved cost recovery for utilities, cost certainty for ratepayers, and regulatory certainty for markets.  In the CPUC proposal, all electricity generated must be sold to the utility, and none of it can be used onsite.    Only a few states have taken the FiT plunge, but it appears to be gaining ground as a regulatory mechanism to encourage distributed generation using renewable energy sources.   FiTs may vary from state to state in terms of the MW capacities, the applications of renewable energy, the locations for its use, etc., but this type of regulation is critical to a power market evolution that opens the way for small-scale energy producers.

Over time, there may be other policies and regulations enacted to encourage distributed generation or meet renewable energy goals.  Especially in view of NIMBY, BANANA, and NOPE, distributed generation may be the only path forward to increasing renewable energy production and decreasing our GHG emissions. 

Smart Grid Rule #4:  You know you have a Smart Grid when your utility offers you a fair, market-based price for any electricity you agree to sell to them.