2.  The recent Federal Energy Regulatory Commission (FERC) decision defines regional planning processes, outlines rules for fair cost allocation, and delivers market certainty for transmission companies and renewables developers that will speed renewables integration and concomitant energy storage deployment. It requires that transmission planning processes include regional policy considerations such as state renewable portfolio standards and Environmental Protection Agency (EPA) standards.  This decision also removed the “right of first refusal”, which discouraged cost-competitive transmission facilities development.  Utility-scale renewable projects such as wind farms and large solar deployments are often far from the points of consumption, and transmission lines will need to be built.  Energy storage should be a natural component of wind and solar projects to ensure firm power to the grid and the ability to participate in new markets.     

3.  The Electric Power Research Institute (EPRI) released a recent study to help utilities develop functional requirements for energy storage to aid in integration of renewable energy sources as well as energy storage at substations and within the electrical distribution networks.  Current work is now focused on similar recommendations for energy storage on the customer side of the meter – micro-scale energy storage that can be coupled with rooftop solar generation.  This means that utilities are taking serious looks at moving from current “always-on” forms of generation to time-shifted generation supported by energy storage, and considering that intermittent renewables like wind and solar can be coupled with energy storage technologies. 

The wild card that will soon be played is the mounting concern about fracking and the impacts to water and air quality and the true costs of these environmental externalities.  Texas, known for its casual attitude toward environmental protection, became the first state through passage of HB3328 to require that drilling companies that engage in hydraulic fracturing or fracking must disclose all “intentionally-used” chemicals that are introduced into the ground as part of their extraction processes.  Of course, the disclosure of incidental, accidental or unknown ingredients is not required, but it’s a significant step that will put a much needed spotlight on industry practices.  The cheap price point of natural gas may not look so attractive if it comes at the expense of potable water, which is in finite and stressed supply on this planet.  If natural gas loses some of its appeal, that will increase the demand for renewable sources of generation, and the need for energy storage.

 Energy storage is finally getting the attention it so richly deserves in the Smart Grid, and it will become a widely deployed technology in many form factors across the entire electricity supply chain consisting of generation, transmission, distribution, and consumption.

The existing grid configuration places centralized generation of megawatts (MW – a million watts) or gigawatts (GW – a billion watts) of electricity at locations that are usually far removed from the customers that use them.  A grid configuration that incorporates distributed generation (DG) puts electricity production on a smaller scale close to consumers.  Solar panels on business and residential rooftops are examples of DG, and offer interesting new business models that modify the electricity value chain.                                                                                                                   

An individual homeowner today may sell back excess generation capacity to the local utility at rates set by the local regulatory authority through Feed-in Tariffs (FiTs) or just run the meter backwards through net metering.  But what if a business aggregated the output of many homeowners’ rooftops to represent large kilowatts (KW) or even MW of electricity for sale back to that local utility?  That could result in better prices and greater revenues shared by all participating homeowners, and might also mean reduced costs for the utility since it was dealing with one entity rather than multiples of homeowners.  We already see some evolving forms of this business model at work.  Companies like Sun Edison focus on large expanses of rooftops found in commercial and institutional sectors, and do everything from purchase the solar equipment to monitoring its performance and dealing with utilities.  Solar City uses a similar business model for residential homes as well as commercial facilities.  Their residential model includes leasing solar equipment to homeowners and assuming responsibility for its upkeep.  These companies literally “lease” the rooftop to create electricity that is consumed on premises, and reducing the amount drawn from the grid. 

The driver for these business models is to reduce the costs of electricity for the participating businesses or homeowners.  However, there are untapped markets for the owners of rooftops that don’t have expensive electricity bills to justify solar investments, but do have prime real estate to generate electricity from the sun.  The disruptive thought here is to look at another industry – the minerals extraction industry – for leasing models that operate on a royalty basis.  The natural gas well on a property doesn’t necessarily supply nearby buildings with natural gas.  The property owner collects a royalty check from one company, and building occupants continue to pay the utility. 

As solar materials improve in performance, as new software applications appear that can monitor and predict solar energy production, and as more states encourage utility purchases of solar-generated electricity, perhaps we’ll see new business models that harvest the solar energy landing on our rooftops and deliver monthly royalty payments on an infinite and clean energy source.   It’s a paradigm shift to be sure, but the prospect of earning money from a rooftop would be a welcome technological and financial disruption for many homeowners and commercial property investors.

We can expand the integration of Smart Grid technologies even further into school districts, and into making money, not just saving money.  Smart Grid technologies enable the electrification of transportation, and can leverage the energy storage capabilities of electric vehicle (EV) batteries in smart charging scenarios.  Most schools have school bus fleets that operate on very predictable times of use with very predictable ranges.  If school buses operate on electric power, they can charge up directly from the school’s own solar facilities, and because this would be a DC (direct current) to DC charge, optimize that charge and avoid the loss of electricity experienced in a DC to AC (alternate current) conversion.  During the school year, the buses can charge using the power that is generated from school solar facilities, or charge at night when local utility rates are lowest.  The bus fleets can also drive revenues for school districts in two ways.  During the school year, the fleet batteries can be used to provide frequency regulation services for region-wide grid operations.  During the summer recess, the fleet batteries can serve as resources to discharge energy during peak demand periods for local utilities, in addition to supplying the electricity from solar panels.  That’s definitely a win for the taxpayers supporting school districts.

The benefits go even further.  We have a dire need to develop a workforce to fill positions ranging from R&D in renewable technologies, EVs, and energy storage to installation and maintenance of solar facilities, vehicle charging hardware and software, and energy management solutions.  School districts can be living laboratories for students – familiarizing them with the state of the art technologies and readying them to pursue careers in distributed generation, renewables, software, hardware, regulatory policy, and economics.  The educational possibilities extend into awareness of energy use to create engaging social media-based applications that enable energy efficient behaviors, as well as creating technologies that minimize their use of electricity.    

What is required to make this dream scenario a reality?  Enlightened regulatory, legislative, and voter actions at the local and state levels would encourage the rapid proliferation of relevant renewable technologies and EV bus fleets in school districts, stimulating local job growth and setting up the next generation of workers in skilled trades and high-tech sectors.  Changing regulatory policies to allow school districts to participate as electricity providers is required.  The school district that is going solar got its start with a voter-approved bond measure.   It’s one step in the right direction.

Can the Smart Grid solve climate change?  No, but it can reduce the amounts of emissions that we will continue to pump into the atmosphere.    Here are 6 examples of how the Smart Grid will reduce emissions:

1.  Smart Grid technologies enable integration of clean, renewable sources of energy into the electrical grid.  Sources like solar, wind, hydro, and geothermal, once deployed, have the additional benefits of using zero to low energy requirements to aid in the extraction or harvesting of these energy sources.  Contrast that to the energy costs to extract, refine, and transport coal or oil, and the emissions equation for renewables looks even better.
2. Smart Grid technologies make the electricity supply chain more energy-efficient.  Superconducting materials will reduce losses incurred in transmitting electricity great distances.  Distribution automation can further reduce energy waste by better matching supply to demand.  At the consumption link of the chain, there are many Smart Grid technologies that improve electricity use in commercial, industrial, and residential buildings.  Since the cleanest energy is the negawatt, any technologies that reduce the electricity load have a beneficial cumulative effect that can result in avoidance of new generation facilities.  Continuous commissioning is a combination of hardware, software, and services that use sophisticated sensors and actuators to maintain buildings at their best energy performance levels while maintaining occupant comfort.  Technology innovations go beyond the building envelopes and into the actual designs of appliances and consumer electronics to do more with less energy.
3. Integrating generation into the distribution grid eliminates losses from long-distance transmission and puts the users much closer to the generation sources.  CHP (combined heat and power) solutions convert what is typically waste heat from generation into useful heat, reducing the need to expend more energy.  Using backup generation sources (aka BUGS) can also reduce the need for building additional peak power plants, although many BUGS units are diesel and would benefit from replacement to cleaner energy sources like natural gas. 
4. Electrification of transportation, particularly personal vehicles, will reduce our reliance on oil, which has tremendous energy costs in its extraction, transportation, and refinement – and then there are the environmental costs.   Additionally, leveraging the energy stored within electric vehicles (EVs) can reduce the need for peaker plants during times of high demand.
5. Energy storage time shifts generation, so electricity can be stored until it is needed.  Energy storage technologies also increase the integration of small to large scale renewables into the grid.  A significant amount of global R&D activity is focused on developing the most effective energy storage technologies.
6. Energy management solutions for residential and commercial and industrial (C&I) applications build awareness of consumption, and a multitude of studies demonstrate that awareness can result in reductions of energy use from 5% to 20%.  The cumulative effects of everyone throttling back on electricity are reflected in less need for additional power generation from any source.  There are a number of solutions in the marketplace today, with the most interesting ones based on open source platforms and standards.     

The Smart Grid won’t cure our planet’s climate ills, but it will certainly lessen the severity of them if we continue to aggressively invest, innovate, and adopt the myriad technologies that reduce our need for energy derived from the dirtiest carbon-emitting sources like coal and oil. 

So what does this mean for the Smart Grid?  Electric utilities in California contribute 28% of CO₂ emissions, and began planning their emission reductions in 2006.  As previously blogged, California uses less electricity per capita than any other state in the US, largely due to enforced policies and regulations that increase energy efficiency of appliances and electronics as well as buildings.  However, the peak demand continued to grow as more people moved to the hot interior of the state where air conditioning is needed.  That prompted the California Energy Commission, which sets energy policy for the state, to create a loading order that governs how the investor owned utilities (IOUs) should plan to add to electricity production.  That loading order puts energy efficiency and demand response measures on top – so negawatts became part of the energy equation.  Integration of renewable energy and distributed generation comprise the second set of energy sources, and then integration of clean fossil fuels and improvement of infrastructure. 

Smart Grid-related solutions significantly factor into this loading order.  Energy efficiency and DR programs can use smart meters, Home Energy Management Systems (HEMS), and energy service providers to produce negawatts.  As California homes and businesses continue to ratchet down electricity use, we’ll continue to enjoy the savings that accrue to intelligent energy consumption.  Look for increased adoption of solutions and programs that drive down electricity usage within the state now that the voters have spoken.   

Beyond negawatts, the second step in the loading order also has a strong dependency on Smart Grid technologies and initiatives.  The Smart Grid integrates renewable sources of energy into the electrical supply chain, and supplements or “firms” intermittent renewable energy sources with energy storage.  California recently enacted an energy storage bill (AB2514) to drive the market for IOU use of these technologies, and all the IOUs in the state are building out utility-scale renewable energy facilities – looking at wind, solar, geothermal and even hydro in the form of currents and waves. The recent Federal Energy Regulatory Commission (FERC) ruling about FiTs is encouraging news for distributed generation (DG), and while some of the state utilities have been reluctant to embrace this concept, achieving a 33% Renewables Portfolio Standard (RPS) may not be possible through utility scale efforts alone.  There are lots of rooftops that are suitable for distributed solar generation – and its time to put the programs in place to accelerate deployment on a mass scale. 

DG deployment has additional reliance on Smart Grid technologies, since the electrical distribution grid must be upgraded to support bi-directional flow of electrons, and aging transformers must be replaced with new models that can handle not only the daytime loads but the anticipated nighttime loads of charging electric vehicles (EVs).  Infrastructure improvements (number 3 in the loading order) must also take place at the transmission network to facilitate remote monitoring and management of transmission lines and substations for reliability of electricity supplies.   

All of these initiatives mean local jobs to conduct energy audits and building retrofits; deploy distributed generation facilities; and conduct upgrades to the transmission and distribution networks in the state.  Despite all the gloom and doom tactics that Proposition 23 advocates used, the reality is that Smart Grid solutions, as part of a clean tech economy, will deliver tangible economic benefits to California, as well as other states that embrace them.

My July 19, 2010 blog identified FiTs as part of a quiet revolution sparked in a number of states to encourage installation of clean and renewable electricity generation at a grassroots level.  This type of tariff requires utilities to purchase electricity from individual producers of different renewable energy sources at defined prices, ending the previous practice of costly one-off negotiations between producers and utilities, and greatly simplifying this relationship to benefit both parties. FiTs have been used around the world to ramp up renewable energy deployments, and are responsible for catapulting countries like Germany to the forefront of solar-sourced electricity generation. 

The FERC ruling resolves uncertainties about how states calculate FiT prices.  In the past, the calculation was based on “avoided cost” (defined in the Smart Grid Dictionary as “A price calculation based on the amount of money that a utility avoids paying for generation through use of cogeneration or distributed generation facilities.  It is the marginal cost for a regulated utility to generate or purchase one more unit of power.”)  While individual states’ calculations varied, most have been based on the costs to build a new fossil fuel generation facility or the purchase of fossil fuel-based power.  Now, costs must consider purchase of similar types of power (ie, other renewable sources), and new costs such as upgrades to transmission facilities must be factored in as well, creating a more level playing field for renewables like solar and wind. In other words, the “locational benefits” of local generation must be considered as part of the calculations to build a proper Feed-in-Tariff. 

Locational benefits factoring in transmission costs are part of DG’s very persuasive argument, but are not the only benefits.  Local generation using renewable energy sources can create local jobs, and negate the CO2 emissions that would otherwise be released through conventional power supplies.

The FERC ruling also commented on how to account for Renewable Energy Certificates (RECs) or credits as part of FiT transactions, so utilities can get credits for purchasing renewable DG, and DG producers get additional returns on their investments.  In summary, this is a boost for local generation of renewables, and all the benefits that accrue from it.  For more information about Feed-in-Tariffs, go to the FiT Coalition website.  

Proposition 23, the ballot initiative that two Texas oil companies hope will overturn California’s landmark clean air legislation enacted in 2006, will be decided on November 2 in California.  The immediate question is – should Californians protect their profits or our health and economic security?  From a broader perspective, do we want to use clean tech as a catalyst for new economic growth or continue on our current path?  Many businesses, including Cisco, eBay, and respected venture capitalists have spoken out against Prop 23, along with numerous state and city officials, the American Lung Association, AARP, local Chambers of Commerce, environmental organizations, and state business and community groups. 

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Transmission planning has a number of challenges that include NIMBY (Not In My Backyard) concerns, environmental issues, and economic challenges.  For instance, a community near a wind farm may object to building transmission lines that cross scenic vistas or wilderness areas, particularly when they receive no economic benefits to compensate for these view degradations.  Construction may impact sensitive habitat for threatened or endangered plant or animal species.  And transmission construction is not cheap.  One utility estimates that it costs $1M/mile to build a transmission line.

There’s another, “hidden” cost of transporting electricity over long distances.  Transmission lines lose some electricity, and these line losses usually average around 9%.  Given the costs to produce electricity and the greenhouse gases that fossil-fuel generation plants produce, opportunities to eliminate these losses should receive first and foremost attention to save ratepayers money and reduce harmful emissions. 

Microgrids avoid transmission construction challenges and line losses.  Co-locating power generation with its end use eliminates the need for transmission lines, and transports electricity on the local distribution network.  Yes, the distribution network will need upgrades to accommodate microgrids, but the distribution network needs to be upgraded anyway to handle increased electrification of our transportation systems; support feed-in tariff arrangements (in which utilities buy back electricity generated from residential and commercial solar facilities); and add new distribution automation technologies for operational efficiencies.           

Sourcing generation close to end use has another benefit as well.  Many generation plants create heat along with electricity, but this heat is wasted.  Many microgrids can take advantage of that heat and in essence squeeze every possible benefit out of the fuel source using CHP (Combined Heat and Power) or co-generation technologies.  For example, a university campus may have a natural gas generation plant as its main electricity source.  The heat created in electricity production can be captured and applied to heat water for dorm use and campus swimming pools, lab equipment sterilization, and other applications. 

Microgrids are strategic components in the future Smart Grid.  Microgrids add distributed generation resources to the grid without the need for transmission lines, and extend the life of the existing transmission infrastructure by reducing the voltage loads placed on these aging assets.  Microgrids can integrate home-grown renewable energy sources into the grid, making it easier for states with Renewable Portfolio Standards (RPS) to meet their goals.  They also help their owners put predictability to variable energy costs, create local jobs, and offer opportunities to sell back excess generation capacity to local utilities.  These are compelling reasons why microgrids should be considered for educational and business campuses, commercial buildings, and homeowner associations.  And because microgrids can improve overall grid reliability and stability, taxpayers, ratepayers, and consumers should encourage legislation and regulations that promote their deployment.

The US grid today operates at three nines (99.9%) reliability– far worse than other nation’s grids like Japan, which gets five nines (99.999%) reliability.  The difference is a few hours of outage in the USA versus a few minutes of outage in Japan.   Outages are quite costly to our economy.  If a grocer loses power for a sufficient time period, the losses to food inventories are substantial.  If a traffic signal is out, accidents may result.  Lawrence Berkeley National Lab released a report in 2004 that noted that estimates of ANNUAL economic losses range from $22B to $135B. 

Utilities design redundancy into their systems to reduce the risks of outages.  However, it is extremely costly for utilities to build redundant transmission facilities and generation sources, and there are the siting issues to consider.  The work-around to this challenge has been to identify “sensitive loads” where a reliable electricity supply supports operations that are mission-critical or vital to business and society.  Mission-critical operations include data centers or industrial processes and emergency services are vital operations.  While this work-around has given us three nines reliability, we can improve it by emulating the power supply configurations for telecom networks.  These networks use distributed generation and storage to ensure that mission-critical and vital communications services can operate without power from the electrical grid.  Microgrids apply this practice to the electrical grid.   

Microgrids function as miniature versions of the larger electrical grid – with three significant distinctions.  First, microgrids don’t require build-outs of transmission facilities since generation is co-located with use of electricity.  Second, microgrids integrate renewables on a much greater scale than the overall grid.  And third, microgrids use onsite energy storage to be self-sufficient or “off-grid” for periods of time.   If we identify mission-critical operations and nest them in microgrids, we can improve the reliability of the overall electricity supply and shield them from larger system disruptions.  Islanding individual or networked microgrids can avoid greater instabilities to the outside grid, or even transmit power back to the grid to stabilize it. 

Islanded microgrids need to be self-sufficient, and that means leveraging all energy efficiency (EE) plays and practicing tactics that shift and spread electricity needs to avoid peak demands that outstrip their indigenous energy supplies.   Microgrids take many of the technologies and practices found in the Smart Grid and deploy them on a small scale.  It’s a compelling strategy because scaling up the Smart Grid in a distributed manner will be faster than continuing to rely on centralized generation and transmission, and help us achieve a grid with five nines reliability.     

Next week’s blog will focus on microgrid security, which is the topic of a panel I’m moderating on August 11 in San Jose at the Smart Grid Cyber Security Conference and Expo. 

Smart Grid technologies can make our electrical grid more efficient and reliable.  We can add more programs to improve energy efficiency and reduce peak electricity requirements.  But we can encourage much greater consumer participation in being part of the solution through policies that promote distributed generation.  Distributed generation (DG) gives consumers the opportunity to reduce their electricity bills and use “home-grown” electricity.

Distributed generation simply means that electricity is produced close to its point of use.  DG doesn’t need new transmission lines (which can face long and expensive legal challenges) and puts an emphasis on locally produced electricity.  DG can be deployed in urban to rural settings and relies on clean, renewable sources of electricity such as solar and wind.  DG turns consumers into prosumers – Alvin Toffler’s term for a producing consumer.  The practice applies to residential and commercial buildings and microgrids. (For more information on microgrids, read here).

DG is a great strategy to address growing electricity consumption and put money in the pockets of consumers.  All states have the authority to encourage and support DG initiatives within their borders, enabled through net metering and interconnection policies.   Net metering lets commercial, industrial, and residential consumers create electricity and sell it back to their local utilities – basically running their meters backwards.  It differs from Feed-in-tariffs (a subject in last week’s blog) in the pricing arrangement for a utility purchase of this DG supply.  FiTs usually deliver improved returns on investments for consumers than net metering, but net metering is better than no policy at all.  Interconnection refers to the technical and legal procedures required to connect your generation source to the utility distribution network. 

There’s an interesting and very readable report called Freeing the Grid that was produced by the Network for New Energy Choices.  This report examines the policies in the fifty states and assigns grades based on assessment of variables that range from ease of interconnection procedures to economic implications.  Residents in California, Colorado, Maryland, New Jersey, Oregon, Pennsylvania and Virginia are lucky – these states receive high marks.  My condolences are extended to residents of Georgia, Indiana, Iowa, and Wisconsin. Your states make it extremely difficult for consumers to become prosumers. 

DG is good for states – it promotes in-state jobs and economic growth.  It helps resolve the looming requirements for additional energy and the need for new centralized generation and transmission assets.  It reduces CO2 emissions through increased use of renewable energy sources.  It helps consumers reduce their electricity bills.  Why wouldn’t every state want to extend the benefits of DG to their citizens?  That’s a great question to pose to your state utility commissioners.  

These outages are not a result of cyber attacks – although such attacks would be equally or more devastating to affected consumers and businesses.  These are a result of aging infrastructure, insufficient intelligent monitoring and control of transmission and distribution equipment, and a reliance on highly centralized generation that leaves end users vulnerable to breaks anywhere along the line.  There are many resolutions to these problems using Smart Grid technologies, but most importantly, distributing power generation facilities at many points within the electrical grid, and creating microgrids within larger grids will improve overall reliability.   Distributed energy storage is another Smart Grid technology that promises to improve reliable delivery of electricity. 

Picture this:  My mother’s retirement community is a very nice campus environment located in the heart of the Pennsylvania Dutch country.  It includes a skilled nursing facility and residential housing for assisted living and independent living situations, and that means medical needs for electricity.  The campus is surrounded by dairy farms, some operations devoted to hogs and chickens, and lots of fields of corn.  A bucolic setting, and a rural economy that could leverage the waste products of these operations for distributed generation of at least some electricity well downstream of centralized generation plants.  These farmers could harvest energy in addition to their crops, and store it in batteries – just like they now store grain in silos and corn in cribs. 

If the local electrical distribution system is upgraded with Intelligent Electronic Devices (IEDs) that can sense power fluctuations, the retirement community need never fear a power outage – their electricity would instantaneously switch from the centralized source to a nearby farm source, or even to the community’s own battery backup to ensure uninterrupted power.  The farmers could enjoy another source of income, and everyone would be happier with a more reliable energy supply.  This scenario has further advantages of building a clean and renewable domestic energy industry and creating local jobs – always a welcome prospect in rural America. 

So if you think the Smart Grid only delivers benefits for utilities, think again.  The Smart Grid means distributed generation, distributed energy storage, and distributed intelligence delivering improved reliability of electricity for everyone.  It means my mother will never have to retype and redo a chapter again, and if mama is happy, everyone is happy. 

For more information about distributing generation and energy storage across the grid, click here.