Regulatory Policy Will Dictate Smart Grid Directions

The Smart Grid will modernize and transform our energy infrastructures to incorporate more renewables and reduce use of fossil fuels for electricity and transportation.  But energy surety or autarchy requires more than a transformation of energy sources to supply electricity.  True energy surety requires the right grid provisioning – how our electricity grid is architected and managed; how our electricity markets are organized; and how our regulatory policies support these actions.  There are two very different directions the Smart Grid could take.  Given the critical social-economic importance of electricity, we must give serious attention to the policies our elected and appointed representatives make in support of one direction over the other.

One path continues the current “command and control” model of centralized, remote, and large-scale generation that is transmitted at high voltage for eventual distribution to consumers. These consumers are mostly allowed to participate in the electricity market through curtailment programs like demand response (DR) that offer some monetary incentive to reduce electricity use (create negawatts) at specific times.  The other direction is a decentralized grid of distributed energy resources (DER) that produce and store electricity close to points of consumption.  Consumers can become producing consumers (prosumers) and participate in generation of kilowatts or negawatts.  In short, it is the choice between a “business as usual” model with utilities as electricity suppliers or a new business model where utilities or other entities become DER managers.

When faced with that choice, the smart questions are, which path offers the optimal grid reliability and resiliency?  Which choice makes consumers less vulnerable to service disruptions and reduces the grid brittleness experienced after severe weather events (or potentially future cyber attacks)?  A growing number of industry experts and organizations are advocating that a decentralized grid based on a transactive energy model  is the best answer to these questions.

Intrepid nations like Germany are pioneers in moving along the decentralized path. Two books offer excellent information about Germany’s Energiewende or Energy Transformation.  The Decentralized Energy Revolution by Christoph Burger and Jens Weinmann describes the early lessons learned through indepth interviews with a number of stakeholders in the evolving energy supply chain.  The second is an ebook from Osha Gray Davidson titled, Clean Break.  Both publications deliver thought-provoking information about Germany’s plans, players, progress, challenges, and potentials, and how we can apply their learnings to our advantage.

Germany is transforming its energy infrastructure to achieve energy autarchy – self-sufficiency in energy production and independence from fossil fuel.  The identified drivers of this transformation are technologies, regulations, and empowerment, which includes ideas like “Think global, act local” and consumer activism, particularly around nuclear energy and climate change.  In the USA, the drivers for our energy transformation are technologies, regulations, and finance mechanisms.

For example, today’s regulations are structured to support business-as-usual in which utilities function as electricity suppliers.  A transition to energy surety or autarchy will require regulatory revisions to support utility transitions to DER managers, and create market conditions that encourage new participants delivering kilowatts or negawatts.

Defaulting to the business-as-usual model for the Smart Grid may seem like less work upfront, but it essentially guarantees a grid that continues to break every time the wind blows with concomitant billions of dollars of lost economic value to regional and national economies.  Creating energy surety through technology, regulations, and financial mechanisms to provision a decentralized grid needs serious discussion in the USA.

On February 28, I’ll moderate a panel session at the Distribution Automation conference in Raleigh, NC that will explore regulatory challenges in the USA to provision a decentralized grid with extensive DER deployments.


Super Bowl Power Outage Reminds Us of the Importance of Electricity

Were you one of the 100+ million fans watching the Super Bowl yesterday?  How about that 34 minute power outage?  It was a potent reminder of the reliance we place on an uninterruptible supply of electricity to maintain our lifestyles, our entertainment, and our economy.

I’m reading an interesting book which (slightly tongue in cheek) catalogs everything we should worry about. This is my short and quite serious list of things we should worry about with our energy infrastructure policies for electricity.

1.  Energy surety.  This is similar to energy autarchy – a concept and practices that ensure national self-sufficiency and independence.  For some, transitioning from imported sources to domestic sources of oil and natural gas delivers energy surety. That’s a correct assumption only if we decree that domestic oil and gas cannot be exported overseas, which gets to an extremely intertwined item number two in my list of energy concerns.  One of the primary objectives and benefits of the Smart Grid is the incorporation of domestic renewable sources of energy that build true energy autarchy and independence from polluting commodity fuels.

2.  Economic surety.  Fuels that are importable, like oil and gas, are also exportable.  And guess what?  These commodities go to the highest bidder – on or offshore.  That’s how capitalism works.  Some American manufacturers like Dow Chemical, which consumes significant quantities of electricity for their operations, are already raising concerns that American natural gas will go up in price as more infrastructure is in place to make it easier to export.   Sixteen applications are sitting with the Department of Energy to build export terminals to ship natural gas to countries that don’t have free trade agreements with the USA.   Promoters of unrestricted exports include companies like Exxon, one of the beneficiaries of the annual $4B in subsidies lavished on them by our current federal tax code.  What odds would Las Vegas bookies put on the current low price of natural gas remaining steady? Or is it’s currently low price merely a temporary reprieve for a fuel that has shown extensive volatility over the years?  Utilities aren’t betting on it as a single source of energy for electricity.

If we really want intertwined energy and economic surety, we need to seriously bulk up on energy sources for electricity that are not exportable.  Sun and wind are two prime possibilities, and biomass and water – whether innovative tidal or traditional dam – are others.  And in the cases of solar and wind energies, the extraction costs are relatively stable or even declining.

3.  Grid brittleness.  Our electrical grids, and even our grids for supplies of natural gas to power plants are extremely vulnerable to disruptions from weather as well as from cyber attack.  The recent devastation wrought by superstorm Sandy is just the latest illustration that reliance on remote generation or extraction sources can play havoc on communities and regional economies.  And when it comes to natural gas, our current supplies overwhelm the existing infrastructure, creating new congestion points and requiring pipeline buildouts.  These undertakings are not fast nor cheap, and likely to be slowed down by legitimate concerns about pipeline safety.  Building distributed energy resources (DER) that range from locally produced and consumed renewables generation, energy storage, and negawatt plays in energy efficiency and demand response can deliver resiliency as well as increased reliability into our grids to withstand and recover from natural or human-caused disruptions.

Widely and massively distributed and small scale energy resources that use or store electricity produced from domestic renewables address this short list of concerns. We have a good understanding of the range of technologies, policies, and financing that are required and will be topics of future articles.