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.

The Smart Grid business sector is facing the same skepticism about many initiatives ranging from large-scale renewable energy grid integration projects to smart meter rollouts.  The nay-sayers point to costs of new renewable energy sources versus existing fossil fuel-based sources.  Critics of smart meters focus on the incorrectly installed or inaccurate meters as reason enough to stop deployments.  Yes, utilities must ensure that every customer has an accurate meter, but should car manufacturers who routinely recall percentages of their fleets every year be barred from continuing to produce cars? 

Changes are coming that will (r)evolutionize our relationship with electricity, and some of them are happening with less fanfare.  Perhaps the lack of a spotlight aids in their progress.  For instance, feed-in tariffs (FiTs) are adopted in some states and under consideration in others.  FiTs require utilities to purchase electricity from individual producers of different renewable energy sources at set prices.  There are a couple of variations of  FiTs, but their benefits are generally the same.  First, FiTs ensure that renewable and locally-sourced energy will be added to the grid.  Second, FiTs eliminate costly one-off contracts between utilities and customers – simplifying the producer/retailer relationship for the benefit to both parties.  The term for this is TLC – transparency, longevity, and certainty in this generator/purchaser relationship.  What does this mean for Joe and Jane Ratepayer?  It means consumers purchase locally-generated power, setting the stage for a vastly different grid that has many points of distributed generation instead of reliance on far-flung centralized power sources.  That means improved grid reliability, reduced greenhouse gas (GHG) emissions, and avoided investments in transmission facilities, which often cost $1million/mile to construct.  And that all means more bang for your buck. 

Another change that is frequently in the news is the continued momentum of electric vehicles (EVs).  From the recent initial public offering (IPO) of Tesla stock to the announcements of planned electrification of more existing car models, there is growing interest in EVs and their role in the Smart Grid.   There’s even an acronym for one of these roles – V2G or vehicle to grid, the practice of using stored energy in EVs as dynamic sources of energy capable of discharging electricity back to the grid.  The coming changes apply to new business models and policies too.  For instance, a recent study from Zpryme cites activity from the state of Delaware that mandated something similar to FiTs for EVs.  Their V2G policy requires utilities to buy back energy from EV owners at the same price that those owners would pay to charge their EV batteries.  This means that an EV can make money for its owner.

It’s hard to oppose a change that makes you money, but it illustrates the challenges for utilities, industry associations, policy makers, and vendors face in educating taxpayers, ratepayers, and consumers about Smart Grid changes that have immediate impacts, but may not have immediate benefits.  The education can occur, and should occur, but it will require concerted efforts by all Smart Grid players to ensure that the changes on the horizon are enthusiastically supported by taxpayers, ratepayers and consumers.