A similar market is already in deployment on the east coast in a program called the Regional Greenhouse Gas Initiative or RGGI, as mentioned in my blog on December 13.  California’s Air Resources Board is also working on a regional level with the Western Climate Initiative  (WCI) for eventual development of a regional cap-and-trade program.

There are still many questions that need to be answered about the California program, including the number of allowances that will be extended to companies and how the revenues from this program will be spent.  One intriguing idea for revenue allocation is to make it “cap and dividend” or “cap and paid”, and it could be used to encourage Smart Grid deployments.

This program idea is similar to the structure of Alaska’s annual payouts on oil dividends to each citizen in that state.  The estimates of the size of California’s emissions market volume range from $3 billion to $58 billion by 2020.  At least one commission of economists recommended disbursing 75% of the revenues realized from California allowance auctions to households, and using 25% for activities focused on low income communities, such as adaptations to climate changes.  Distributing auction revenues to all California citizens would be a great economic boon for the state economy.  Check disbursements could include education about initiatives that each household can take to reduce their GHG emissions, such as putting solar on rooftops, buying EVs, or making buildings more energy-efficient.  Investments in these areas certainly further Smart Grid technologies focused on localized electricity production and intelligent consumption. 

Offsets present another interesting opportunity to encourage Smart Grid-related projects.  Offsets are credits for reduced emissions (or carbon capture) through forestry projects and reduction of methane at dairy farms.  That’s a nice start, but why stop there?  Why not encourage offsets for state-based investments in microgrids or distributed generation (DG) facilities that use clean renewable energy sources and energy storage technologies to ensure reliable energy supplies?   Offset programs would then provide market certainty and opportunities for microgrid and DG technologies and businesses, and accelerate deployment of these solutions, which in turn reduce GHG emissions.   This policy could enable public/private partnerships between schools and companies to put solar on rooftops for reduced emission credits or replace diesel back-up generators at hospitals with cleaner natural gas and battery facilities to earn offsets.  Investments in projects like these would also accelerate deployments of Smart Grid technologies, reduce grid vulnerability, improve school financial situations, and create viable new businesses. 

The passage of AB 32 has already had beneficial impacts for a Smart Grid – the IOUs are already building their renewables portfolios.  However, the California carbon emissions market can do more to promote Smart Grid progress, and a cap and paid distribution of revenues and appropriate offset policies can accelerate investments and growth in Smart Grid technologies and businesses. 

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.

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.  

Business and academic campuses are excellent candidates for microgrid installations, and many already fulfill some capabilities in the definition above.  Microgrids can serve as living laboratories for the proliferation of technologies ranging from generation (especially renewables), transmission, distribution, building energy management, and data center energy efficiency.  Beyond the technologies, microgrids provide perfect settings for different communications strategies and outreach programs to encourage smart energy behaviors.  College campuses also have the added benefits of aligning microgrid projects with academic departments ranging from electrical, mechanical, chemical, and civil engineering to information and communications technologies (ICT) and public policy, economics, and behavioral science disciplines.  Just imagine the opportunities that exist at these intersections of need and innovation.

Here are three areas where I’d like to see academic campuses get involved:

1.  Data center efficiencies.  Cloud computing, the continued adoption of the Internet and new social media applications mean that more data centers will be built going forward, and they can’t be the energy hogs they are now.  Can new data center designs take advantage of the waste heat instead of expending energy to cool it or exhaust it out of the buildings?  Can new technologies make it useful heat instead of waste in both new and legacy data centers?

2.  Regulatory incentives for microgrid interconnection to utility grids.  The majority of states today do not make it easy to tie microgrids into the utility grids.  Standby charges are also disincentives, forcing microgrid operators to purchase standby power from utilities in case the microgrid generation shuts down.  What are the better models to encourage microgrid development while ensuring the overall reliability of power delivery for all utility grid customers?  What legislative, regulatory and tax policies work best to accelerate development of microgrids? 

3.  Social media applications.  The potential of social media to educate and influence human behavior regarding energy awareness and consumption is largely unexplored.  Students are natural adopters of social media, and are a great research population for companies interested in measuring the impacts of these applications into overall energy efficiency and energy management programs.  How can social media be used to reduce greenhouse gas emissions?  What programs will appeal to the broadest range of microgrid energy consumers?

To learn more about microgrids, join me at the Sustainable Silicon Valley/Santa Clara University Smart Microgrid event on February 23 to hear about this university’s project to upgrade their existing microgrid to a smart microgrid.

If your interests are focused on electric meters, the Metering, Billing/MDM America show in San Diego on March 7-10 has a conference agenda that delivers valuable information on the latest advances in meters and more.  This annual event draws innovating utilities, meter manufacturers, and thought leaders to discuss not only theory but reality in Smart Grid deployments.