Getting the Electric Power Grid of the Future Right (or Wrong)

David Bernell

 

After a lot of posts about politics, here’s one about energy policy and technology. I find the electric power grid and the energy policy that governs it fascinating. There’s a massive interconnected machine that spans the continent and provides us all with electricity. Most of us are always really close to it since we’re often in homes and other buildings. We can even charge up our phones and stay connected to the world with our electricity just about wherever we go [1]. So here’s what I’m thinking…

 

There is a great deal of interest, study, deliberation and conflict about how to manage and pay for the electric power grid as it evolves into a system characterized by lots of clean, renewable energy, and  multidirectional flows of both energy and information. Big wind and solar farms are being built to supply the utilities, and new distributed energy resources (DER) that customers control such as solar, storage, efficiency, and demand response have become more widespread throughout the grid [2]. States and the federal government have been implementing new policies to modernize the grid and introduce competition. And utilities are looking for ways to ensure that they can deliver electricity reliably and affordably to their customers without getting run out of business by all the changes.

 

Meanwhile, the business and regulatory models we use today were developed more than a century ago in response to the technologies that were developed at that time to provide power to consumers: big power plants running on fossil fuels (and some hydropower), with long transmission lines to take the electricity from the power plants to the customers. New technologies and concerns about climate change are increasingly prompting the need for new business practices and regulations.

 

Now that there are smart meters, electric vehicles, and of course, a rapidly growing number of solar PV systems installed on houses and buildings to deliver onsite generation, along with a feared "death spiral" for electric utilities, the ideas for reimagining the grid are proliferating rapidly [3]. Ideas abound:   

 

1.  Introduce variable rates based on the time of day electricity is used (businesses have been doing this for decades, but not residences).

2.  Change net-metering rules so that when customers sell electricity back to the utility they are paid the wholesale rate for the energy and not the retail rate.

3.  Create a special “demand” or “standby” charges to customers who have their own solar panels on their homes and businesses to compensate utilities for the services they provide to customers whose net electricity usage from the utility may be rather small.

4.  Alternatively, instead of charging customers extra who generate some of their own electricity, pay them a premium for the value of the energy they produce during peak hours, when they might be at work but their solar panels are generating energy.

 

Such proposals seek to introduce a level of granularity to the grid, to accommodate the various ways in which market actors engage the grid. The idea of making the grid "fit" ones needs and interests is attractive. However, if the solution involves making customers more educated about or interested in their energy use and costs, or introduces a level of complexity into the system that requires a great deal of time and attention from consumers, then my expectation is that such solutions are not likely to succeed, or at least they will fail to deliver on their full potential.

 

The virtue of the grid and the utility business model as it has existed has been that the complexity of the system has been masked by the utilities. People tend to not need or want to be energy experts, they want to have the services they need, and then pay the bill. The utility provides this. The power stays on, the bill is affordable. What's the problem?

 

To the extent that an evolving grid will need to address little growth in consumer demand, climate concerns, transmission congestion, demands for energy choice, the falling cost and rising popularity of solar, along with other concerns, then we will be well-served by devising a system that continues to mask complexity for the consumer as we seek to accomplish these other goals.

 

To me, the gold standard in taking complexity out of the consumer's hands is Uber. Imagine trying to get a cab in the rain, or on a busy afternoon. If you're in downtown Chicago, you might be able to hail a cab quickly, but not always. So you have to wait a while and hope an empty cab drives by. Then when you get frustrated, you call the cab company who tells you a cab will arrive in about 20 minutes. Meanwhile, you're running late, getting wet, and getting mad. Uber takes all that out of your hands. You simply tap the button on your phone, type in where you want to go, and in a minute or so, you get a call from someone who is on the way to get you. In only a few minutes, you have a ride. You can track the car's movements, and you don't even have to pay or ask for a receipt at the end of the ride. That's the ideal user experience, and the one that we should strive for in imagining and building the grid of the future.

 

The way I think we should want the grid to work is like a smartphone. It allows for both individualized experiences that fit the user’s interests (we all have our favorite apps, news sources, and games), while also being connected to a larger network that allows the user to interact with people all over the world via voice, text, email, video and social media.  And it has a camera too!  Moreover, the complexity of the smartphone is completely hidden. My children (everybody's children) can use an iPhone with ease, and the adults also do pretty well.

 

If the electric power grid we have years from now combines the power, efficiency, individuality and simplicity of the telecommunications sector, that will be a victory. There’s a lot of potential. Think about it: if Alexander Graham Bell came back today and saw what we did with his invention, he’d be blown away. If Thomas Edison (who established the first electric utility company) came back to today and saw his invention in action, he would barely notice a difference.

 

 

[1]  I’ll start with a little shameless self-promotion. I wrote a book about US energy policy called The Energy Security Dilemma: US Policy and Practice. I’m sure you won’t be able to put it down. You can find it here: https://www.amazon.com/Energy-Security-Dilemma-Policy-Practice/dp/0415890551.

 

[2]  Demand response refers to providing information, incentives and technologies that can get electricity consumers to use less when demand is high – during the peak hours of usage in the afternoons and early evenings. This could involve many things, like having homeowners washing and drying their clothes at night in exchange for a lower electricity price after peak hours, or having all the retail stores in a city turning off the air conditioning for a half hour every afternoon in the summer. This would have a negligible impact on the temperature inside any building, but it would reduce overall demand significantly.

 

[3]. The “death spiral” that utilities fear is that as customers do more at their own homes and businesses to provide electricity for themselves (such as using solar panels and batteries), they will need less electricity from the utilities. This means the utility will sell less electricity and have to charge higher rates to the customers it maintains. When that happens, more customers are likely to install onsite generation like solar because the cost is more competitive with the utility’s rate. So the utility will have to charge more to its remaining customers. And so it goes. Meanwhile the utilities would still have to pay to keep up and maintain the grid, while still supplying electricity to their customers with solar whenever they need it, even if it’s for only a short time every day (or year).

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