Decentralize the Grid: Practical or Unrealistic?


The US electrical grid is a century-old “machine” built for a singular purpose: to power the development and industrialization of the nation’s economy.  It is designed to deliver electrons from centralized power producing plants through transmission wires to end consumers.  This archaic, unidirectional architecture is unreliable, inefficient, and unsafe.

Using many of the same technologies and assumptions first implemented in the 19th century, today, the grid must keep up with rising demand which outstrips available generating capacity and technological advancements designed to make the grid “smarter“.

Studies referenced in the Department of Energy’s (“DOE”) Modern Grid Strategy highlight the economic consequences of power losses caused by this outdated power delivery infrastructure:

  • Power interruptions and disturbances cost the U.S. electricity consumer at least $79 billion per year
  • A recent rolling blackout caused an estimated $75 million in losses in Silicon Valley alone
  • When the Chicago Board of Trade lost power for an hour during the summer of 2000, trades worth $20 trillion could not be executed

But modernizing the electrical grid is a monumental task and requires much more than sweeping federal mandates and cash.  Even with The American Recovery and Reinvestment Act (“ARRA“) pouring $11 billion into “smart grid” and Title XIII of the Energy Independence and Security Act of 2007 establishing US policy supporting the modernization of the Nation’s electricity transmission and distribution system, the challenge lies in coordinating the interests of regulators, utilities, consumers, vendors, R&D organizations, and academia.  It all comes down to ownership — over generation, transmission infrastructure, information, etc. (for an in-depth discussion read here).

UC Berkeley’s Energy & Resources Collaborative (“BERC”) assembled a panel of experts at Monday’s Energy Symposium: Bold Ideas for a New Energy Landscape entitled, Decentralizing the Grid: Practical or Unrealistic? to discuss some of the challenges associated with modernizing the grid. Speakers included Dr. H Walter Johnson (Principal, Technology Strategies, California ISO), Chris Marnay (Leader, Technology Evaluation, Modeling, and Assessment Group, LBNL), Chris King (CSO, eMeter Corporation), and Ken Abreu (Principal Regulatory Analyst, PG&E).  Mary Ann Pietta (Research Director, PIER Demand Response Research Center, LBNL) moderated the panel.

Fraying the Extremities

While all panelists agreed that the grid will become increasingly distributed and move away from the centralized structure that has impeded modernization thus far, they disagreed as to the extent decentralization would overhaul the existing framework.  Generally, new institutions will develop at the extremities of the grid, while the big institutions that sit in the middle between generation and consumption (like the utilities) will not accelerate their glacial rate of change anytime soon.

At the meter end, two-way communication between the utility and end-use customer is becoming reality with the rollout of “smart meters” throughout utility service areas.  Eventually, increased access to real-time and dynamic pricing structures (updated hourly according to Abreu) will enable end-use customers to make smarter decisions about when and how they use electricity (including shifting load to off-peak hours to save money or respond to “event” triggers, see demand response).  Abreu explains that real-time prices will initially be based on day-ahead prices (not so real-time after all), and eventually on same day prices.

Studies have shown that consumers can achieve 5-15% demand reductions on their energy use when given access to usage rates and price information.  But the degree to which consumers “own” this information is unsettled, and it is unclear how much utilities will (or will be required) to relinquish control.  How these issues ultimately play out will have important ramifications for companies selling home energy management software solutions.

On the generation side, the problems associated with centralized power sources are significant.  Heavy reliance on traditional source of power (e.g. coal) means a more homogenous power supply, significant waste through heat loss over transmission wires, and lack of customer control over the type of power consumed.  While renewables offer a cleaner alternative and can be deployed wherever there is a sufficient source of energy (i.e. sun, wind, waves), they can not meet current load demand on their own and face serious land use challenges.

The panel agreed that increasing the supply of renewables is a complex undertaking.  To scale-up production, it is both necessary to draw from greater distances (like Nevada or Arizona for the state of California), and promote distributed generation.  While this would mean more heterogeneity in the type of power produced, utilities would still sit in the middle between producers and consumers.

Spawning Microgrids

Chris Marnay, whose work centers around researching microgrid systems, described such clusters as an “escape from the tyranny of centralized uniform power supply.”  He argued that microgrids would reduce waste, enable end-users to have better control over the resources they use, and allow communities to rapidly respond to disruptions in power supply.

But a necessary precursor to establishing microgrids is the creation of networks of rooftop solar, small turbine, battery storage, and other related technologies.  Without distributed generation and storage capabilities, the microgrid can not survive independent of the national grid.

It would also be difficult to coordinate microgrids given the current state of the national grid, especially since microgrids must still operate within the existing framework.  Dr. H Walter Johnson explains that a reliance on microgrids would require shifting from large investor-owned utility (“IOU”) footprints across large swaths of territory to cluster locations scattered across a given state or region.  In this scenario, local generators would be paid according to local prices in nodes (or clusters), whereas load aggregation points would maintain the same price across a given ISO territory.  But balancing islands of microgrids with aggregate grid needs would be difficult, and in the case of blackouts, Dr. H Walter Johnson warns that it is not easy to just “throw a switch and roll microgrids back in.”

Federal Policy

To date, the federal government has punted major decisions about implementing smart grid upgrades and technology to the states through DOE programs like Energy Efficiency and Conservation Block Grants and the State Energy Program.  For a good summary of how the DOE plans to implement ARRA, read here.

In the absence of aggressive federal energy efficiency and demand response legislation, many cities have begun transforming themselves into “smart grid hubs”, like Austin, Denver, Boston, and the Bay Area.  CleanTechies should monitor stimulus spending to these cities as they emerge as important test areas for many of the new technologies that will transform the way we consume energy.

["Smart Grid" illustration courtesy of DOE]


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  1. Wow, it’s surprising how these solutions are all monolithic, big-idea approaches trying to solve everything at once. All we really need are international standards, then get out of the way and let free enterprise go to work!

    The internet was built on the “centralized” phone grid, which wasn’t made to support the grid-style of IP routing. Standards created a predictable business climate that let free enterprise explode into what we all take for granted today. We don’t need trillions of budget dollars, we need trillions of investment that is guided by standards of communication and security across a variety of platforms.

    Let appliance manufacturers know that if they include metering in home products, those products will easily communicate with home servers, which in turn will provide users with accurate usage data. Then provide standards for aggregating home data into neighborhood and community web-based reporting. That way cities and regions can begin to collect accurate data. No need for permission from energy utilities trying to protect their cash-cow status, we simply route around them.

    Does this really sound so hard? Get out of Washington think tanks and university seminars, and work with real people in real situations. Just get started…stop waiting for some so called experts to solve the problem. It’s economics 101, right?

  2. CARS WILL BECOME POWER PLANTS – That will encourage grid decentralization…

    Unconventional energy conversion systems are under development that tap the Zero Point Field, a never previously commercialized, renewable, abundant source of energy. These revolutionary new energy conversion devices are inherently cost-competitive. They can eventually power and make practical cars, trucks and buses that need no engines, banks of batteries, or any variety of fuel or battery recharge.

    One Proof-of-Concept prototype has been said to be analogous to the early work on the transistor, which eventually led to the creation of Silicon Valley.

    Generators that convert Zero Point Energy are expected to provide sufficient power to demonstrate replacement of the plug needed by a plug-in hybrid car. This will be a harbinger of automobiles that need no conventional fuel or recharge. A prototype system is anticipated to replace an automobile engine. That goal might be achieved much more rapidly if development involves four teams of engineers and technicians working 24/7. The prototype will lead to mass production of an entirely new variety of automotive power plant.

    Electric vehicles powered by these generators will breathe new life into auto manufacturing.

    Skepticism is anticipated and understandable. However, Independent laboratory validation, Demonstration Devices and toys are included in the program.

    The next step will be Vehicle to Grid (V2G) power sufficient to pay for many vehicles over a reasonable period of time. Today, prototype V2G systems are being prototyped that use a hefty two way plug. In one direction, the batteries are recharged. When suitably parked, a local utility can purchase power stored in the vehicles’ batteries. It has been estimated car owners might earn up to $4,000 per year from such payments.

    Now imagine vehicles that need no batteries and can supply far more power – in some cases up to 150 kW. That is a power plant that can earn considerably more. And the connection to the utility will need no wires!

    Consider this new technology. It opens new possibilities. For example, parking lots can become utility substations.

  3. Ted Jasiewicz on

    It appears we are reverting to the original ‘game plan’ for energy distribution. Until 1990 regional ‘electric companies’ generated and supplied locally. Deregulation occurred in 1990 since it was ‘guaranteed’ that competition would lower the price to consumers. This concept of trading energy produced the likes of Enron and others.

    The good news is that regional systems for usage including monitoring and feedback via smart meters. Systems have been developed and installed for control of voltage/energy flutuations and are being utilized today. More importantly, at the city level and local level.

    Bigger is not necessarily better.

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