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Department of Energy’s (“DOE”) Modern Grid Strategy highlight the economic consequences of power losses caused by this outdated power delivery infrastructure: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