Utility Company Makeover

David Roberts at Grist has a rather thought-provoking article on how utility companies can be transformed to take advantage of new, cleaner technologies.  Mr. Roberts asserts that distributed generation will not mean the downfall of the grid, but that distributed generation and energy efficiency beg for a new model, one where the utility companies may facilitate an energy marketplace, but do not control the source of energy.  I would recommend reading this in conjunction with an article by High Country News titled "Haywired."  Although a subscription is required for the article, the gist of it is that the transmission system in this country is built around an old paradigm that cannot take advantage of the flexibility offered by clean energy, including rooftop solar.  

Essentially, both articles argue that we need a new energy paradigm.  Utilities want to replace old coal power plants connected to a behemoth transmission line grid with new natural gas and wind facilities plugged into the same grid.  And they will argue that new transmission lines are needed to accomodate all of this new infrastructure.  NREL is quoted in "Haywire" as saying that for every 3 MW of new wind facilities, utilities usually need 2 MW of new natural gas peaker capacity to deal with the intermittency. A Northern Arizona University professor told High Country News points out that breaking down stovepiping in how energy regulators share energy across the national grid, we could cut out such destructive redundancies:

"For renewable energy, it makes zero sense to stay in your small area," says Tom Acker, a professor of mechanical engineering at Northern Arizona University. He compares the utilities' current approach –– building up all their own natural gas reserve plants –– to buying a big SUV for everyday use, even though you really need it only a few days out of the year. Under an EIM [energy imbalance market], a bunch of balancing utilities would be able to share their renewables and that SUV, not to mention the transmission lines. "The progressive way of thinking is to share ... that is absolutely crucial or we'll never get renewable energy into the system."

While "Haywired" argues that breaking stovepipes in the transmission system would make the transition to clean energy more efficient, it is still assuming that we have to stick with a mostly central station model that does not require utility companies to change much about how they do business.  The article mostly argues that utility companies and grid regulators need to cooperate across administrative boundaries to share resources.

But the concept of a windmill or solar panel means that we can generate energy just about anywhere, so we should not be allowing utility companies ot reinforce this same archaic infrastructure.  As storage technologies become more advanced, eventually distributed generation technology will enable even greater independence from the grid because we can store any unused solar energy from the day for use at night.  Will we completely abandon the grid?  Probably not.  But the inherent and proven potential of scalable renewable energy technology (like rooftop solar) means that we can severely undermine a model that allows energy companies to profit at the expense of our wildlands and our climate.

Mr. Roberts helps capture the problem of utility companies clearly in the Grist article:

"You see the simple incentive created by this arrangement.  If the utility sells more kilowatt-hours than expected, it must make more investments, thus increasing its returns. Conversely, if customers start buying fewer kilowatt-hours, the utility risks having its investment costs stranded.

All of the blooming, buzzing innovation happening in distributed energy, at the distribution edge of the grid, is geared toward reducing the kilowatt-hours customers need to buy, through utilities, from distant power plants.  Ergo, distribution-edge innovation and the basic incentive structure of utilities are at odds.  That is the nut of the problem."

Mr. Roberts' article in Grist helps explain how utility companies of the future could look a lot different from today, facilitating instead of blocking adoption of distributed generation.  His article shows more concern than I ever will for utility company profit, and I do not think that preserving the profit of utility companies should be a key driver in how we think about forging a sustainable energy path.  However,  Mr. Roberts' makes a good point that trying to push utility companies off of a centralized and destructive monopoly will require them to imagine how they can still make profit under a new system.  It will be a tough fight, as the passage of SB 123 in Nevada shows.  In order to get a coal plant shut down, Nevadans essentially signed a deal with the devil (NV Energy) that will allow the company to build more transmission lines, natural gas power plants and gas pipelines. 

We can think about how to create incentives for utility companies to transition, but we cannot let them steer the implementation and expect a sustainable outcome.