Editor’s Note: EarthTechling, always looking to bring you interesting cleantech reading, is proud to repost this article courtesy of partner Txchnologist. Author credit goes to Terrence Murray, Txchnologist staff writer.
Since the time of Edison, the solution to increased demand for power has been to build more power plants. But not only is it impractical to continue building expensive and unpopular generating capacity, it is increasingly straining antiquated and inefficient electricity grids. Rather than build both capacity and transmission, a recent study by the Massachusetts Institute of Technology’s Energy Initiative has proposed an ambitious “third-way” that pushes for the deployment of tens of thousands of megawatts installed on millions of residential and commercial buildings.
The model proposed by MIT’s report, entitled “The Future of the Electric Grid“ is formally known as distributed generation, and is already well underway in mature renewable energy markets like Germany and Spain. Both countries gave distributed generation a boost by establishing a national feed-in tariff, which guarantees small power generation projects such as rooftop solar arrays a fair price for the energy they generate. In the U.S., these subsidies are currently limited to a few states, with the result that some parts of the country are well ahead of others when it comes to distributed generation. California’s Governor, Jerry Brown, has called for the installation of 12,000 megawatts of distributed generation on the state’s residential and commercial rooftops by 2020, thanks to a state-wide feed-in tariff system implemented by the state government.
California the exception
Still, California is an exception. Most experts believe the high cost of renewable energy means that the U.S. will not reap the benefits of distributed generation without some sort of long-term federal subsidy program. The MIT report claims “distributed generation installations theoretically can improve reliability, reduce costs, reduce emissions, and improve power quality.” However, these benefits can only be realized with the steady help of programs like feed-in tariffs. “The durability of such government policies will largely determine the rate of growth of installations over the next several years,” say the report’s authors.
While deploying millions of subsidized solar panels seems like a boon to beleaguered U.S. home owners, the power industry remains skeptical, and for good reason. The MIT scenario is tantamount to a fundamental transformation in the domestic power sector. Under the current system power generators send their product to market through expensive transmission lines. The distributed approach would, in effect, decrease the amount of electricity generated by power companies and distributed through the grid by shifting some of theproduction to consumers. MIT Professor John Kassakian, who co-chaired this two-year study, notes that as more customers generate their own electricity utilities will rely on a shrinking customer pool to finance the upkeep of the existing generation and grid network. “If we decide to fully adopt distributive generation there are a number of caveats we can’t ignore,” Prof. Kassakian explains.
One effect of the model proposed by MIT is that it would fundamentally change how utilities price electricity. Currently electricity prices are officially based on a customer’s monthly usage. However, actual costs are not based on solely on usage but are also designed to cover the power company’s distribution costs. Scaling up the deployment of distributed generation would allow customers to pay only for their usage. So, how do we get utilities to support distributive generation? “It’s going to be expensive,” warns Prof. Kassakian. “Utilities are a business. The way you get them to go along with distributive generation is by ensuring they stay profitable.” One way to do that is by connecting utilities to islands of distributive generation in their service area so they can sell any excess power to consumers. While a simple idea on paper, such integration is bound to be expensive, Kassakian believes.
Smart meters key
Utilities could slow the strategic shift to distributive generation, but the reality is that the way power is distributed is already changing. Smart grid technology, which allows micro-scale power producers to sell their surplus energy to other consumers, is challenging the dominant centralized power generation model. “The U.S. has seen dramatic growth in the deployment of advanced metering infrastructure (AMI),” the MIT report notes, in reference to what is widely known as “smart meters.” The report goes on to note that an estimated 27 million AMI meters have already been deployed nationwide, and smart meter AMI installations are expected to increase to 60 million over the next three years. “As we look to 2030 and beyond, it is difficult to envision a scenario without broad deployment of some form of advanced metering across U.S. utilities,” MIT concludes.
In a world where electrons are set to play a greater role in supporting our day-to-day lives – as everything from home heat to transportation becomes electrified – consumers are going to have a greater say in managing their own electricity production. The utilities that will thrive in this new environment must learn to abandon a highly profitable revenue model and embrace something far more uncertain.