With batteries and a local microgrid, this PV-powered house near Boston, Massachusetts, could eliminate its dependence on grid-supplied power. Photo: Gray Watson (256.com/solar) / Wikimedia Commons.
For the next energy revolution, we must deregulate power grids
14th August 2014
How do we spur more microgrids powered by renewable energy? Deregulate, writes Bill Watkins, ending the monopolies enjoyed by centralized energy companies. The alternative is to keep consumers and micro-generators stuck with the energy equivalent of the 'Princess' phone.
Solar, software and storage - the three S's of the utility death spiral - are eroding the need for centralized control.
What is the single most crucial energy policy change needed to spur microgrid development?
Deregulate the market - and let people and businesses large and small compete to sell electricity and other services directly to customers.
Utilities in most parts of the world operate under legal monopolies. They have to provide access to service to everyone in their territories and their rates and returns are fixed.
As a result, they don't have a tremendous incentive to come up with new services. And any change or program they want to introduce will have to be thoroughly vetted in public hearings before it can be implemented. Innovation is just not worth it.
We can already see the results that come from opening up the last mile. Retailers in the UK and Texas are experimenting with a variety of customer acquisition and incentive strategies
Microgrids are the logical outcome of deregulation
Comcast is bundling TV and other services with power. Germany became a world power in solar through deregulation: the country's feed-in-tariff essentially gave everyone with a roof or some spare real estate the ability to become a commercial power producer.
Increasingly, you'll see demand response services and time-of-use pricing programs rolled out through new providers.
Microgrids will become one of the outcomes of deregulation because they are a natural fit for technologies like solar and demand response. A smaller, decentralized footprint also fits better with how new power providers will operate.
Packaged solutions that combine solar, efficiency software and storage linked by a microgrid and that can rolled out in a somewhat modular fashion will be able to economically compete with traditional grids with their dependence on extensive, and often underutilized, infrastructure.
For example, microgrids are gaining in popularity in New York City in part because some of the buildings that fared best in Superstorm Sandy were linked to their own microgrids.
Grid-in-a-box services that provide businesses or consumers everything they need-renewable sources of power, energy storage, software for controlling peak power consumption, automation services-are, or could, become fairly common.
Developing nations have most to gain
And while this will have a huge impact in North America Europe, it will have an even bigger impact in emerging nations. Energy insecurity is a fact of life for most people in the world. Look at India.
Over 300 million people, or about 25% of the population, don't have regular access to the grid. Those that are linked to the grid, however, must contend with chronic blackouts: a debilitating outage plunged 640 million into the dark in 2012.
These outages dent India's GDP by an estimated 1.5%. In Africa the continents largest utility ESKOM now suffers blackouts so frequently that mining production is being curtailed with negative GDP impacts of around 2% and it's getting worse.
Many emerging nations have ideal conditions for solar: distributed microgrids make sense environmentally, economically and technically.
Microgrids will additionally target one of the biggest problems in Brazil and India: power theft. The World Bank estimates that over $202 billion worth of electric power every year gets lost through technical error or theft.
In some places, 50% of the power is stolen, and it is increasingly stolen by sophisticated criminal gangs, not your amateur electrician. Power is also the third most stolen commodity in the US, right after cars and jewelry.
With a microgrid, local citizens often own the power producing assets: the incentive to reduce theft is strong. At a minimum, they can detect and monitor theft more easily.
Seismic changes ahead - and about time too!
Once a steady supply of power can be established, you will see the same sort of seismic changes in rural areas in emerging countries that we saw in the US. Instead of trying to read by oil or wood fires, kids will be able to stay up late and study: people in emerging nations consume about 11% of the electric light that residents of North America or Japan do. Why would you want to build a Western-style grid when independent microgrids can provide better services for less?
In fact, it's hard not to think of ways that microgrids will help. Energy storage has been a long-sought after dream of the industry. Electricity is probably the most commonly consumed commodity in the world after water, but it has been economically and technically impractical to store it - until now.
With flow batteries, solar power generated in the morning can be consumed at night. Electric cars and motorcycles can be changed with power that otherwise might get thrown away. You can link storage to the grid - Imergy is already linking its batteries to the grid in that way - but a microgrid brings it down to a human, workable scale.
We will reduce peak power and emissions and be able to serve a broader population of people without spending hundreds of millions on new power plants. You don't have to wade through years of regulatory approval first.
Current grids reflect 1920's technology - and it's time for an upgrade
Foes and critics, naturally, will urge caution. The power system is one of the most vital infrastructures we have, they will say. Deregulation could retard necessary core investment or push additional costs of the grid onto people who can least afford it.
Those are very valid points, but they shouldn't stop progress. We lived through Enron. We have seen deregulation grow in Texas and the U.K. We have also seen how successful deregulation can be. We can craft policies that accommodate these concerns and still let people compete for the last mile of service.
It also needs to be pointed out that the macrogrid, and the utility rate structure that supports it, exists only because of the state of technology in the 1920s. Countries and cities awarded monopolies to utilities because it was the most economical, sensible way to bring the benefits of power to a wide audience without leaving anyone out.
But technologies evolve. Solar, software and storage - the three S's of the utility death spiral - are eroding the need for centralized control. Just as the invention of pavement made it more possible to travel by cars, microgrids give us the benefits of the macro grids without the nasty overhead.
Deregulation isn't perfect. Clearly, more caution should have been used when they deregulated banking and mortgages. But look at phone service. AT&T enjoyed a monopoly for decades. The company invented the solar cell, UNIX and the transistor.
But when it came to consumer innovation, the company often fell flat. AT&T didn't rush to give consumers wireless phones. It wasn't pushing the Internet for consumer uses.
Instead, it gave us the Princess Phone.
Bill Watkins is the CEO of Imergy Power Systems, a Fremont, California company that offers stationary energy storage with flow battery technology.
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