US Microgrid Technology and the U.S. East Coast

Microgrid systems, an alternative approach for integrating small scale distributed energy resources, are becoming a reality on the U.S. east coast. The microgrids are viewed as a way to improve energy resiliency in the face of future impacts related to climate change, as reported by the Hurricane Sandy Rebuilding Task Force. Bill Howley, in today’s “The Power Line” blog, points out a critical necessity for microgrid development – the need for larger capacity, less expensive battery storage. Bill notes that one company, Solar Grid Storage, is making significant strides in this direction. Here’s Bill’s summary:

Larger capacity, less expensive battery storage is the key to building more microgrids in the US. Here is a story about one new company, Solar Grid Storage, that is developing new grid storage systems.   The article also gives you a good overview of new microgrid systems that are popping up on the East Coast.

Solar Grid’s primary focus is commercial customers, but it also works with utilities and municipal governments. Among its customers are a school system in New Jersey and a utility in North Carolina. It partnered with Standard Solar Inc. on the installation of a solar system at the Konterra Realty Corporation that opened last month.

He says grid operators like PJM, a regional transmission organization, pay Solar Grid an installation fee and a monthly fee based on the hourly market rate of access to its battery system.

Leyden says the company is currently in talks with utilities in the Maryland-Washington, D.C. area on solar storage. He declined to identify them but the major operators in the District are Pepco and Washington Gas.

 

The Continuing Saga of the Utilities’ Death Spiral

For those of you who are fighting numerous proposed high-voltage (HV) transmission projects, take some solace in the idea that “time is on our side”. There are lots of reasons for that, but one of them has always been that technology and the market would unfold and develop in ways that would, and should, make HV transmission largely unnecessary. As I’ve said before in other Geopostings’ blogs, I think that is exactly what’s currently happening with the disruptive challenge and the death spiral related to on-site solar and energy efficiency. Every day that passes increases the chances that more HV transmission will never be built. To elaborate on this, I’ve included a soon-to-be published op-ed in the Bozeman (Montana) Daily Chronicle by John Vincent (a frequent contributing author to Geopostings):

The Continuing Saga of the Utilities’ Death Spiral

– by John Vincent,  former Montana state legislator, Bozeman mayor,Gallatin County Commissioner and Montana Public Service Commissioner

Recently two opinion pieces published by the Bozeman Chronicle have addressed energy issues from a single perspective; increasing the supply of electricity. One article advocated for more power from wind. Another, while not dismissing wind power, made the case for coal fired generation.

Certainly reliable energy supply is important, the cleaner and cheaper the better.  But increasing supply isn’t what’s getting the most attention or generating the greatest concern in the utility industry today.

Here’s what is:  The industry is becoming more than a little troubled by the fact that energy efficiency and on-site and locally generated and distributed energy (which reduces demand for the power they sell) is beginning to threaten the way they’ve done business for over 100 years. They see this trend starting to cut into their profits, (profits made possible primarily by building large, centralized power plants and long distance transmission lines at handsome rates of return guaranteed by government regulation of electricity rates).

Consultants for the private utilities’ owned trade group, the Edison Electric Institute, recently acknowledged this threat. They call it a “disruptive challenge.” Others have dubbed it a “death spiral” for the utility industry.

What is “disruptive challenge” or the “death spiral”?

As more and more people and businesses use less and less energy and generate more of what they do use on their own, utilities will sell less power. Rates will have to go up in order to keep profits healthy and stockholders happy.

Customers who haven’t become more energy efficient, or who’ve been unable to find ways to utilize on-site or distributed energy systems, will bear the brunt of these higher rates. But because the cost of distributed energy and improved efficiency will continue to drop, increasing numbers of these customers will become empowered, motivated
and enabled to significantly reduce the amount of power they purchase from their traditional utilities.

The customer base for traditional utilities will shrink, profits will decline, expensive (and previously profitable) power plants and long distance transmission projects will no longer be needed and investors will look elsewhere for the kind of safe, profitable investments
government regulation of utility rates has guaranteed them for decades.  Utilities, as we know them, will no longer exist.

Because one key component of the “disruptive challenge/death spiral” is on-site solar, some may counter that what’s going on in the broader utility industry won’t apply to Montana.

Don’t bet the farm on it. New Jersey, under Republican Governor Chris Christie, trails only California in on-site solar installations; state of the art energy efficient office buildings using on-site solar are going up in Seattle; the chairman of the Federal Energy Regulatory
Commission said last week that on-site “solar will overtake everything” and so the cost of on-site solar will continue to drop. The utility industry’s Edison Electric Institute has warned its own constituency that they have a big problem on their hands; In Georgia, the Tea Party is going to bat for more on-site solar to reduce dependence on the grid; and Bloomberg BusinessWeek just  published an especially timely article, “Why The U.S. Power Grid’s Days Are Numbered”.

On top of all that, and of even more immediate concern for Montana, is the fact that substantial amounts of our state’s electric generation are exported to markets where, for decades to come,  85 to 100 percent of new energy demand is expected to be met through conservation and efficiency.

The grid isn’t going to disappear altogether and technology will make what remains of it smarter and more efficient.  But our reliance on the grid (the world’s largest machine but also a vast, interconnected system highly vulnerable to cyber attack and terrorism) will become a small fraction of what it is today. The signs are there for all to see and more than a few  industry leaders have started to adapt in order to survive and remain profitable in the coming decades.

We’ve seen this kind of paradigm change before, most recently in the phone industry. Land lines out, wireless in. A quantum leap. We are about to see it again in the utility industry. You can bet the farm on it.

Power Companies Losing Out To Rooftop Solar??

by John Vincent, former Montana Public Service Commissioner

America’s utility industry, “Big Power,” is, by their own admission, scared.  Made up of large corporations with huge and profitable investments in centralized generation and long distance, high voltage transmission (profits mostly guaranteed by monopoly status and government regulation), they are facing what their own industry calls a “death spiral,” – the likelihood that the loss of demand (need) for the power they sell will put an end to “business as usual,” (the old energy paradigm).

On Rooftops, A Rival For Utilities”, a 7.28.2013 NY Times article by Diane Cardwell, details the industry death spiral, and ties the spiral into net metering and its strong appeal to potential rooftop solar users:

Net metering right now is the only way for customers to get value for their rooftop solar systems,” said Adam Browning, executive director of the advocacy group Vote Solar.

Mr. Browning and other proponents say that solar customers deserve fair payment not only for the electricity they transmit but for the value that smaller, more dispersed power generators give to utilities. Making more power closer to where it is used, advocates say, can reduce stress on the grid and make it more reliable, as well as save utilities from having to build and maintain more infrastructure and large, centralized generators.

But utility executives say that when solar customers no longer pay for electricity, they also stop paying for the grid, shifting those costs to other customers. Utilities generally make their profits by making investments in infrastructure and designing customer rates to earn that money back with a guaranteed return, set on average at about 10 percent.

“If the costs to maintain the grid are not being borne by some customers, then other customers have to bear a bigger and bigger portion,” said Steve Malnight, a vice president at Pacific Gas and Electric. “As those costs get shifted, that leads to higher and higher rates for customers who don’t take advantage of solar.”

Whether it’s on-site solar (the main focus of this article), conservation, efficiency, distributed on-site or locally distributed power from other alternative energy sources, smart grid and micro grid technology or more efficient home appliances (the new energy paradigm), “Big Power” sees the day coming when sufficient need and market demand for the power they sell will no longer exist. Of course, they will do all they can to prevent that from happening, and that fight will be coming soon to a legislature and public utility/service commission near you.

One of the huge benefits of the new energy paradigm will be the rapidly decreasing need for any new high voltage, long distance transmission lines. Every day the new energy paradigm gains strength and momentum is a day that further diminishes the need for projects like NorthWestern Energy’s MSTI line and all the environmental, financial and private property rights problems it raises.

So, whether it’s rooftop solar in California or energy efficiency programs and small scale, on-site solar, wind or micro hydro projects in Montana, it all pushes the new energy paradigm forward. And that’s a good thing.

Energy Efficiency and Small-Scale Solar Power Threaten Utilities’ Bottom Lines

Power company revenue is under siege by energy efficiency and small-scale solar power, says a Fitch ratings analyst.

Rooftop solar power and energy-efficiency programs will eat into utility revenue and profit margins and discourage investment in new transmission projects within five years, a Fitch Ratings analyst said.

Utilities in stagnant or low-growth markets in the Midwest and Northeast face the biggest losses as more businesses and homeowners install their own generation systems and upgrade to more efficient appliances, said Glen Grabelsky, Fitch’s managing director of utilities, power & gas. Retirees flocking to southern states may offset some losses for local utilities.

This is serious business for utilities as Bill Howley of The Power Line notes:

Fitch is issuing this report as a warning of downgrades to come if power companies don’t step and squash rooftop solar power soon.

The demand loss for grid electricity will be significant as further remarked by Grabelsky of Fitch Ratings:

Loss of demand from customers that go solar or reduce consumption in other ways will shift more and more grid costs onto customers that do nothing. As there are more and more successful Off Grid Solar Projects, traditional grid companies will have to change with the new developments or be left behind. Power supplied by U.S. utilities declined 3.4 percent last year, largely from energy efficiency and on-site solar generation, which reduces demand for electricity from the grid, Grabelsky said.

Unless utility rate structures change, that will reduce utilities’ abilities to invest in major new projects and upgrade their transmission systems, Grabelsky said.

“It will have a negative impact on their ability to raise capital,” Grabelsky said. “Regulators will ask, ‘Do you really need all that new transmission when there’s no demand growth?’ There’s the potential for stranded assets.”

A recent study by the Edison Electric Institute (EEI), “Disruptive Challenges – Financial Implications and Strategic Responses to a Changing Retail Electric Business”, basically reiterates Grabelsky’s view of the threat to utilities by energy efficiency and distributed energy generation. The report details corporate utilities’ angst regarding their customers’ shift to go solar and reduce demand for grid electricity. Many are switching over to prepaid energy plans for their grid electricity, which is a greener option and more cost-effective to manage. With fewer people deciding to have a look for certain types of grid electricity, they are less likely to be overcharged by their utility company, which is good news for the customer.

How will utilities compensate for the loss of demand? Howley, in his “The Power Line” blog, gives a good response:

This translates into: do away with net metering and charge higher rates to people who install solar panels and invest in efficiency.

John Vincent, a former Montana Public Service Commissioner (PSC), in a recent op-ed in the Bozeman Daily Chronicle, calls the shift away from using corporate grid electricity the “new energy paradigm”. As Vincent explains:

A new paradigm is grabbing hold in the residential, commercial and public sectors of our economy. That is: local distributed or “on site” electrical generation and consumption (wind, solar, small scale hydro, biomas, geothermal, micro turbines, combined heat and power systems etc.) conservation, efficiency and smart-grid technologies (to increase the efficiency and capacity of existing electrical transmission systems rather than of building costly new ones at rate payer expense).

But, as Vincent cautions us:

The new energy paradigm is, for obvious reasons, being met with strong resistance by those who benefit from the status quo. Unfortunately, these self interests still carry a lot of political clout, witness recent Montana legislative sessions.

The “new energy paradigm” is a model that we must embrace. We need to get people and politicians to move on this.

Blog Postscript – Former PSC Commissioner Vincent adds the following clarification on the EEI study mentioned above:

The Edison Electric Institute is Big Power’s number one ally and voice (funded and supported by Big Power) and so their own consultant has: 1. Clearly identified Big Power’s dilemma and, 2. Recommended ways to beat back the new paradigm and maintain the status quo…… at rate payers expense. I think the recommendations cited in the consultant’s report can be boiled down to raising rates (one way or another) to offset the loss of revenue brought about by on site, distributed generation and improved efficiency.

In other words, Big Power will do everything they can to make us (rate payers) pay for distributed energy and efficiency……..the new paradigm, not their stockholders.