Getting By Without The Grid

The blackout has raised public interest in distributed generation (DG). DG technologies have gotten more cost effective over the past decade, and many businesses that cannot afford power outages use DG for backup. See, for example, this Time article on net metering, which is allowing your meter to run backwards and thus sell power back to your local utility at the same price you get charged for it, this AP article on a New York woman who generates her own and puts excess power back on the grid, and this Wired article on getting off of the grid. The Wired article points out the value that DG can have in taking strain off of the grid, as well as in making the grid less vulnerable to terrorists (an argument I made in November 2001 in this commentary):

The high cost of everything from photovoltaic cells to batteries is likely to keep such home-power systems from becoming widely used any time soon, notwithstanding events such as last week’s massive power failure in the Northeast and Midwest, said professor Lester Lave of Carnegie-Mellon University in Pittsburgh.

But the underlying notion — that power generation and transmission should be more widely distributed, like the design of the Internet — is one that has huge promise in fixing some key problems with the electrical grid, said Lave, co-director of Carnegie-Mellon’s Electricity Center.

“It’s certainly true that the system is aged and creaking, and that’s what the blackout is telling us,” Lave said. “We’ve done a fair amount of work here on distributed generation as a means of achieving energy security — such as deterring a terrorist attack — and efficiency. We’re optimistic about its ability to solve many of these problems and make the system much more reliable and secure.”

As is typical with Wired stories, this one is well-researched and informative.

So if DG is valuable and becoming more affordable, why isn’t it more widespread? In spring 2000, the Department of Energy published a study of the barriers to distributed generation ( here’s the press release on it). Its primary finding:

The Energy Department examined 65 distributed electricity generation projects. Of the 65 case studies, only seven reported no major utility-related barriers. However, in most cases, substantial regulatory, technical and business-practice barriers exist, which inhibit distributed generation interconnection to the grid in the United States. For example, 17 projects, more than 25 percent of the case studies, experienced delays greater than four months.

Think about this from the point of view of the utility, which is operating in the 85-year-old regulated business model of “make more profits by selling more power.” DG removes potential load from their customer base, so of course they are going to fight it as long as they remain in the “make more profits by selling more power” mindset. Breaking out of that mindset requires active retail choice, which is how the utilities can make more profits by selling less power (i.e., by charging different prices at different times depending on demand).

One thing that utilities can do is use the “obligation to serve” regulatory mandate under which they operate to argue that they must keep customers on the grid. Under this obligation to serve, utilities have also been able to charge high “grid exit” fees to customers who wish to be removed from the physical service of their local distribution utility monopoly.

Here is a 2002 study done for the DOE by the Regulatory Assistance Project, very thoughtful folks, on how DG can help utilities avoid incurring the costs of upgrading their distribution networks.