EDF on Grid Modernization

Last week the Environmental Defense Fund released a new report on grid modernization, Grid Modernization: The Foundation for Climate Change Progress (pdf). This short report provides a clear overview of how grid modernization enables a cleaner energy future, examining six areas where investment and regulatory policy should focus to make that happen. The focus of this report is on the role of a digital grid in enabling distributed energy resources — renewable generation, energy storage, and microgrids — as well as consumer choice and control. The argument is a common and widely-held one in energy right now: on both the supply side and demand side, digital technology enables (1) decentralization of generation at smaller scale, (2) consumers who want to choose renewables and/or reduce their energy use, and (3) distributed ownership of resources that can enable consumers to be producers depending on physical and economic conditions (“prosumers”).

The six focal areas EDF identified are

  • Efficient infrastructure
  • Sensors and monitoring
  • Distributed resource integration
  • Renewable energy optimization
  • Electrified transportation
  • Access to data

As a high-level strategy document for policymakers, this report is quite useful, and I hope it prompts conversations and new ideas in Washington and state capitols around the country. Because it’s a high-level document the report is silent on some of the most important factors influencing the outcomes of grid modernization, in my opinion: transactive energy and retail competition and markets. For grid modernization to enable truly transformative decentralization, it has to make such decentralization cheaper, easier to implement, and economically beneficial. The most effective way to do that is to have processes that enable DER owners to buy and sell from each other, and that enable entrepreneurs to bring innovative technologies and business models to consumers and prosumers.

Those processes are market processes. Digital technology makes it easier for devices to transact with each other through a market platform, based on owner preferences that we program into our devices. And making that market platform competitive harnesses entrepreneurial incentives to develop new products and services.

Transactive energy and retail markets harness market processes to align economic and environmental incentives, in a distributed way that incorporates all of the diversity and subjective preferences of the consumers, producers, and prosumers in the system. These elements are missing from the EDF report discussion, but are complementary to their goal of harnessing grid modernization for climate change progress.