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Electrical Grid Woes and the Rise of Edge-Power Players

Hurricane SandyIncreasingly frequent and severe weather events have starkly illuminated weaknesses in the 20th century electric grid. As I’ve mentioned in previous posts, problems with the grid go beyond susceptibility to failure during severe weather events. The convenience, safety, security and economic well-being of retail consumers are at stake in a successful transition to a 21st century grid.

The quality of life and economic productivity in the United States has been achieved largely as a result of an affordable supply of reliable electric energy. Modern life has been defined by access to as much electric energy as we want, for whatever we want, whenever we want. However, it’s increasingly obvious that the 20th century’s centralized, cost-plus monopoly model, once supported by economies of scale for huge centralized power plants, is not going suffice to make these practices possible through the 21st century.

Even if the traditional utility model could still work for another hundred years, new technologies, applications and business models will make possible dramatic improvements in meeting consumers’ and enterprise’s wants and needs, with the reliability, economy and security we’ve enjoyed in the past. These new technologies include what’s being dubbed “edge power”: decentralized generation, storage and energy management systems as well as distributed metering, monitoring and control devices ultimately operating in closed loop, with automation, linked to the so-called “Internet of Things.” Edge-power players will eventually bypass the traditional vertically integrated electric utility business model to participate directly in regional, transactive energy markets (e.g., EnerNOC in the PJM Interconnection).

Who are these edge-power players? They are entities willing to provide customers with things that incumbent utilities are unwilling or unable to provide. Customers will embrace edge power, but not because they are willing (or even interested) in the production, distribution and metering of electric energy. Utilities’ experiences with demand response over the past several years has revealed that most customers are uninterested, even averse, to the time and effort required to become electric utility experts, energy efficiency professionals or full time energy managers, even if it saves them some money or allows them to be “greener.”  

People and companies want to use electric energy not as an end in itself, but rather to maintain and improve their lives and livelihoods. They will gladly do business with companies that sell them products and services that provoke reactions such as “Wow!” “Cool!” “I need that!” and/or “I want one of those!” Electric consumers have little or no concern for the continued economic well being or even the integrity of operations of their incumbent electric utility. At best, economy and efficiency will be constraints on what they can afford, not their primary goals.

It is no longer possible for centralized electric utilities to continue to provide an increasingly reliable power supply with steadily declining real costs and acceptable levels of adverse environmental impacts as they did in the past century. This fact in turn drives consumers to alternatives that provide the economy, reliability and sustainability they want and need. As incumbent electric utilities attempt to accommodate and integrate edge power, their effectiveness will determine their fate. The less effective they are, the less attractive their price and quality of service will be and the greater the motivation for consumers to rely even more on edge power. At some point, as traditional electric utilities’ costs of providing service increase and their sales of power and energy decrease, edge power is likely to achieve grid parity. Consumers will find it beneficial to operate “off the grid” some or all the time, further accelerating a downward spiral for incumbent utilities that can’t compete in this new world.

Even so, traditional electric utilities will remain obligated to continue to operate their existing centralized grid so as to maintain a power source – perhaps primarily for backup – with acceptable levels of reliability, safety, security, economy and environmental impacts. The incumbents in this new world do not have the option of being mere spectators, much less becoming opponents of their customers. And it is extremely unlikely that they will be able to control the fast moving, innovative, highly competitive markets for edge power in the way that they have controlled centralized generation, transmission and distribution in the past.

What’s a poor utility to do? Get a lot smarter! Race to deploy the grid monitoring, analysis and control technologies and application that will be required for them to operate and maintain the part of the grid for which they are responsible. But that won’t be enough. Traditional base-load power plants and bulk transmission corridors cannot accommodate the swings of power resulting from increasing penetrations of:

  • stochastic (i.e., randomly variable) generation sources (e.g., wind, solar photovoltaics),

  • customer-dispatched generation sources,

  • electric vehicles and plug-in hybrid electric vehicles,

  • disintermediaries engaged in demand management, energy conservation and even energy trading in organized markets and

  • nanogrids and microgrids that come and go.

Utilities are going to have to figure out ways to partner with these edge power players, which include large industries, commercial enterprises and residential consumers and the various third-party entities that the latter will be doing business with.

Steven Collier's picture

Thank Steven for the Post!

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Ivor O'Connor's picture
Ivor O'Connor on Mar 21, 2013 3:40 pm GMT

I read and tried to follow your entire article. You lost me at the end. If there are HVDC high power bulk transmission corridors why can't they handle the loads. I agree most people will want to be off grid and with EVs will be able to. However the biggest problem seems to be the power lines exposed to the elements. Every storm seems to knock out the electricity and workers run around putting the lines back up. If they were underground we probably wouldn't have hours each year of power outages. It's almost as if the power company unions force these above ground power lines to keep the union ranks up. Anyway here is where you lost me, I copied in your text below:

 

 Traditional base-load power plants and bulk transmission corridors cannot accommodate the swings of power resulting from increasing penetrations of:

  • stochastic (i.e., randomly variable) generation sources (e.g., wind, solar photovoltaics),

  • customer-dispatched generation sources,

  • electric vehicles and plug-in hybrid electric vehicles,

  • disintermediaries engaged in demand management, energy conservation and even energy trading in organized markets and

  • nanogrids and microgrids that come and go.

Roger Faulkner's picture
Roger Faulkner on Mar 23, 2013 12:15 am GMT

As the number of small generators proliferate, especially those too small to participate in the bulk electricity markets (where on & off switching times are agreed in advance in a bidding process with the ISO), the power variability becomes worse. On the other side of this, as the total interconnected capacity increases, the aggregated variability decreases most of the time. In rare cases though, large, uncontrolled variations can occur, and with many "net metering" small installations online, the maximum variability increases, which could crash the grid. Fast responding online storage, like Beacon Power's flywheels (Beacon is now bankrupt, but they made some great flywheel energy storage systems) can take out a lot of the short term fluctuations. At the next time scale up, gas turbines and pumped hydro respond fast enough to balance loads. 

Ivan mentioned HVDC, but at present in America, that is comprised of only point-to-point HVDC links between major nodes in the AC grid. HVDC does stabilize the connected points somewhat, but the real potential of HVDC to stabilize the grid is not realized until one begins to consider multi-terminal HVDC lines. Multi-terminal HVDC LOOPS are especially significant, because (as long as there are HVDC circuit breakers between each next-neighbor set of power taps) these loops are "self-redundant" which means that no matter where a line break occurs, such a loop can still deliver power from any node on the loop to any other (this is called "n-1 redundancy;" the fact that a loop is self-redundant makes such loops the ideal morphology for reinforcing the AC grid in a given region.

HVDC loops are a sort of regional version of a supergrid. The bigger is the region that is strongly enough connected to trade power back & forth, the more stable the grid becomes. A "supergrid" is when the power exchange capability reaches a continental scale (we are far from that...but that is "my issue"). A supergrid reduces the aggregated variability of stochastic (uncontrolled) generators and loads greatly, and if it is large enough to span three or more weather systems, then the aggregated reliability of wind & solar is greatly enhanced. But a supergrid absolutely requires multiterminal HVDC and a whole lot of highly reliable HVDC circuit breakers and fault current limiters (which are not yet developed to the level needed). I have been focusing on a few parts of this puzzle: how to underground a high capacity HVDC power line (I call my solution "elpipes") and we need a better HVDC circuit breaker (I call my solution "Ballistic Breakers"). A supergrid would also allow access to remote sites for power generation (such as class 7 wind areas in Wyoming, for example) and storage, especially pumped storage. It is dramatically less expensive to build pumped storage in a remote area than near a city.

Douglas Short's picture
Douglas Short on Mar 25, 2013 6:12 pm GMT

Hi Steven - I agree with your premise. An interesting question is whether distribution utilities can make the changes you identify. I think there are three problems.

First, many distribution utilities are owned by companies that have generation assets whose book value far exceeds that of their distribution assets. That makes it really hard for any existing executive to adopt the required changes, even if they see they are required. It will mean a significant loss, so why do it until it becomes absolutely necessary and it is some other COOs job.

Second, the skills that would be required have been bred out of utilities generally, and distribution utilities in particular. Figuring out ways to partner with edge players requires innovation, sales, relationship, and decisive decision-making that distribution utilities no longer have. They are good at maintaining the status quo, but not much more.

Third, many regulators, as well as utilities, are blind to the coming price completion from edge power. Their current price structures charge for fixed costs in variable prices. They seek to increase rate base so they can have higher earnings. These things make prices higher and make edge power cost-effective sooner. And, they take years to change, while edge power will propagate rapidly once it reaches the price tipping point.

Steven Collier's picture
Steven Collier on Mar 28, 2013 6:08 pm GMT

Douglas,

Thank you for taking the time to read my post and provide your feedback.

i think that you are generally right about the inertia caused by the immense finacial investment the incumbent infrastructure, reluctant management and overwhelmed legislators/regulators. Utilities see value in reducing peak demand primarily because it allows the continuation of a monolithic, centralized grid based upon cost=plus monopoly market division and pricing. Few utilities yet see the value to their consumers, the public, and ultimately themselves of energy efficiiency and distributed generation that can significantly reduce energy sales. Hence, for example, their tendency to pursue VVO and CVR to reduce demand while being careful not reduce energy consumption.

Essentially all of the electric utilties that own and operate generation continue to believe that the solution to the grid for the present and the future is to remove the regulatory barriers and constraints on siting, building and operating a centralized grid. Hence the disproportionate emphasis by the industry on demand response to "flatten the load duration curve" so that fossil fueled, basel load generation can continue to meet consumers' needs.

However, there are encouraging signs of some electric distribution cooperatives and public power systems not only recognizing and accommodating but actually embracing and leveraging a new, decentralized grid model with edge power technologies and vendors. One of my favorites is Wright-Hennepin Electric Cooperative in Rockford, Minnesota.  They are aggressively pursuing community solar, Modlets, home and business security monitoring, home and business autiomation, Silent Power, distributed generation monitoring and a variety of other technologies, applications and business partners that they see as being necessary for success in the 21st century. One of their wholesale suppliers, Great River Energy, a generation and transmission cooperative, has also been a long-time pioneer in energy efficiency.

My post is premised upon the fact that edge power is inevitable and the incumbent industry players can either promote it or be diminished by it. Just as has been the case in the closely regulated telecommunications utility industry, it really doesn't matter in the long run wither the incumbent utilities, their management or their regulators are willing to embrace a new grid model (i.e., the Internet) and the disaggregation and reaggregation of the retail market by disintermediaries. Disintermediaries have little to lose and everything to gain. They are first adopters of the latest and best technologies and they seek the levels of return that only occur when there is great risk. Furthermore the old electric utility paradigm is neither feasible nor desirable for the future. So there will be churning and thrashing, there will be weeping and wailing and gnashing of teeth, and their will be financial hardship for the incumbent utilities. But innovation, in technology, in business model, in customer service, will happen one way or the other. "If you can't beat 'em, join 'em."

Thanks again for reading and commenting.

Steven Collier's picture
Steven Collier on Mar 28, 2013 6:25 pm GMT

Ivor,

I appreciate you taking the time to read and comment on my post.

Roger's comments are spot on in response to your questions. 

The traditional centralized grid is having difficulty in accommodating wind, photovoltaic and customer-owned and operated conventional generation because base load power plants simply cannot ramp up and down (much less be brough on line from a cold start) as rapidly as these stochastic resources vary in output. In MISO, for example, this results in a utility having to actually pay to deliver power from their baseload power plants into the grid during off peak periods (i.e., night time during spring and fall). Furthermore, in ERCOT where I live, the greatest source of wind generation is where there are the fewest people and business and therefor the most limited transmission capacity. So, even if conventional generation plants could accommodate the variability fo the wind energy, the transmission system is a limit on how much wind capacity can be accommodated.

As to outages caused by storms, accidents, utility equipment failures (or vandalism . . . or terrorism), it could be effective to put all of the lines underground and all of the substations inside hardened structures, but the capital investment required would be staggering. Decentralizaing the grid with smaller generating units sited closer to load centers, including renewable energy sources and energy storage facilities, would  increase overall grid reliability. It could also substantially increase efficiency (e.g., reduced losses), sustainability (renewable energy sources), and grid security (i.e., it is much harder to disable a decentralized system of sources and loads than a centralized one whether it be by physical threats or cyber ones).

Thanks again for participating in the discussion.

Steven Collier's picture
Steven Collier on Mar 28, 2013 6:37 pm GMT

Roger,

Thanks for reading and commenting. Your perspective is terrific.

I agree that the single greatest barrier to accommodating both conventional and renewable energy sources, facilitating the most efficient organized power markets, and operating the grid, locally, regionally and nationally, most efficiently is the absence of what you call a supergrid. Outside ot the New England, the PJM, MISO and ERCOT, the lack of transmission interconnection and capacity is a severe limitation on all of these. Unfortunately, considerable investment, time and regulatory review will be required to achieve a physical supergrid. A desirable intermediate step would be to, as much as possible, get the interconnections in place to allow local, regional and national transactive energy markets.

It turns out that Thomas Edison may have been right about the superiority of DC to AC (apologies to Nikola Tesla and George Westinghouse). One of the significant advantages of DC power is the ability to directly regulate the power flow in a DC line. Of course, doing so in a large interconnected system is not simple and would require considerable remote monitoring, analysis and control hardware and software. Hmmm, Moore's Law, Metcalfe's Law, Gilder's Law, Kurzweil's Law, Wright's Law have been resulting in rapid, disruptive advancement in the electronics, telecommunications and information technologies that would be required. This is why I firmly believe that the Smart Grid is ultimately a part of the Internet of Things.

Thanks again for your input.

 

 

Ivor O'Connor's picture
Ivor O'Connor on Mar 28, 2013 6:43 pm GMT

Thanks for such a detailed reply Roger. I learned quite a bit and will refer back to it. And now I know whose problem it is and who to blame! Get working on that supergrid and expand it to span all of north america!

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