A Sea Change in the Power Business: Can Your Utility Survive?

February 24, 2014

Evidence keeps piling up that, like it or not, we are headed for a future of distributed energy generation, where small generators are contributing the major portion of new energy on to an electrical grid that must become smarter, more flexible, and a two-way system.

The “hub and spoke” model, with small numbers of huge power plants supplying most of the energy, and smaller customers dependent on giant utilities or government agencies, is going the way of typewriters and landline phones.

Midwest Energy News:

Here’s a sobering thought for U.S. utilities and grid planners seeking solutions for a future filled with distributed, customer-owned energy assets: that future is already here.

That’s one way to look at a striking chart presented at the DistribuTECH smart grid conference last month. It indicates that distributed energy resources (DER), far from being a tiny fraction of the country’s massive central generation fleet, may account for up to one-third of the total U.S. electricity supply by decade’s end.

But there’s a catch — this supply isn’t mostly made up of rooftop solar PV, or homes and business equipped with modern energy-saving, peak-shaving demand response technology. While those resources are growing fast, by far the biggest share of this untapped DER resource comes in the form of two decidedly un-sexy technologies: combined heat and power (CHP)systems and rarely used backup generators.

Here’s the chart, provided by former Southern California Edison smart grid chief and Cisco connected grid CTO Paul De Martini during a presentation hosted by grid software startup Bit Stew on the future of distribution grids:


More than 99 percent of new electric capacity added in the U.S. in January came from renewable energy sources, according to data released by the Federal Energy Regulatory Commission (FERC) on Thursday.

Of the 325 megawatts of new capacity installed, solar led the way with 287 megawatts added in January. That was followed by geothermal power with three new units totaling 30 megawatts, one new unit of wind energy with an installed capacity of 4 megawatts, and three new units of biomass totaling 3 megawatts. In addition, there was 1 megawatt added that FERC defined as “other.”

Despite significant gains, renewables are still a relatively small piece of the overall capacity picture in America. Renewable sources, including hydro, account for just over 16 percent of total installed operating generating capacity, according to FERC — a picture dominated by fossil fuels.

And it’s important to note the difference between capacity to generate electricity and actual generation. Capacity is the total amount of energy that can be produced, whereas generation is the total amount that is produced. Because renewable sources like wind and solar produce energy less of the time than other resources with the same amount of capacity, these two numbers can sometimes vary significantly.

Like capacity, electricity generation in America is heavily dependent on fossil fuels. As of November 2013, renewable energy sources, including hydro, accounted for about 13 percent of total net generation, according to data from the U.S. Energy Information Administration.

Big picture aside, the immediate renewable energy trend is clear. January’s noteworthy numbers mirror those from several months last year — in November, 100 percent of the 394 megawatts of new capacity added came from renewable sources. In October, 699 megawatts were added, 99 percent of which came from renewable sources. And in March, 100 percent of new electrical generation capacity came from solar, as seven units with a total combined capacity of 44 megawatts were added.

Midwest Energy News:

Clean energy advocates are pointing to recent reports on electricity use in the Midwest as clear evidence that state efficiency programs and technological advances are paying dividends in the region and fundamentally altering the landscape for utilities, regulators and consumers.

One example is a recent projection from the Midwest’s grid operator that showed electricity demand in the region is expected to decline almost 1 percent annually through 2016.

The forecast of a 0.75-percent reduction in annual electricity demand within the Midcontinent Independent System Operator Inc.’s North and Central regions represents a shift from the 0.8 percent growth rate in the organization’s previous long-term reliability assessment.

Howard Learner, executive director of the Environmental Policy and Law Center, a Chicago-based policy advocacy group that has pushed for energy efficiency policies across the Midwest, said the 1.55 percentage-point swing in MISO’s demand forecast is a milestone.

“This isn’t a minor difference,” Learner said. “This is a big delta. We’re dealing with a structural change that fundamentally affects the decisions for owners of power plants, state utility commissions and [the Federal Energy Regulatory Commission].”

He and others also believe there’s good reason to believe the decline in electricity use will exceed the level predicted.

“The MISO data is based on their conversations with utilities, and historically, utilities have tended to aim a little high in announcing their load forecasts,” he said.

While Midwestern utilities also saw electricity demand decline in recent years, the dip was a result of the recession.

That’s no longer the case, Learner said, and evidence can be seen in reports from two of the region’s largest utilities.

Xcel Energy Inc. saw a 0.8 percent drop in weather-adjusted electric sales for its Minnesota service territory last year, the company said in its recent earnings conference call. And Exelon Corp. executives forecast a 0.2 percent drop in load growth this year for Commonwealth Edison, the utility serving the Chicago area. The projection is based on the assumption of 2.3 percent economic growth.

Learner and other policy advocates attribute the trend to improving efficiency of air conditioners, televisions, computers, and other consumer appliances and devices as well as state-level energy efficiency policies — ones his group advocated for in places like Illinois, Iowa, Minnesota and Michigan.

“Energy efficiency is not a sideshow anymore,” said Rebecca Stanfield, deputy director of policy for the Natural Resources Defense Council’s Midwest Region. “It is part of the way utilities are meeting demand.”

Midwest Energy News:

In the meantime, the much greater amounts of distributed energy capacity represented by CHP systems and backup generators are largely lying dormant today when it comes to grid integration. That’s because these systems most often are built to supply customers with their own power independently of the grid, as part of a campus or facility-wide energy efficiency scheme in the case of CHP, or strictly for emergency power when the grid goes down, in the case of backup generators.

Even so, there are ways that CHP systems could begin to play a much more useful role as the foundations of microgrid systems, able to offer always-on power consumption flexibility to utilities and grid operators, as well as to take themselves off-grid during emergencies. Almost all the large-scale microgrid systems that kept running amidst grid outages during Hurricane Sandywere centered around CHP systems, and New York and Connecticut are looking to invest millions of dollars to create more storm-resilient microgrids.

Backup generators, in turn, make up a significant part of the portfolios of many demand response aggregators such as EnerNOC, and they account for the vast majority of national programs like the U.K.’s Short-Term Operating Reserve (STOR). The idea isn’t to run generators all the time, but rather to call them into play at moments of grid stress, local congestion or peaking energy prices.

Indeed, some utilities, such as Portland General Electric in Oregon and Madison Gas and Electric in Wisconsin, have programs that dispatch them to meet critical grid needs, De Martini noted. Demand response company Blue Pillar got its start testing the readiness of hospital backup generator systems, and has since moved into building-wide, grid-interactive energy management systems based around emergency power supplies.

How can on-site diesel-fueled generators, or even natural gas-fired microturbines, be a green alternative? De Martini noted that the latest systems from big CHP providers such as Tecogenand big backup generator companies such as Generac are able to meet stringent air-quality standards.

They can also be quite useful to mitigate the intermittency of solar and wind power as compared to conventional large-scale generation, according to the Department of Energy’s National Renewable Energy Laboratory. That’s largely because they come in bite-sized versus megawatt-scale increments, and don’t lose lots of their power to transmission and distribution line losses.

One thing’s for sure: DER is out there, it’s coming on-line at a rapid pace, and there ought to be a way to integrate it into the overall energy infrastructure, whichever forms that takes. Vanguard energy markets like California are already working on ways to integrate these grid-edge resources into their traditional grid capacity and reliability planning methods, and Japan and Germany are arguably even further ahead.

And, as De Martini told his DistribuTECH audience, “Suffice it to say, if you don’t have quality and reliable data coming out of the field, it’s going to be next to impossible to manage in this kind of domain” for utilities.

53 Responses to “A Sea Change in the Power Business: Can Your Utility Survive?”

  1. Everyone should view this video to discuss renewables. It clears up so many misconceptions. Like the need for storage. Storage is only one of many options. Did you know that in Texas half of the regulatory reserve is demand response? Renewable misconceptions abound. This video clears a lot up. Professor Eric Martinot. Renewable energy futures to 2050.
    Other vids include “conventional wisdom about clean energy is still way out of date”.

  2. Tedex Martinot renewable energy

  3. […] 2014/02/24: PSinclair: A Sea Change in the Power Business: Can Your Utility Survive? […]

  4. […] 2014/02/24: PSinclair: A Sea Change in the Power Business: Can Your Utility Survive? […]

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