As our world relies increasingly on renewable energy, we’re facing a new challenge: the way we generate and distribute that energy. Our current system is based on a model of inefficient centralized generation, or the large-scale generation of electricity at centralized facilities, a model that is built around fossil fuel and nuclear power plants. As we move towards a clean energy future, we need to change that model and build a system based on distributed energy resources (DER), a variety of technologies that generate electricity at or near where it will be used.
To understand this issue, it’s important to consider why electricity is so important in the first place. As we move away from fossil fuels, we are going to have to electrify all of our energy needs like transportation and home heating, and to do that, we need to build more generation for electricity.
Our electric system was designed over one hundred years ago, and was based on the idea that you have a power plant supplying electricity to homes through a collection of wires connecting the two—a series of one-way streets. This system is similar to the old model of computing, where you had one central computer and individual terminals. Today, we have what could be considered “distributed” computers, laptops and PCs, that are all tied together through the Internet, which is really just many two-way streets sending and receiving information. It’s about mass interconnection, rather than one-way connections. As we move towards a model of distributed electricity generation, our electric grid has to modernize in a similar way, going from that series of one-way streets to many two-way streets. It's more efficient, just like in 21st century computing.
The old system made sense when fossil fuels and nuclear were our major source of energy—the only way to generate coal and nuclear power, was through massive central plants. The problem with these central plants, beyond the environmental impact, is that they’re inefficient: you waste 2/3 of all the energy you put in to them. To burn the massive amounts of fuel needed to power our world, you needed to build enormous plants in order to create any scale efficiencies. This wasn’t an issue because we were able to extract fossil fuels cheaply, and we considered them to be infinite resources that we could draw from forever. We now know that any finite resource will eventually lead to higher prices, meaning that this system is not sustainable in the long term.
The Importance of Distributed Generation
Our current regulations support that centralized generation plant system. But it’s the wrong system. Distributed generation is not only more sustainable, but it’s more reliable. Because you have many sources feeding into the system, any outage of one solar array or a wind farm will have minimal impact on the entire system. But if you shut down a nuclear plant in the middle of the day, you’ll lose a tremendous amount of generation, so it has to be backed up somehow. Currently, the grid has to have other forms of generation running partially loaded or on standby, ready to back up those large plants if they fail. It’s a myth that renewables aren’t reliable—the reliability of the system is increased with greater numbers of distributed resources feeding into that system.
Distributed generation also has lower transmission and distribution costs, and helps avoid new, expensive transmission upgrades because you don’t have to transmit so much electricity from so far away. It’s more flexible, because you can put renewables in many locations—solar and wind are modular, and you can put them in fast. And it allows homeowners and business to generate their own energy, rather than having to rely on large, fossil-fuel based power systems.
Distributed generation does have some challenges. Wind and solar are location-specific: you have to put solar where the sun shines, and wind where the wind blows. The current electrical rate structures, whether we are looking at wholesale or retail and commercial rates, do not allow for long-term, fixed pricing structures which would help build renewables. When you build a central plant, you have the capital costs of building the plant, but then your operating costs are spread out over the life of the plant. Total costs are not all embedded upfront like they are with renewables, where the resource is then free. And our current regulatory environment says that if the cost of a traditional fuel goes up, you can pass that on in future rates. With a solar system, you have all your costs figured out, so you can put a fixed price on the system for 25 years. But that upfront price is usually higher than current prices, and our regulatory folks don’t always recognize the benefit of a secure, long-term fixed price.
Currently, developers of fossil fuel and nuclear plants say they can’t project the costs because “We don’t know what the cost of coal will be in 25 years—it could be tripled because of carbon taxes.” And that’s true! Why is society taking that risk now and not taking that additional cost into consideration, and framing fossil fuels as the cheaper option? Gas is cheap now, but what’s the price going to be in 25 years? Nobody knows for sure, but it’s going to be a lot higher. When you consider the future costs of energy, wind and solar is clearly cheaper.
The other big challenge facing distributed generation is that utilities are fighting this model. They need to accept the shift, and realize that they’re going to be making their money by distributing and moving these distributed energy resources through their electrical distribution system. They’re service companies, and they’re still trying to figure out how to do that in a profitable way. Across the country, energy regulators need to encourage the utilities to invest money into creating a modernized, strong, smart, and two-way grid system. Local resources, and local distribution are going to play a big role in making this new system work, but it’s a change for the utility—their whole business model is changing.
The renewable future is going to be more tied to the energy being generated every day, and using it at peak production times, rather than extracting as many fossil fuels as possible and burning them at will. Fossil fuels are going to be moved to backing up renewables, especially natural gas, since we now have technology that allows for fast-ramping natural gas plants. Being able to run central plants as needed, instead of depending on them as our primary source of electricity, will be key.
As we switch from the idea of finite fossil fuels to this whole new way of renewables, we’re going to be facing a lot of mindset hurdles. It’s different, so you have to look at it in a different way. But if you shift your way of thinking about the future, you’ll see that it’s going to be a better, more sustainable system for us all.
David Blittersdorf is the President / CEO of AllEarth Renewables. Published on December 20, 2016.