We’ve heard a lot about exciting new visions for the electricity sector, with technologies such as smart grid and renewables, new business models such as distributed generation and the promise of improved efficiency and reduced emissions. And, all that in a sustainable package that is robust, reliable and secure. But how are all of these elements going to play together?
Rocky Mountain Institute (RMI), under the leadership of Amory Lovins, developed an uncanny ability long ago to figure out what needs to happen next, and then getting out in front to help make it happen.
RMI came out with its groundbreaking book, Reinventing Fire, in 2011. It outlines a path to a future where renewables provide 80 percent of our electricity while saving $5 trillion and growing the economy by 158 percent – all by the year 2050. The section on electricity goes through various scenarios titled “maintain,” “migrate,” “renew” and “transform.” RMI’s eLab was formed in the aftermath as a vehicle to realize this vision.
I spoke with Lena Hansen of eLab, which has representatives of 35 leading organizations, including regulators and grid operators, renewable, grid, and distributed resource providers, utilities, experts and advocates.
Hansen: Technology is Not the Biggest Problem
What Hansen had to say was a little surprising to me: Of all the barriers presented by technology, economics and the regulatory and business models, by far the greatest obstacle is regulatory and business models.
That’s why eLab was formed. The hope is to hurdle those regulatory and business model problems by getting the various industry players into one, collaborative arena. Here’s some of what Hansen had to say in our wide-ranging interview:
Question: Give readers a sense of the specific problems we’ve yet to figure out as we move toward renewable energy solutions.
Hansen: A lot of the technologies that are going to get us to a highly efficient, distributed, renewable system are totally different than the centralized approach that we have come to rely upon. For example, rooftop solar, electric vehicles, smart grid infrastructure, are fundamentally different from big power plants. First, they’re in physically different places … as opposed to being at the center of a big hub and spoke transmission network.
Also, the ownership is different. Anyone can own distributed resources, customers, third party providers, etc. Finally, a lot of these resources produce power intermittently and are not always available. All of those differences mean that power companies have a hard time knowing not only how to integrate those resources into the grid but also how to value them appropriately.
Rate structures, for example, do not take these kinds of things into account. So, if, for example you put solar PV on your roof, you are providing excess electricity to the grid, but the grid is also providing a service to you (i.e., an uninterruptible backup system). So, right now there are conflicts over things like net metering. And it’s all rooted in the lack of clear understanding of the value drivers and the cost drivers around the table. It sounds like a trivial thing, but if we can’t work out the pricing, then we can’t move forward.
Question: What about variability? How do you manage an electric system that is comprised of 80 percent renewables?
Hansen: First, you want to geographically diversify where you put the renewables resources because the wind is always blowing somewhere. Just spreading it around can reduce the variability quite a bit. Second, there is a reason we proposed an 80 percent renewable system as opposed to 100 percent. Having a certain amount of fuel-based energy that can be available anytime provides a very important element of stability to the grid. Third comes the question of demand response, where customers agree to defer a certain portion of their consumption when the grid is under stress. This can be done directly by the utility, with some kind of switching capability, or through aggregators like Enernoc or Viridity that also provide value-added services such as pre-cooling your building in anticipation of a need to cut off the chillers later. In the future, smart appliances will communicate directly with the grid and provide operational management that reduces peak demand on the grid, saving money for the customer in the process.
Finally, there is the question of storage. This is more costly, but our analysis has shown that the amount of storage required to provide 80 percent of electricity from renewables is not as much as you might have thought.
Question: So, if you had a magic wand you could use to address the various problems, where would you start?
Hansen: The first thing I would want would be for everyone in the sector – the utilities, the regulators, the solar companies, the environmental NGO’s – to have a shared and consistent understanding of what all the value streams are for renewable energy, and what the costs are to support their integration into the system. With that common understanding, it becomes much easier to develop and adjust business models and rate structures and things. I think that that would really change the conversation and affect the transition to more effective business models.
Question: As long as you have a magic wand, you might as well make everyone easier to get along with, too, right?
Hansen [laughs]: Yes, sure, but one of the things we’re really trying to do with eLab is trying to create an environment, where all of these different actors, with all these different perspectives are able to really talk to each other in a non-confrontational way. I mean, none of these actors are evil. They just have their own business priorities that they are trying to meet. And those are frequently in conflict. But if we can take a step back … then I think from that understanding can come much more effective solutions.
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