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Distributed energy technologies: Disruptive, beneficial — or both?

By Frank Lacey

Editorial note: In the run-up to the National Town Meeting on Demand Response and Smart Grid, July 11-13 in Washington, D.C., we will be publishing blogs by two conference presenters, each taking a different approach to utility integration of distributed energy technologies. The opinions expressed in the following piece are the author’s and do not reflect the views of either the Smart Electric Power Alliance or its board of directors in general.

On July 12, I will be in Washington, D.C., moderating a “Shark Tank” panel at the National Town Meeting on Demand Response and Smart Grid, hosted for the first time this year by the Smart Electric Power Alliance (SEPA). During the panel, four speakers will pitch different cutting-edge technologies that their respective companies offer – ranging from demand response and solar to storage and electric vehicles (EVs). Audience members will then be asked to vote on which technology they think will be the most disruptive over the next five years.

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Frank Lacey

For those of us in the electricity industry, headlines about disruptive technologies have become pretty much the norm, as they have in many other fields these days. Companies proudly proclaim that their technologies, products and services are “disruptive.”

But organizing this panel for the National Town Meeting got me thinking — what exactly is a disruptive technology, and disruptive to whom?

Webster defines “disrupt” as “to break apart” or “to throw into disorder.” A secondary definition is “to interrupt the normal course or unity of,” which is probably more applicable to how the word is used in the power industry.

Get full information on the National Town Meeting here.

With that definition in mind, I began to think about the technologies that will be vying for audience votes at the panel, as well as other technologies now entering the energy markets. I also started thinking about other influences on energy markets, such as environmental regulations, court cases, weather patterns and reliability concerns. Looking at this bigger picture, it appeared to me that we need to change our vocabulary.

The technologies we’re talking about are not disruptive; they are assistive.

Over the past 15 years, the U.S. electricity industry has experienced a couple widespread blackouts caused by human error. We have also ridden out storms and other extreme weather events that resulted in previously unmatched levels of infrastructure damage, leaving customers without power for days, weeks and, in some cases, even longer. Believing that climate change may be an aggravating factor in some of these events, our government is moving to further restrict greenhouse gas emissions from power plants, which may, in turn, force the retirement of tens of thousands of existing megawatts of power plant capacity.

Many customers’ normal and expected reaction in such situations is to protect themselves. As a result, over this same 15 years, we have seen a remarkable increase in customer adoption of technologies to “harden” their homes and businesses – that is, technologies that provide backup electricity and minimize inconvenience if the grid goes dark.

Read Frank Lacey on the Supreme Court’s FERC 745 decision here.

The result is that homes stay cool; businesses keep selling goods and services. Technology companies make better, faster, less expensive devices to harden these homes and businesses, which allows more customers to buy and install them. This virtuous cycle is exactly how our market-based economy should work.

I realize the fact that the system is working doesn’t mean that such technologies aren’t disruptive. Cell phones were a product of this same virtuous cycle, and they were and continue to be absolutely disruptive – in the more violent sense of the term. They broke apart a giant industry, which has all but vanished today.

While the implosion of the telecom sector is often cited as a cautionary example, what is happing in the electricity industry provides a very different model for change. The technologies that we often cite as disruptive – storage, solar, EVs, demand response, and other distributed energy resources – are being deployed and combined in ways that create synergies to shore up the reliability of the system.

Value of distributed technologies is tied to grid

I believe the term “disruptive” has come into common usage here because utilities — seeing themselves as potentially losing control of electricity markets – feel disrupted. Customers and technology developers are identifying needs and finding solutions much faster than any one company might accomplish on its own. Hundreds of companies are working to improve the system’s reliability, affordability and sustainability for the end user, a fact that utilities might interpret as a sign of assurance.

Unlike the cell phone industry, none of these disruptive technology providers, at least that I am aware of, are trying to put utilities out of business, mostly because the value of their products and services are linked to the grid and other energy services utilities provide. Residential solar customers need power at night. Demand response customers want their air conditioning on most of the time. Electric vehicle owners want to charge their cars when they get home.

The utility of the future needs to embrace these customer choices and advanced technologies as a platform to build further customer engagement and grid resiliency – as some are now beginning to do. Individual electricity customers who can provide their own power after a hurricane or other disaster can make the recovery effort easier for everyone. For example, a community microgrid with solar plus storage could provide cooling and cell phone charging to residents in a specific neighborhood, while a hospital with a storage facility could reduce stress on its own backup generators, potentially saving lives.

Find out how utilities are planning for distributed energy resources here.

Clearly, all these changes raise fundamental issues about rate design, beyond debates over how and how much solar customers and other distributed generation customers should be compensated for excess power they feed into the grid, or how utilities can cover their costs for grid maintenance. Any change in rate-making structures will produce winners and losers, which means we must move forward with caution.

But these changes aren’t going to “interrupt the normal course” of utility operations. They are to change the utility compensation model.

The human errors that cause blackouts, the extreme weather events such as heat waves and Hurricane Sandy, the legislative and regulatory policies developed as a result of these events – those are disruptive. Those are changing the normal course of utility business. Solar power, storage, electric vehicles, demand response and other distributed energy resources are responsive to the disruption and beneficial to customers, technology providers and utilities.

How can these technologies be safely and affordably integrated into our existing energy system to boost reliability and provide customer and utility benefits? How can we negotiate differences in regional markets, and foster cross-industry partnerships and collaboration?

These are some of the questions and issues we will be exploring at the National Town Meeting – during my panel and at other sessions at the event. I am confident that the discussions, the questions and the answers will not be what most of us expect. I believe we will learn quite a bit about some of the positive, healthy “disruption” our industry needs and is now seeing.  I am looking forward to a very informative program.

Frank Lacey is President of Electric Advisors Consulting and a member of the Board of Directors of the Smart Electric Power Alliance (SEPA). He can be reached at [email protected].