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Technological innovation entices consumers to acquire new capabilities. For example, wireless communications devices have evolved from “clunky” bag phones to sleek devices with hundreds of apps.
This impacts traditional industry business models — for example, the increasing abandonment of wired line phones. As the technology is refined, consumers purchase increasing numbers of the new products, and the resulting declining prices entice more manufacturers, retailers and consumers to the market.
The same pattern is occurring in the distributive generation arena as rooftop solar, community wind and energy storage are becoming more acceptable and affordable to consumers.
What makes the energy sector so exciting is the convergence of telecommunications capabilities (like the smart grid) for utilities and traditional customers to produce and market energy.
Because smart phones and other devices can be used to adjust energy consumption patterns in homes and businesses, demand management and ancillary services can also be provided by customers in response to formal signals from utilities or simply in response to increasing electricity prices. Appliance manufacturers are increasingly taking note of the convergence of technologies and customer expectations, including the ability to link appliances for load-shifting purposes.
The GridWise Architecture Council (GWAC) is leading the intellectual endeavor to provide a theoretical framework around Transactive Energy, the ability of “traditional” utility customers to be energy “takers” or “sellers” based on price signals.
As the general public, corporate boards of directors at companies like Amazon and Wal-Mart, the Environmental Protection Agency, the U.S. Department of Defense, and other stakeholders demand more renewable electricity, the confluence of generation capabilities and communication technologies places us on the cusp of a major evolutionary change in the electric grid.
The traditional utility developed as an improvement for individuals lighting their homes with candles and heating them with wood. We are coming full circle now as individuals can power their homes with wind, solar, bio-mass, storage and other technologies. Business and academic campuses are becoming micro-grids with generation capabilities sufficient to sustain themselves and support the traditional utility in times of need.
What is lacking are the regulatory and political frameworks necessary to permit Transactive Energy. New York and California regulators lead the way, but Kansas has a unique law that would permit five or more small generators to form a Renewable Energy Cooperative and move their collectively generated power among themselves without being considered a utility.
If those cooperative members are residences within the same bloc, distribution system costs would be minimal; if the members are big box and grocery stores within a community, distribution costs would be a little higher, but the increased generation capacity would off-set it.
In the rush to reduce our individual and collective carbon footprints, it is important to remember that consumers value reliability and affordability above all else. A mix of generation types contributes significantly to both by reducing the volatility of any single type of fuel’s cost, and protecting against fuel delivery interruptions, including the lack of wind or sunshine.
Utilities serve as the energy storage system for those individuals who are not totally off the grid, but self-generate some of their power. The value of the utility providing this back-up power through generation and wires, the value of ensuring that those people unable or unwilling to afford their own distributive generation have electricity, and the value of having one company restore service after a severe storm or other service interruption is important and must be financially covered.
Most electric utilities will strive to protect their market share to compensate employees and shareholders, or owners for publicly owned utilities. All electric utilities must adjust to the combination of self-generation technologies becoming more affordable and reliable, and the communications technologies that permit customers to buy and sell power and sell ancillary and demand management services.
The public can encourage state policy-makers, regulators and utility executives to plan for and invest in a more distributive-based system that includes utility-size renewable energy generation. Those utilities that resist consumer interests combined with technological capabilities will suffer. The key is for utilities, policy-makers, regulators and especially consumers of all types to collaboratively develop the new electric grid to ensure reliability, resiliency, responsibility and affordability.
Representative Tom Sloan (R-45) is serving his ninth term in the Kansas House of Representatives, where he is a member of the Energy & Utilities Committee.