Quanta Technology Blog
Posted on: Mar 24, 2015
Renewable energy, distributed resources, smart equipment, microgrids, customer-centric energy plans and a host of other new concepts and technologies are changing our industry’s landscape. Almost everyone in the electric utility industry expects that as a result, 21st century power systems will be nothing like 20th century power systems. But there is another change that comes along with those new machines and technologies that is often not recognized for what it means: the complexity involved in making decisions about how and where to “best” provide power to consumers has increased immensely. That, on its own, will have a profound impact on the electric utility industry. Twenty-first century power systems will require a profound change in how we scope, engineer, justify and develop new additions to power supply and delivery systems. In some ways, this will be a more fundamental change than the new technologies driving it. Currently, many people are not seeing this trend for what it is, or taking it into account, and that is causing some mis-steps and confusion.
The traditional 20th century way of making decisions about power system design and additions was straightforward. It sometimes involved intricate and precise engineering analysis, as well as detailed economic comparisons of benefits, costs and alternatives, so it was not always easy to do, but at its core it was a simple paradigm. The utility generated power at big central-station plants, then transshipped it in bulk quantities at high voltage, gradually reducing that voltage and increasing the number of pathways as that power was moved ever closer to the energy consumers, who always outnumbered the central stations by at least a thousand to one, if not a hundred thousand to one. Decisions on what was needed, and what was best, were based on present-worth economics interpreted through a single-valued metric – revenue requirements, benefit/cost ratios, or payback period depending on the specifics – in order to achieve acceptable system-wide service reliability with maximum economy.
There was and is nothing wrong with that paradigm. America would not be America without it. The first “modern” grid was built by Thomas Edison and Charles Insull in Chicago in the 1890s the seed of today’s Commonwealth Edison system. Driven by the economies of scale for both system efficiency and service reliability, that paradigm drove power systems across the continent to gradually grow ever larger and ever more interconnected. Over the past century, these well-designed regional and local-delivery grids gave America abundant, cheap and reliable power, so it could grow and prosper.
But that paradigm also forced a one-size-fits-all, energy-use value set on energy consumers. Standards and design guidelines applied system-wide, as interpreted from the system owner-operator’s perspective: As an energy consumer, you got what you got, and you got what everyone else got. These new technologies mean that that will no longer be the case. Much of the appeal – the extra value – seen in these new smart, renewable, distributed microgrid-enabling technologies is the local tailor-ability of power delivery capabilities; the fact that if desired, a local microgrid or smart home or business power system can be constructed around a very different set of needs and values than the incumbent power delivery grid can provide.
These systems can provide different combinations of environmental and aesthetic impact, reliability, economy, control and power characteristics that a particular energy consumer may prefer. They can be used to change and tailor, materially, the local marginal costs of demand, energy, expansion, reliability, control, condition or resiliency from that of the power grid around them. The benefits energy consumers see in these new technologies, and the ways they assess their value, vary as much as the customers themselves. A homeowner, business or institution can combine them into a private power system designed to address or augment their needs as they see them, without letting the utility take the lead – in fact, in some cases without having the utility involved. Not all customers have outlier needs, values or perspectives that aren’t well-served by the traditional paradigm. But for the many that do, distributed resources, smart equipment and microgrids provide value and a “best fit” for those needs.
The customization these new technologies provide – the democratization of power systems, so to speak – will drive change as much or more than the technologies themselves. It is the combination of these new distributed smart technologies and the increasing diversity of local decision-makers they create that will transform the power industry. Those who don’t recognize this interpret the capabilities of these new technologies and systems only from the standpoint of that traditional electric utility’s paradigm, and that leads to confusing mis-steps. An example is a recent report released by the New York State Energy Research and Development authority (NYSERDA), “Microgrids for Critical Facility Resiliency in New York State.” The report has been the source of a considerable amount of heartburn and concern in some parts of our industry, because it has been taken by many people to mean that microgrids aren’t generally beneficial enough to make them practical.
That is not the case. The NYSERDA report’s analysis of microgrids, done mostly from the traditional perspective of the electric utility and its regulatory backstop, is entirely correct within its context: If traditional power-grid economy, reliability and resiliency are the goals, then microgrids are often not as cost-effective as other options. But the NYSERDA report doesn’t address the myriad of other benefits smart microgrids have in the 21st century grid, at least as seen by that diverse range of energy consumers, benefits that will lead to their use where they fit those different local needs as viewed from non-traditional, local value systems.
It would be too easy, and wrong, to blame the NYSERDA report or the people who wrote it for any confusion their report created; although, one doubts that twenty years from now a report with the same goals and title would be structured anything like the current report. That future report would no doubt acknowledge the capabilities and characteristics of microgrids, but then discuss when, where, how and why they cannot match the purpose-built marginal cost of well-designed, incumbent central-station systems when it comes to providing traditional levels and types of service reliability and storm and emergency resiliency. Smart equipment and microgrids, like traditional power systems, do not fit all needs. Each does some things better than the other; in fact, each can provide some benefits the other can’t period.
Looking to that future, and knowing the way our society always strives to have its cake and eat it, too, we expect that often – perhaps more often than not – the best solution for consumers and utilities will be an artfully-crafted combination of old and new. A well-crafted integration of smart, distributed microgrids with a good traditional power grid won’t just make them compatible, but synergistic, so they support one another to best address the customers’ or site’s unique characteristics, values and needs. If well-integrated and designed to work hand-in-glove, microgrids and the central-station grid can always outperform either alone.
Planning and engineering these hybrid combinations of microgrids and what might be termed the “macro-grid,” and tailoring each to local customer needs and values, will require much more complicated engineering methods and multi-metric decision-making methods than power systems have needed up to now. These new, microgrid-enabling technologies turn the traditional power systems paradigm on its head. Instead of customers outnumbering power generators by one-hundred thousand to one, by mid-century there could be more power resources – PV panel sets, wind turbines, energy storage capable of feeding into the system, and real-time load control devices – than energy users. New, data-analytic power system and energy supply engineering methods will be required, that use massive data bases, very involved optimization and 8760-hour simulations of performance, along with 21st century engineering and integrated-resource planning skills on the part of utility planners, engineers and operators.
Utilities that get out in front of that concept and master those complex numbers, and develop the flexible business frameworks needed to work alongside customers and institutions that want and need those hybrid microgrid capabilities, will be the winners in the 21st century power industry. Making that happen will require sea change in engineering methods, as well as perspective and understanding on the part of utilities, regulators and energy consumers; and it will probably not always go smoothly, as the recent NYSERDA report indicates. But we’re confident it will happen.
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