It is argued that the smart grid is not the lifeline of renewable power. Instead, what´s holding both is the Investor Owned Utility paradigm.


Renewable Power and Smart Grid are Parts of a Whole

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on December 22nd, 2008.

Copyright © 2009 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

David Talbot has provided the timely and well documented paper “Lifeline for Renewable Power: Without a radically expanded and smarter electrical grid, wind and solar will remain niche power sources,” for the January/February edition of the Technology Review magazine. In this Electricity Without Price Controls (EWPC) article I argue differently by selecting a few EWPC article with their summaries to support the argument.

The lifeline of renewable energy is not the smart grid. Renewable power and the smart grid are just two disruptive technologies that are componentes of an interlocking whole (the emergent order of the power sector), which is enabled by the EWPC market architecture and design and which involves tightly integrating a set of disruptive technologies, as envisioned in the EWPC article The Sixth Disruptive Technology (please hit the link to read it).

The articles’ summary says: “A set of 6 disruptive technologies can be identified ‘To do a better job of managing our dwindling energy resources…’ AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and will be tightly integrated by business model innovations - the sixth disruptive technology - developed by 2GRs into a systemic superior solution. The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency.” According to Peter Senge, the task of integrating the technologies is more critical than the task of designing any single component.

The paper talks about one vicious circle, which is signaled by “In many of the states in the region, there's no particular urgency to move things along, since each has all the power it needs.” The problem arises as integrated Investor Owned Utilities (IOUs) get in the way of the emergent revolution. In fact there are other vicious circles reinforcing each other in the old IOUs order, which are disintegrating the power sector. For example, one of those vicious circles is due to the perverse incentive against energy efficiency, which is now handled with an artificial decoupling.

The problem can be seen from another angle in the EWPC article The Anti-System Utility, whose summary says: “Vertically integrated utilities don't operate as a system because of a monopoly mindset of incumbents’ investor owned utilities and political interference. To operate as a system a paradigm shift to EWPC is required to offer customers competitive services and to neutralize political interference.”

As for IOUs restructuring to end the price control business model and enable business model innovations, we get to the question posed in the EWPC article “Will Dr. Chu Turn Around the Power Industry?” This article is summarized in this way: “As President Obama's picked Nobel Prize Steven Chu as the Energy Secretary, that knows what he is talking about the environment, he will need to enable Mr. Obama’s leadership to be able to turn around the global power industry to complete a global energy deal that is a prerequisite to complete the global environmental deal.”

Such turn around can only be done with the introduction of comprehensive legislation based on EWPC to execute Gore’s plan. Gore’s plan was anticipated in the EWPC article Is Gore's Revolutionary Leadership Challenge Feasible? The article’s summary states: “Al Gore leadership challenge is based on leading expert advice. EWPC is the first holistic step ready to be implemented in an Energy Policy Act that satisfies the non-trivial power system requirements laid out by the leading experts’ power industry insiders the late Fred C. Schweppe and Jack Casazza.” It is that essential step that enables the process to integrate of all the disruptive technologies.

The other alternative mentioned in Talbot’s paper, to execute Gore’s plan as a public works project, will be a great mess, as IOUs will keep interfering as they do today. The “regulatory moves was that companies had less incentive to invest in the grid than in new power plants, and no one had a clear responsibility for expanding the transmission infrastructure.” The solution is the EWPC smart grid T&D transportation only utility regulated under a compact with a responsibility to transport.

Finally energy leaders should follow the advice of the EWPC article Leadership Answers What to do First, whose summary affirms that “The answer to the question of what to do first is for the global power industry to get out of the wrong jungle to produce a EWPC based EPAct as soon as possible. That is the kind of leadership needed to face the inevitable fundamental changes required to significantly reduce today’s legislative and regulatory uncertainty.

Note: most old EWPC articles can be found in the index EWPC Blog's First Year Anniversary: Electricity for the Digital Era. For the recent ones I suggest browsing www.energyblogs.com