By 8pm on Tuesday 8th November 2016, Stephen A. Smith was ecstatic; Florida had voted ‘no’ on Amendment 1 by a margin of 51% to 49%. “Sunshine State voters have spoken clearly” he gushed, “they want… the freedom to harness the sun’s power for the benefit of all Floridians and not just the monopoly utilities”. Smith had every right to be excited. As the executive director of the Southern Alliance for Clean Energy, he had been a key figure in the ‘Vote No’ campaign.
The Amendment 1 vote had become national news in the United States; a classic David v Goliath story pitting the helpless homeowner against the well-funded utilities. However, Amendment 1 was not about the right to install solar power. Amendment 1 was about the right to sell excess solar power, effectively allowing a household to become mini-retailer and sell their leftover electricity to their neighbours. In the days after the election, the media revealed the utilities had spent more than $25 million directly on campaigning.
Travelling 2,500 miles across the country, to California, it becomes clear why the Floridian utilities are so concerned about Amendment 1. In one of several projects, Tesla is supplying batteries to a Los Angeles-area network that would serve more than 100 office buildings and industrial properties, many of which have solar panels on the roof. According to Tesla’s chief technical officer, J.B. Straubel, the projects will “show how you can use communication and control technology to make a bunch of distributed energy assets act like one big one.”
Energy companies in San Francisco have come up with a name for this new concept; a virtual power plant. According to PG&E Corp, Edison International and Sempra Energy, a virtual power plant is a way to network distributed energy generation, battery storage, two-way communication devices and software to provide a steady supply of electricity. Much of the technology that enables these processes was not available five years ago. The virtual power plant has the potential to be the most significant business model innovation in the electricity supply chain since Thomas Edison opened the first commercial centralised power station in lower Manhattan, in 1882.
The virtual power plant empowers distributed generation, which uses two Business Model Innovation concepts to transform the traditional electricity supply chain. Firstly, it splits electricity generation into much smaller units. Rather than a centralised coal-fired power plant, the virtual power plant collects electricity from solar panels, cogeneration plants, wind turbines, kinetic energy plants, and other energy sources that are embedded within the network. This removes the need for the centralised power plant, as well as extensive transmission networks and the associated pollution and electrical inefficiencies that these introduce. Secondly, the virtual power plant pools the energy generated from the distributed sources to ensure that energy is available for all consumers when it is required. This uses advanced software and energy management systems, which, along with batteries, are the key enabling technologies that have allowed this business model to emerge.
The stakeholder most significantly impacted by distributed generation is the transmission network, which is experiencing the beginning of a ‘death spiral’ in several developed economies. A poignant example of what is to come can be seen in the decline of fixed line telephones and the rise of mobile phones; in recent memory, the copper wire telephone network in the US experienced a rapid reduction in value. Conversely, this new business model provides opportunities for consumers, nimble generators and network owners, so long as they can meet the requirements of the market.
The social and environmental benefits of this new supply chain are impressive in places where electricity already exists; this supply chain improves energy independence, encourages cleaner sources of energy and reduces our environmental footprint. Its impact is more profound when you consider its ability to be rapidly deployed in regions around the world that do not currently have reliable electric power. From a social perspective, access to clean, reliable energy is one of the most powerful enabling technologies to improve living standards. In addition, a model of using renewables as part of a distributed energy system provides better environmental outcomes than almost all the other models that we currently know. It is widely agreed that society should avoid both energy poverty and the consumption of fossil fuels; distributed renewables achieves both these objectives.
The distributed generation model is just one part of the evolution of ‘smart cities’; the idea that information and communication technology and the Internet of Things will combine with the proliferation of low-cost sensors to provide unprecedented control of the urban environment, with benefits in energy efficiency, safety and quality. As we imagine the cities of the future, it is hard to ignore the attractiveness of distributed generation.
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Sources
https://www.ft.com/content/b411852e-9b05-11e4-882d-00144feabdc0
http://www.miamiherald.com/news/politics-government/election/article113449438.html
https://www.wsj.com/articles/how-california-utilities-are-managing-excess-solar-power-1488628803
https://www.epa.gov/energy/distributed-generation-electricity-and-its-environmental-impacts
https://www.greentechmedia.com/articles/read/utilities-have-a-lesson-to-learn-from-the-phone-companies
This is fascinating stuff. Having worked in the sector briefly, I realise how important this change would be for the sector. As has been rightly pointed out in the blog not only does such a system bring in more efficiency and hold promise for areas that are still out of the realm of the grid, but also has huge potential in terms of environmental benefits.
However, to promote this system governments would have to try hard to prevent any lobbying efforts of transmission companies and utilities as they would stand to lose out the most if such systems become more prevalent.
Furthermore, in developing countries, where I see these systems to hold the most promise, given that these countries still have a huge population that is not connected to the grid, governments would need to put in place proper regulations in place that permit commercial sale of electricity by households or industries (similar to may be the net and gross metering regulations), and ensure that the power exchange is a well-functioning institution to facilitate smooth transactions. Another aspect to look out for would be for these systems to not render the existing power plants redundant well before their useful life, as that would be a huge loss.
This is definitely the future of the industry and all countries should already begin preparing themselves for this change.
I found this article truly interesting. Maybe a sustainability concern for me is the carbon footprint clean energy still has: if we compare the carbon footprint of x solar cells and wind mills per kWh produced with traditional energy production there is still a big gap to be addressed, especially considering that the capacity would have to be hugely increased.
The idea is, though, very innovative and solves a very relevant problem in our everyday life, so I am definitely looking forward to understand how this will develop in the following years.