The Revolution Won’t Be Distributed

Most Renewables Deployment Centralized

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The environmental press, including the New York Times, has suggested that America is on the cusp of a distributed generation (DG) revolution, with distributed renewable energy technologies wielding the potential to lay waste to US power utilities. But the reported death of the centralized electrical grid and the utilities that run it is greatly exaggerated. In fact, a renewables-powered future will probably require more centralized generation, not less. Achieving significantly higher penetrations of renewable energy will require transmitting electricity over hundreds or thousands of miles. Most places that have achieved significant deployment of renewable electricity, like Germany, receive their power from large, utility scale installations. Renewables champions may talk small-scale DG, but what they intend to build is every bit as centralized as the centralized power sources we have today.

January 13, 2014 | Ted Nordhaus, Michael Shellenberger, and Alex Trembath,

If you read the environmental press, clean tech media, or even the New York Times, you might conclude that America is on the cusp of a distributed generation (DG) revolution. “Solar power and other distributed renewable energy technologies could lay waste to U.S. power utilities and burn the utility business model to the ground,” wrote leading environmental news site Grist last April. “Renewable-energy technologies like solar and wind power,” the Times wrote, are now “challenging the traditional distribution system.”

The utility industry too is taking the threat seriously. The Edison Electric Institute (EEI) recently issued a report titled “Disruptive Challenges,” assessing the threat renewables pose to the industry. Utilities and rooftop solar companies are facing off in Arizona and other states over rate subsidies for solar. Former Federal Energy Regulatory Commission Chairman Jon Wellinghoff recently told reporters that, “Solar is growing so fast it is going to overtake everything.”

Not So Fast

But the reported death of the centralized electrical grid and the utilities that run it is greatly exaggerated. Solar panel prices have come down, but rooftop solar is still much more costly than centralized fossil generation, nuclear, or even utility scale wind and solar. Whether in Germany or California, solar deployment remains entirely dependent upon a raft of direct public subsidies and indirect rate subsidies.

Despite those subsidies, solar has yet to generate significant electricity anywhere. Germany, the world solar leader, after over a decade and $100 billion in direct public subsidies, gets only 5% of its electricity from solar. U.S. leader California generated less than 1% of its electricity from solar in 2012.

DG advocates have made much of the recent EEI report, but the report actually concludes that there will be no DG revolution. “In fact, electric utility valuations and access to capital today are as valuable as we have seen them in decades,” the authors say, “reflecting the relative safety of utilities in this uncertain economic environment.”

Disruptive Policies

If you want to know what utilities actually object to about DG, it is policies that functionally require them to purchase power from solar homeowners at $0.30/kWh when they don’t need it instead of buying it on the wholesale market for $0.04/kWh when they do. The result is not just less-profitable utilities but also higher rates for the vast majority of ratepayers. A recent California Public Utilities Commission study concluded that by 2020 the state’s net metering programs would increase rates by a billion dollars annually.

That’s not to say that the growth of renewable energy is not disruptive—just not in the way its advocates claim. Look at just about any place that has achieved significant deployment of renewable electricity, and what you find is that the vast majority comes from large, utility scale installations, not rooftop solar or any other behind-the-meter generation source. Even Germany gets over three-quarters of its renewable generation from large-scale wind, hydro, and biomass.

Given the current state of renewable technology and the scale of generation necessary to run a modern economy, these basic dynamics appear unlikely to change anytime soon. Take a peek at any of the dozens of scenarios produced by renewables advocates that claim we can run the U.S., Europe, or the world largely on renewables, and what you find is that most generation comes from massive industrial scale wind and solar developments from North Dakota to the North Sea—not DG.

In fact, a renewables-powered future will probably require more centralized generation, not less. Achieving significantly higher penetrations of renewable energy will require transmitting electricity over hundreds or thousands of miles from where large amounts can be generated to places where it will be consumed. Renewables champions may talk small-scale DG, but what they intend to build is every bit as centralized as the centralized power sources we have today.

Ultimately, what is disrupting the existing utility model is not the distributed nature of renewables, it is their intermittent nature, and the policies necessary to make them viable. Heavy public subsidization of the capital costs of wind and solar, combined with preferential purchase requirements for the power they generate, ensure that the marginal cost of wind and solar will always be lower than just about anything else when the wind is blowing and the sun is shining. Hence, Germany simultaneously boasts the highest retail electricity prices in Europe and the lowest wholesale prices—not because the power costs less to generate but because most of the cost has been shifted elsewhere. In Germany, expensive, highly subsidized, intermittent renewables generation has driven wholesale prices so low that the utilities that must manage the grid and operate conventional power plants can no longer operate profitably. This, not cheap distributed solar, is what is disrupting the utility industry here and abroad.

Just because an electrical system that relies heavily on today’s wind and solar is likely to be costly and unreliable doesn’t mean we won’t build one. Our energy systems are a reflection of our culture, ideology, and politics, not just rational economic and engineering decisions. Germans, for instance, so fear nuclear energy that they prefer to pair expensive renewables with cheap coal. Perhaps the U.S. will do the same with wind, solar, and gas. If so, it will certainly be disruptive of our current electrical system. But one thing it probably won’t be is distributed.

 

This article originally appeared in POWER.


Comments

  • I agree with the article’s fundamentals, and believe that DG solar power will have little benefit for countries with advanced energy grids. I believe that less-developed countries where much of the population is in scattered villages (think India or Equatorial Africa) might be able to introduced DG systems to the village level if some of the energy storage options under investigation pan out.
    Many of these countries would be hard pressed to build widespread reliable grids quickly.

    By Robert Marshall Kelley on 2014 01 13

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    • In location where there’s no electricity at all, solar is obviously much better. It is also definitively simple to use at a small scale, opposite to wind.
      But still if you check, the actual usages it covers are limited, it’s only those where the cost of batteries is not too much of a deterrent.

      This means led based lighting that requires very small batteries, so has a lot of value for very small actual energy use, and loading objects that already have batteries anyway, mostly mobile phones, and therefore don’t incur the cost of batteries because of solar. That’s all and however useful, it’s not really a lot.

      By jmdesp on 2014 01 14

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      • I agree with you that commercially available battery technology is too expensive for household use with applications such as refrigeration and air conditioning, at least in poorer countries. Battery technology has been advancing rapidly, though, and the organic flow electrode technology discussed here is a good example of what could be available soon: http://www.nature.com/news/cheap-battery-stores-energy-for-a-rainy-day-1.14486

        This type of technology could be very useful in distributed systems in regions that lack an electrical grid. In systems with a functioning grid, it could buffer solar or wind generation at the household level and feed electricity back into the grid at a controlled rate.

        By Robert Marshall Kelley on 2014 01 14

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  • There’s a CA DWP from 1964 which makes it clear: solar panels will work great on your outhouse in Joshua Tree, but will not function for anything else, in substance, especially desalination, which is the subject of the report. Anyone need any water?

    By Michael Steger on 2014 01 13

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    • Large scale desalination requires enormous amounts of energy and is only really practical if you build huge nuclear or or fossil-fuel power plants. I had a marvelous opportunity to tour a Saline Water Conversion Corporation (SWCC) plant in Jubail, Saudi Arabia that was at the time the largest desalination plant in the world. It used vacuum flash evaporation and was also a gas-fired power plant.

      There might be cases where thermal direct solar could be used in desalination, but I suspect that the materials cost would be prohibitive.

      By Robert Marshall Kelley on 2014 01 14

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    • I don’t have an outhouse, but I do know the real cost of these solar fields that they are trying to install all over this California desert. Because BLM practically gives away the public’s land, the colossal Industrial solar installations go there instead of far less sensitive areas for desert wildlife and flora. The Ivanpah BrightSource Thermal Solar Installation is a good example. Half that property the BLM gave away was prime territory for a rare healthy sub-species of an endangered tortoise. The proponent lied about the tortoise surveys and then when time came to actually clear the land, the tortoise count was ten times what the proponents survey reported. Typical-and the tortoise mitigation is mostly failing of course.

      By Idavid Graficks on 2014 01 21

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  • This article is an excellent description of the market realities that will shape the “renewables future.”

    Another way to convey the implausibility of that future is to speak of the “Five Infrastructures” required if that future were to be realized:

    Solar (the “someofthetime” daytime energy source)

    Wind (the “someofthetime” daytime/nighttime energy source)

    Storage (the conjectural source when the “someofthetime” sources fail.)

    Remote Transmission (from the “someofthetime” sources.)

    Traditional Sources (when all of the above fail (as in December 2013 in Germany))

    Simple phrase, “The Five Infrastructure Strategy”, that gives pause to even the most ardent proponents of the “renewables future.”

    By Paul Nelson on 2014 01 15

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  • Centralized power is not dead, perhaps just stunned like a deer in the headlights of progress. Growth however and it’s attraction for new investment has changed or shrunk with load growth that has gone anemic. Distributed Generation DG is anything that can produce power behind the meter - not just Solar and Wind!  I am tired of this lop sided talk regarding DG.  The sleeper part of the DG revolution is Natural gas fired cogeneration of Heat/cooling and power! This is the threat or opportunity for the electric utilities that most blogger don’t know anything about.  CHP/ CCHP& Micro grids are the new sexy after super storms and are the future. Resiliency and backup power needs make a fresh look at renting power from a centralized power plant unacceptable to savvy business owner who want to be more competitive now and remain so.  Microturbines and traditional reciprocating engine gensets own this space and are almost as scalable as solar- with better paybacks for the right host. microCHP is coming for the homeowner.  Some retrofit and most new commercial facilities today have the option to be off grid and have 25-50% lower operating cost & carbon foot print than business that used conventional separate heat (boiler) and power to your meter from a (33% efficient dirty grid power). It has not changed that much since the 1950’s.  You don’t have to buy energy the way you did 10 years ago. Every LED light installed chops away at the base load for large centralized power plants. Centralized power for the first world has delivered us to today and that is great.  The most powerful thing it has given us for tomorrow is the potential smart grid that connects us so that someday we can all share not only information rather electric power (like a cup of kWh sugar from your neighbor) and keep the onsite heat vs. wasting most of it the power plant 45%losses or downstream 7% to all the consumers. Prosumers will want to participate in making the market.

    By Daniel Natura on 2014 01 22

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  • The article decries distributed solar effects, and goes on to cite only Ute large scale managements. In no case has true smaller scale distributed solar production yet disrupted any Ute production, except to threaten their projected proffit plans.

    By AT THE BRIDGE on 2014 01 22

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  • Ute production like you say vs. behind the meter deployments is an important distinction. These are old rules and the rules are changing.  My point is don’t be fooled just because something is small that it not a game changer.  Distributed Generation Energy Efficiency including CHP and now grid scale storage the new rules are being written today.

    By Daniel Natura on 2014 01 22

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