Thursday, February 19, 2015

These are terrific reports by the Aspen Institute: 

"The Future of the U.S. Electricity Sector 

"Tectonic Shifts in the U.S. Electriciy Sectort"

PART II: ECN Engineering Live: AC vs. DC II (On Demand) FEB 15, 2015

PART I: ECN Engineering Live: AC vs. DC (On Demand) July 29, 2014

Wednesday, January 28, 2015


One of the topics that I am frequently invited to address at conferences and workshops is what electric utilities, especially electric distribution utilities, should be thinking about, planning for and implementing as the industry undergoes revolutionary restructuring. Here is my list of the Top Ten (Plus 1) Challenges for electric distribution utilities.

1. Bulk Power Grid - The reliability and economy of the bulk power grid has been declining at an alarming rate and is expected to continue to do so. A groundbreaking 2009 report by the industry's Electric Advisory Committee to the USDOE stated that:
" . . . the current electric power delivery system infrastructure . . . will be unable to ensure a reliable, cost-effective, secure, and environmentally sustainable supply of energy for the next two decades . . . is nearing the end of its useful life."
This is in part because the grid is simply wearing out . . . depreciation expense exceeds new investment. And, because new circumstances and requirements exist, simply investing more in the traditional centralized grid model will not suffice.

2. Climate - Even aside from the hotly disputed linkage of climate change and utility use of carbon-based fuels, the number, duration and severity of weather events have been steadily growing. The result is undeniable even if the cause may be disputed. This further degrades the reliability and economy of the grid, further reinforcing customers' interest in alternatives to grid service.

3. Security - The grid is not adequately secure. While much of the dialogue in the industry is about cyber security, the grid is, even more troublesome, dramatically insecure physically.This is especially true for large, centrally controlled, synchronous AC grids. There is really not a critical facility (e.g., generation, transmission, distribution) in the grid that is not readily approachable.

4. Change / Complexity - The fundamentals of the electric utility business have changed and will continue to do so. Not only are the foundations of the legacy industry eroding, but there are entirely new requirements that the grid was not designed for. Almost all of them make the business more complex.

5. Customers / Competitors - Customers in the 21st century have new expectations and opportunities They have an increasing variety of alternatives to the all-requirements service from their incumbent utility that prevailed for nearly a century. These range from conservation and energy efficiency to demand management to distributed generation and storage to competitive transactive energy markets.

6. Distributed Energy Generation, Storage & Management - There is now an order of magnitude more energy generation units at the distribution edges of the grid than all the utility owned generators in the entire bulk power grid. The benefit versus cost for these “grid edge” components continues to improve exponentially. Monitoring and control is not longer the sole domain of the local electric utility or it's power pool or system operator. Add to this the growing number of electric vehicles which represent roaming energy consumption, storage and even generation.

7. Costs / Revenue - Costs of generation, both fixed and variable are rising. Costs of transmission and distribution are rising. The costs of doing business are rising. On the other hand, utility revenues from energy sales are declining as a result of conservation, energy efficiency, competition and distributed generation. Utilities generally collect a majority of their revenue through charges for energy usage, a variable quantity yet the majority of their costs are due to capacity, a fixed quantity that doesn’t diminish with diminished energy consumption. Traditional approaches to rate design are no longer sufficient. Simply raising rates to overcome declining revenues only increases the incentivize for customers and competitors to further displace purchases from their utility.

8. Technology - A rapidly growing array of new energy, electronics, information, and telecommunications technologies, devices and applications are available. The Internet of Things has arrived. These are helpful, even necessary to meet the challenges of “Grid Edge.” What are they, what do they do, and how can they be properly evaluated, deployed and operated?

9. Digital Enterprise - To stay competitive, utilities must transform themselves into fully digital businesses. Information technology (IT) and operations technology (OT) must merge. Customers' expectations of digital sophistication must be met. New kinds of competitors will come into existence as digital enterprises, not slowed by the need to overcome an incumbent, non-digital business structure and culture.

10. Workforce - It is necessary to rethink the recruitment and management of utility personnel given both the new realities of the grid and the unique characteristics of the next generations of employees.

+1 - Who really knows what can and will happen next? Realize that Moore’s Law for electronic components is just a special case of a more universal truth (a la Wright's and Kurzweil's Laws) that change is exponential in technologies enabling exponential change in business. Utilities will require unprecedented agility and innovation to face a rapidly changing future and largely unpredictable future. The only way to reduce the uncertainty and risk is to aggressively shape the future.


The industry's response has been, shall we say, less than enthusiastic. In a way that is both humorous and sad, many electric utility executives, professionals and line employees tend to react to this list with something akin to the well known Kubler-Ross five sequential stages of grief:

Denial and Isolation - Insist that grid restructuring isn’t necessary, that the legacy grid just needs some tender loving care, maybe some CPR. Avoid those who say otherwise. Try to get out of the business or make it to retirement instead of facing reality.

Anger and Resentment - Assert that the new realities are unreasonable and unfair. Protest that the problems are arbitrarily caused by others and that it could be eliminated by them. Seethe and sulk because business is so hard without the beloved legacy grid.

Bargaining - Try for exemption from the future by lobbying for favorable legislation, petitioning for regulatory relief, or suing for judicial intervention. Try to persuade customers to change their behavior to make the problems go away.

Depression - Mourn for the old burnt out light bulb and take no joy in the new and better LED one. Have no joy or enthusiasm for the future of the grid.

Acceptance - This stage is attainable by only a few incumbents (e.g., NRG) who realize that denying the passing of the old grid model only hinders finding peace and success. More importantly, those who were never really attached to the dearly departed (e.g., customers, entrepreneurs, innovators, competitors, developing economies) are at this stage from the very beginning. They are free to move on to new and better things. Acceptance can be accelerated by associating with them as well as with those who have experienced and triumphed over a similar loss (i.e., a devastating industry restructuring).

To successfully meet the challenges, and, more importantly, to exploit the opportunities, they must be recognized, understood and accepted. The industry, like Norman Bates, cannot prosper by trying to preserve the departed!


A reader posted a comment questioning Item 2. Here is a graph based upon a compilation of reports by utilities to the Energy Information Agency.

There are two motivating forces here. One is the increasing frequency and severity of weather events. The other is the declining reliability of the legacy grid which would mean growing frequency of weather related outages even if there was no growth in the frequency or severity of weather events.

Friday, May 23, 2014


I just saw a thought provoking Youtube video that's had a million views . . . 

Solar Freaking Roadways 

which got me thinking . . .

The former Saudi oil minister, Sheik Ahmed Zaki Yamani, once warned his OPEC colleagues: “The Stone Age didn’t end because we ran out of stones.” Few technologies actually become obsolete because they no longer work. Instead, they are displaced by something better. The Stone Age ended because of better tools, bronze in particular. Then the Bronze age ended with the Iron age which was eclipsed by the Industrial Age. If Neal Stephenson's sci fi is, as I believe, prophetic, the Industrial Age will give way to the Diamond Age.

I believe that the Carbon Age will end long before we have used up all the coal, oil and gas in the ground because it will be replaced by better (cleaner, more sustainable, ultimately cheaper) forms of energy. This will be accelerated as we begin to face the "hidden" costs of our profligate use of carbon:

1. The increasing costs of exploration, production, transportation, utilization of carbon fuels exacerbated by exploding global demand . . . the risk of getting so much of our energy from potentially adversarial countries . . . the immense transfer of individual, corporate and national wealth to carbon fuel producers . . . cleaning up the by products of exploration, production, production, utilization that have been dumped into what we breather, drink and eat . . . bearing the costs of their adverse effects on quality of life and productivity of business. In this regard, if our use of carbon has in fact contributed to climate change, the cost is practically incalculable.

I firmly believe that we should have an aggressive national goal, like JFK's "a man on the moon by the end of the decade," for achieving a sustainable energy supply. It should include aggressive public policy with economic incentives for R&D and even commercial deployment (just as carbon and nuclear energy have had throughout their history).

As to the solar roadways concept, there is certainly a huge amount of real estate (and growing) tied up in roads and highways. However, I'm not familiar enough with the technical / economic parameters of converting roadways to solar arrays to know whether this represents a feasible solution. In particular, what are the economic / performance penalties for having to design the panels to be able to withstand the mechanical challenges of traffic on the panels? What are the power transmission / distribution routing issues? Would it be more economical / productive to equip existing rooftops, parking lots, utility rights of way, railroad rights of way, airport rights of way, other otherwise unusable public and private lands? Would other renewable energy sources be preferable . . . hydrogen based fuel cells . . . some hitherto undiscovered technology (quantum energy generation)?

By the way, I don't think that the Carbon Age will be replaced by a Nuclear Age because burning uranium results in deadly wastes that last essentially forever. If the recent events at WIPP in my hometown are any indication, there is no certainty that they can be safely sequestered on earth. There is also the potential for irreparable damage from events like Chernobyl and Fukushima. Even if the waste were benign and/or could be safely sequestered, the economics of huge, central station generation plants (the only way that nuclear power is economically feasible at present) are increasingly nullified by risks, not to mention that the grid is moving to economies of mass production at its edges rather than massive production at its center.

Thursday, March 13, 2014


Let's talk about the issues that underly the increasing prominence of the "utility death spiral" concept. Of course, in times of economic and technological revolution, it's only the incumbent providers who focus on the possibility of a death spiral while consumers, innovators and entrepreneurs focus on the exponential growth in opportunities.

US energy sales have fallen to 2001 levels and are expected to continue to decline until 2025 or after. So far, the decline has been primarily the result of: 

(1) Continuing migration of domestic commercial and industrial business (2/3 of US energy sales) to offshore locations where labor / energy are cheaper and regulations are less confining, 

(2) Prolonged economic slowdown in the US that is exacerbated by the above,

(3) Explosive growth of developing economies which provide even more incentive for emigration of C&I activities and their energy consumption from the US, and 

(3) Growing customer deployment of conservation and energy efficiency measures which will continue, even accelerate in the short term as incumbent monopoly utilities raise rates to offset the fact that their embedded costs are not reduced as much as their revenues decline.

We already see the growing public resistance to carbon and nuclear fuels that make it more difficult or even impossible for incumbent monopoly utilities to build and operate conventional, central-station generation. This will only increase.

We haven't even started to see the full effects of: 

(1) Increased deployment of distributed generation, both conventional and renewables (primarily PV in the near future) which has the same net effect on incumbent monopoly utilities as conservation and energy efficiency (i.e., reduced sales, revenues, margins, market control, physical system control),

(i) increased deployment of energy storage (electrical, thermal, mechanical, chemical) that will further increase the amount of energy that can be obtained from distributed generation instead of using the legacy monopoly franchise grid for backup and supplemental power.

(ii) accelerating decline in cost and increase in performance of wind, PV, fuel cell, energy storage technologies that, as has already occurred with wind, make conventional coal and nuclear generation economically non-viable.

(iii) deteriorating reliability, security, resilience of the legacy centralized monopoly grid that will strongly favor decentralized energy production, storage, management, even at the extreme minigrids / microgrids / nanogrids operating partially or wholly "off the grid."

(iv) continuing exponential improvement in electronics, telecommunications, information technologies (i.e., The Internet of Things) that will make it possible to economically, reliably and securely operate an increasingly complex energy network made up of tens of billions of independent endpoints compared to today's electric grid with <<500 million centrally monitored and controlled generating plants, substations, transmission lines and electric meters.

(2) Entry into the market of a growing number of "non-utility" sellers of power and energy that will further reduce the sales of incumbent monopoly franchise utilities.

(3) Expansion of transactive energy markets in which incumbent monopoly utilities + non-utility sellers + retail customers must buy and sell capacity and energy (and coordination services) between and amongst themselves at market-based (not cost-plus!) prices in real-time and futures markets that further reduce the margins of the incumbent monopoly utilities.

Finally, there is a wild card that almost always favors new market entrants over incumbents . . . a la Kurzweil's and Wright's Laws, technology continues to exponentially improve in performance and decline in cost with occasional quantum leaps (e.g., hydrogen fuel cells, cold fusion, peer-to-peer energy distribution, wireless energy transmission, quantum energy production / transfer / storage).