The U.S. electricity sector is poised for a profound transformation—but the path to get there is neither clear nor straight. Last week, over 600 people joined us for a live chat about the future of electricity and the key questions surrounding the transformation to a more efficient, renewable, and distributed electricity system. We received over 230 questions and were able to answer a third of those (we’ll continue to strive for greater eye->brain-> finger typing efficiency). While we can’t address all the great questions we received, we’re focusing this blog on major themes that emerged.
What it takes to make the transformation happen
Question: I always wonder why it is taking so long to make these changes that we know have been needed for so long, and what do we need to do immediately to make those changes that are stopping the implementation of these ideas?
Response: This is perhaps THE key question for us all. It’s definitely one about which we are constantly thinking. Here are just a few of the many reasons change is slow:
The U.S. electricity system was designed and built a century ago and is the largest integrated system in the world. Transforming that system is sometimes likened to rebuilding an airplane while in flight—we can’t turn it off while we create a new one, and we can’t just scrap it and start over. Meanwhile, utilities that operate the system are required to maintain reliability, which makes them risk-averse by design. Finally, change is slow because the change depends on people, not just technology. And changing people’s mental models is never fast or easy.
So what can be done immediately? This is, after all, partially a people problem, and everyone has a role to play. As individuals, we can all take responsibility for our own electricity usage. We can greatly improve the efficiency with which we use electricity, saving money in the process. We can push for clean sources of electricity generation, and where it’s feasible and cost-effective, install renewable distributed generation. If your business is involved in the electricity sector, or even if your business just uses electricity, we’ve put together some near-term recommendations here.
Question: What will have to happen in the political/regulatory arena to make this transition to renewables?
Response: While RMI generally focuses on business-led solutions, it’s impossible to escape regulation in the electricity sector. As a regulated industry, the business model is defined by the regulatory structure. Therefore, while we don’t think any acts of Congress are required, driving the transformation of the electricity sector depends a lot on regulation—often, at the state or local level.
At a high level, regulation can level the playing field so that all resources, including renewables and distributed resources, can compete fairly. That starts with developing a common understanding, supported by transparent access to information and data, of the impacts, costs, and benefits of distributed resources on the grid. Then, rate structures and ultimately business models must be adapted so customers and new market actors have an opportunity to compete and so grid operators are fairly compensated for the important integration and reliability role their system serves.
While we don’t have all the answers, this is one of the key areas where RMI will be working over the coming months and years. Particularly, in late June we’ll be launching the Electricity Innovation Lab (e-Lab), a multi-year working group of thought leaders and decision makers from across the electricity sector to develop innovative solutions to some of the trickiest barriers to change. With support from the Department of Energy’s SunShot program, we’re also working to develop new business models to support the deployment of distributed solar.
The role of new technologies like storage
Question: What do you believe is the most promising way to store electricity?
Response: Let’s first take a step back from this question and ask, “Why do we need electricity storage? What is the service storage provides, and how can that service best be provided?” We think the answer to the first part of the question is flexibility. That is, as more and more renewable energy is added to the grid, resources are needed to manage power output that varies as the wind blows and the sun shines. Electricity storage is one way to provide that flexibility, but it’s far from the only way. Flexibility can also be provided by existing power plants, particularly natural gas and even by demand itself. Using information technology, we can shift when we use electricity, like pre-cooling our houses and then turning the air conditioning down during the peak afternoon hours. In that way, demand can provide virtual storage with no impact on comfort.
As for the second part of the question, we are most excited about demand response as a source of flexibility, although we continue to monitor developments in a variety of electricity storage technologies, ultimately including electric vehicles.
The role of natural gas
Question: Do you see cheap, abundant natural gas as complementing or competing with renewable energy?
Response: The short answer is both. More specifically, it’s true that very low natural gas prices now are threatening the expansion of renewable energy. But in the medium- and long-term, gas prices are likely to go back up, renewables prices will continue to fall, and natural gas will assume a complementary role as a transition fuel.
The flexibility of how natural gas is used makes it a potential complement to increased penetrations of renewable energy into the grid. How? Although in the given market climate (cheap natural gas prices), there’s a strong incentive to use natural gas as a “baseload” generation resource—one that produces high output consistently—power production from natural gas can also be used to compensate for the variations in renewable power output. It boils down to the type of power generator used. Some natural gas generators can quickly ramp power production up or down as demand changes—or as there is fluctuation in solar or wind energy. As renewables start to account for a larger and larger share of electricity supply, natural gas can be used as one method for more flexible power output.
Thanks to everyone who participated in our live chat on electricity. The questions you asked are exactly those that we’re trying to answer (along with you!) in order to accelerate the growth of renewables and efficiency within the electricity sector. We look forward to continuing to engage in this conversation.