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Paradigm Buster: Why Distributed Power Will Rewrite Open-Access Rules

Fortnightly Magazine - October 15 1999

the line?

* Will they serve primarily as carriers of bulk goods or as integrators of retail information?

* Does the value of the wires lie in their ability to transmit power or to serve as an interactive customer interface? And if the latter, what is the comparative value of this manner of customer interaction in competition with other forms of aggregating diverse consumer demands?

In short, the industry may be moving toward an electronic transmission and distribution model, or ET&D. Such an industry structure is quite different from the "common carrier" model on which the open-access rules are predicated.

Power Quality:

Pressure from Below

On the demand side, the development of electronic commerce in all its forms is causing the need for high-quality power to skyrocket. This e-commerce revolution means that a fast food restaurant with gas-fired grills can't sell so much as a salad if a power outage puts the cash register/integrated-inventory-management system out of commission. A single instant's outage in an office building can set off wailing and gnashing of teeth as spreadsheets and pleadings vanish without warning.

Companies relying on computer-based systems for dealings with suppliers and customers are similarly at risk. As a result, ordinary commercial customers now are demanding power quality at standards that used to be reserved for precision manufacturers. This trend is expected to continue with society's increasing dependence on electronic information appliances, and will make itself felt in the marketplace as a premium consumers will pay to ensure high-quality, reliable service.


Pressure from Above

At the same time, on the supply side, equipment manufacturers have significantly improved the performance and economics of small-scale, dispersed power generation and management systems. For example, microturbines now are available that promise sufficiently low capital and operations and maintenance costs to make self-generation feasible for many more customers with much smaller loads than in the past.

Because of their relatively small size, the new units typically are located on the customer's premises. For example, 75-kilowatt demonstration units are now being tested at fast food restaurants, and, if successful, may be adopted in coming years by vast numbers of similarly sized commercial customers. In addition, fuel cells are being commercialized, with additional power quality, environmental and other advantages that may offset potentially higher costs. Solar and other renewable technologies also will be suitable for location at particular customer sites.

The improvements in these smaller-scale technologies have come quite recently - virtually overnight, when compared to the seemingly glacial pace of regulatory proceedings. Figure 1 shows improvements in gas turbine efficiency during the last 20 years. As shown, while improvements in the efficiencies of larger, single-cycle gas turbines have been fairly continual over time, striking changes have come recently in the smaller units.

These improvements in operating efficiencies translate into increasingly more attractive economics, as illustrated in figure 2. Technological "miniaturization" likely will continue to keep driving down the unit costs of small generation equipment to keep pace with falling costs of larger machines. While very small-scale generation remains more expensive than power at the busbar from new, large