The battle to control profit margin really boils down to a battle for the customer premises, where the serious money resides.The gas and electric industries in the United States control about $900...
The Energy Tech Chronicles: Will Bust Turn to Boom?
be built in populated areas.
Distributed generation also offers an immediate solution to generation problems in places such as California and New York City. Look at virtually every building or hotel in any major city, most (if not all) have back-up diesel generators in case of a power outage. These units are currently installed and ready to run. While these back-up units are primarily used only in case of emergency, if they were turned on at the proper times, there would be an immediate and enormous supply of electricity. Caterpillar estimates that if half the installed power generators were connected to the grid, there would be no blackouts. In the June 15, 2001 issue of the Fortnightly, Mark B. Lively estimated that there are 30 gigawatts of distributed generation available in California in the form of stationary diesel engines. Salomon Smith Barney has estimated the size of such stand-by capacity at 70 to 80 gigawatts. A number of energy technology companies are focusing on how to best utilize and control this large distributed power base.
Distributed generation opportunities also are driven by raw economics. More and more energy technology companies assert they can provide electricity at prices that are competitive with the grid. While a customer must make upfront capital costs to install a DG device, depending on the regulatory scheme in place, natural gas prices (most distributed technology is gas fueled), transmission, and distribution charges can be avoided (which are a material part of one's electric bill) and price saving can result. Arthur D. Little estimates that a typical customer could use a 50kW microturbine to reduce annual electricity costs by $28,600, and wind turbine technologies can generate electricity at 5 to 7 cents per kWh (a price which is competitive with the grid).
The Inevitability of Deregulation
That deregulation has stalled is undisputed, but so too is its seeming inevitability. Notwithstanding California's problems, PJM Interconnection, which runs the grid for Pennsylvania, New Jersey, Maryland, Delaware, the District of Columbia, and part of Virginia, is confidently going forward with its deregulation plans. And on Oct. 29, 2001, Trans-Elect and General Electric Capital announced they plan to purchase Consumer Power's transmission system, representing the first sale of a U.S.-based transmission system to an independent company. That deregulation should proceed is logical. The production of electricity is not a natural monopoly nor is retail distribution. Like cable television, there is no reason why there should not be multiple content (read energy) providers supplying product through a shared pipe (read wire). So, too, the existence of one set of local copper phone lines has not prevented competition between digital subscriber line (DSL) and competitive local exchange carriers (CLEC) competitors, nor will it prevent competition between different retail energy aggregators. All this will take time-after all, deregulation in the UK took over 10 years.
Energizing The World: Bringing Power To The Power-less
In understanding the opportunities offered by energy technologies, one should not focus only on the power needs of the United States. The traditional knock against new energy technologies has been their high cost