The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Evolutionary directions for electric system architecture.
Quadrant II would depend heavily on comparative economics. Because local variables might play an important role in this case, the grid might not retain a unified look in the “nimble” scenario. An interstate highway-scale system would still be built to access the most desirable energy resources, but to a lesser extent than in the “metallic skies” scenario. This backbone would be complemented by a diverse set of smaller-scale resources including distributed generation, storage, and demand response suited to different geographic areas.
The Obsolete Grid
In the “radical” scenario of Quadrant III, rather than augmenting the transmission backbone, distributed capacity itself becomes the key structural element of grid architecture. Most if not any large-scale transmission to be added would have to be underground, or otherwise unobtrusive to the public eye—say, by consolidating circuits into superconducting links—as a socially acceptable alternative to overhead transmission capacity. While the cost of transmission is highly project-specific, and while technological improvements might reduce these costs, it seems a safe bet that buried transmission systems will tend to remain more costly than standard overhead lines. For this reason, the “radical” scenario would include a competition between advanced transmission on the one hand and a narrowed geographic focus on the other, where the system’s function becomes defined as facilitating the exchange of electricity locally or intra-regionally. In other words, the economic incentive could shift in the direction of finding local alternatives to long-distance connectivity.
To the extent that expensive, invisible transmission isn’t built and access to significant amounts of distant generation reserves is therefore unavailable, siting enough distributed generation would be the first challenge, followed by matching this generation to load. An extremely high premium on energy efficiency, combined heat and power, demand response and electrical or thermal energy storage would be expected. Furthermore, the actual value of service reliability to different loads would likely receive much scrutiny. Enabled by intelligent switching technology, microgrids might provide variable power quality and reliability to specific loads as appropriate.
Operationally, the major implication of the “radical” scenario would be a redefinition of the role of electricity distribution. With all stops pulled to reconcile electric supply and demand locally, the distribution system is no longer a one-way delivery infrastructure: instead, it collects, coordinates, stores, and delivers. As in the nimble scenario, the problem of managing large volumes of information will arise. Because of the reduced connectivity, however, at least the geographic scope of high-priority information would be more limited. More importantly, owing to increased generation and power quality control capability at the local level, more local intelligence could be depended upon. The key question for distribution operations might become where to draw the line on information management and control relative to the customer meter, and placement of this line could change over time. Indeed, microgrids at various scales could intentionally operate as power islands under specific conditions, introducing a much more proactive approach to variable topology for T&D systems than is currently used by any utility.
While potentially radical in its departure from traditional operating philosophy, the T&D system of Quadrant III might not