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Green Transition

Integrating distributed resources into the smart grid.

Fortnightly Magazine - May 2011

millions of consumers as active participants. Driven by rational and instantaneous price signals and supportive incentives, energy entrepreneurs in the new retail energy market will employ user-friendly technologies to create widespread prosperity and energy independence for America. American dollars currently being shipped overseas or being spent on costly and destructive coal will now be spent at home on clean, wholesome and local fuels, enriching local economies.

Re-engaging Customers

Wellinghoff’s vision suggests a paradigm shift is now technically within reach. Among the key features of the smart grid is its ability to mix and match generation and load by adjusting supply and demand from a variety of sources, locations and times while maintaining the system’s reliability.

The smart grid of the future will no longer serve as a one-way conduit, delivering electrons from large central generating plants to major load centers. Instead, it will soon evolve into a dynamic network where distributed generation, renewable resources, storage technologies and price-responsive customer demand are integrated with more traditional means of power generation.

In the historical paradigm, customer demand was taken as a given by utilities. Supply-side resources had to be dispatched to meet the demand at all times, no matter what the cost.

For more than a century, the utility industry unwittingly disengaged customers from the upstream side of the business—from generation, to transmission and distribution—by offering unlimited supplies at affordable prices. With predominantly flat tariffs, customers became oblivious to the varying costs of generation and delivery. Utility customers were largely unaware of and therefore indifferent to the enormous costs of operating a washing machine during peak demand periods or the low costs of energy during off-peak—even though the costs of that activity could differ by two or more orders of magnitude. 8 With consumers having little or no incentives to adjust their energy usage based on variable costs, utilities were forced to invest heavily in inefficient and infrequently needed peaking units.

The result of this legacy is that many summer peaking networks, such as those in California, have to deal with needle sharp peaks—mostly driven by air conditioning—which occur infrequently but are notoriously expensive to meet with traditional supply-side options, namely peaking units. Figure 5 illustrates a typical warm weather California peaking cycle, where utilities and regulators refer to the air conditioning load as “the load from hell.”

The industry is now attempting to re-engage customers by eliminating flat tariffs, introducing dynamic pricing and implementing distributed resources and demand response (DR) programs. Their objective is to make the demand side of the equation part of the energy supply solution.

Many customers have discretionary loads or have flexibility in choosing when and how much energy they consume. Others are increasingly able to generate some or all of their internal needs from distributed resources, including solar panels, heat pumps, wind turbines, solar hot water collectors, or other methods of on-site generation.

With the expected penetration of EVs in the coming years, many customers will also have sizeable energy storage potential. V2G technology will allow EV owners to store low-cost electricity and then feed it back into