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Technology Wins

Economics, not politicians, will determine what tools are best.

Fortnightly Magazine - March 2012

issue of Fortnightly, we hope Crocker will explain his views in more detail, but his key point is this: distributed generation (DG) technologies—notably photovoltaics (PV) and wind generators, and someday fuel cells—are being subverted by a utility industry whose business model depends on perpetuating Edison’s central stations and long-haul transmission lines.

Of course Crocker isn’t the only one who says things like this. The Minneapolis-based New Rules Project, for example, published a report last June that stated, “While technology advances and costs drop, a major obstacle confronting distributed generation is a century of rules and institutional structures predicated on the outdated assumption that power plants will continually grow in size and electricity will continue to be transmitted over ever-longer distances. From federal energy incentives to rules issued by the Federal Energy Regulatory Commission (FERC) to state interconnection rules, there is a systemic bias toward centralized power and one-way grid systems.”

Advocates in other states have argued the same point; Bill Powers, principal of Powers Engineering in California, told the San Diego Union-Tribune , “Utilities make their best rate of return on new transmission lines. So a utility is almost reflexively saying we must [site renewable power plants] remotely in order to get the most cost-effective power. But if you add the cost of putting in that transmission line, you’ve completely negated the economic benefit.”

In effect, incentives for long-haul transmission (see “ Killing the Goose ”) are propping up “outdated” technology—similar to the way crazy traffic laws were meant to protect horses from automobiles. But unlike those quaint anachronisms of the 19th century, the rules of the road for electric utilities don’t just govern how electrons from different sources behave around each other. They determine where and how electrons will be generated, and how they’ll get from source to customer.

History has shown that when governments try to protect the technology status quo, consumers pay the price. In the resource planning example, transmission rate incentives, renewable energy zoning, and other policy frameworks effectively mask the true costs of central-station power generation—and according to Crocker, Powers, and others, that’s stacking the deck against DG. (See “ Renewable Reality Check ,” Bruce W. Radford, June 2009) .

My Pigs Don’t Stink

It’s easy to dismiss DG’s advocates by saying the technology is immature, and until it matures we simply can’t abandon the Edison model. But that’s a straw-man argument; nobody is saying we should dismantle the grid. However, ratepayers should expect that resource planners will evaluate options objectively, on the basis of their actual all-in costs.

DG advocates say an objective analysis will turn toward a distributed model, sooner or later. But the pro-transmission bias inherent in the system virtually guarantees the transition will occur later, rather than sooner. That’s because DG, located at or near the electric load, must not only beat the price of retail power, but also the price of wholesale power that benefits from the socialized investment in a huge transmission grid. After all, customers are stuck paying the bill for those big transmission lines whether they get their