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Reinventing the Grid

How to find a future that works.

Fortnightly Magazine - March 2014
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The phrases "utility of the future" and "utility 2.0" aren't new, 1 but they've entered the lexicon in a big way in recent months. In various public and private forums, utility leaders across the country have been trying to visualize the industry's future - and to clarify the utility's role in that mix.

Different people see different things when they gaze into the metaphorical crystal ball. Some see catastrophe, the so-called "death spiral." Others see a renaissance, a new age of innovation in energy services.

Most everyone sees big changes ahead.

In the death-spiral vision, renewable energy and distributed energy resources (DER) will continue to get cheaper - just as traditional central utility services become more expensive. As customers become their own generators, they drop their former share of the utility's fixed costs onto the backs of other ratepayers, driving more users to seek alternatives to utility power. At some point, the utility ceases to be a viable business - and the grid falls apart. Only the wealthy will be able to afford first-class electricity service, and the rest will be relegated to price spikes and rolling brownouts.

Some foresee less drama, and more subtle changes. In their view, things like renewables and DERs might just be a fad, perpetually unable to compete without subsidies and mandates. This scenario sees the pendulum swinging back toward least-cost planning as the industry's primary guiding principle.

But even this view includes some important changes coming as new technologies mature - most notably grid modernization, distributed intelligence, fast communications, and real-time analytics. Automation offers new ways of operating the system to deliver reliability and safety at the least cost. And even traditionalists foresee continued advances in technologies to deliver and manage things like demand response (DR) and microgrids.

Others see a future in which the utility realigns itself to serve a new set of mandates. Instead of building out a system to electrify the nation - a task that was mostly accomplished last century - the industry will prioritize making that system as flexible and adaptive as technology will allow. Reliability, safety, and reasonable cost will remain pillars of the regulatory compact, but the utility 2.0 mission will be to integrate all energy resources - including DERs, variable renewables, and more traditional assets - in a way that ensures optimal deployment, nondiscriminatory treatment, and maximum value for customers.

Where utility 1.0 was required to provide undifferentiated service for all ratepayers within a given class, utility 2.0 will provide a platform for innovation and customer choice.

A common theme unifies these three visions - namely, a more decentralized grid architecture, with more resources dedicated to serving localized customer needs.

"If you look into a real crystal ball, what you'll see is a view of exactly what's in front of you - except it's upside-down," says John Jimison, executive director of the Energy Future Coalition, a Washington, D.C., nonprofit affiliated with the UN

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