[BETA] Fortnightly

Energy microgrids have emerged as more than just a curiosity. The technology is improving, costs are falling, and developers are lining up to build projects. How will microgrids overcome the substantial challenges that stand in their way?

It’s tempting to attribute the recent slowdown in electricity demand growth entirely to the Great Recession, but consumption growth rates have been declining for at least 50 years. The new normal rate of demand growth likely will be about half of its historic value, with demand rising by less than 1 percent per year. This market plateau calls for a new utility strategy.

(May 2012) Entergy Louisiana starts construction on gas-fired power project; Virginia Commonwealth University and Dominion partner on a test site for efficient energy technologies; Burlington Electric Department selects Siemens for meter data management platform; IKEA commissions four Blink electric vehicle charging stations; Edison Mission Energy, TIAA-CREF and Cook Inlet Region Inc. form partnership, and others.

In any conservation or efficiency program, some market participants will reap benefits without paying their share of the costs—i.e., the “freerider” problem. Some freeriders are unavoidable and generally not a problem. But as Cadmus Group analysts Hossein Haeri and M. Sami Khawaja explain, avoiding excessive freeridership requires careful program structuring, as well as ongoing measurement to accurately evaluate outcomes.

Where wind integration has been most successful, state authorities developed and adopted basic transmission planning and cost allocation principles before FERC issued Order 1000. Experiences in Texas, California, and Hawaii demonstrate what it takes to overcome permitting and cost allocation barriers—namely, a coherent policy framework and close coordination among stakeholders.

(March 2011) First Energy subsidiaries get new executives; Constellation names new treasurer, finance v.p., and CIO; Puget Energy gets new general counsel; plus senior staff changes at Dominion, Georgia Power, Parsons, California Energy Commission, Washington Utilities and Transportation Commission, and others.

As Google says, “the wind cries for transmission.” But the opposite is true as well: without new wind and solar energy projects, we would not need to build so many new transmission lines. Each side needs the other, yet neither dares declare too soon, and risk weakening its bargaining position. That is, until one utility in California found a way to break the impasse, with each side scratching the other’s back — thus putting to rest the age-old question, “Which came first, the . . . ?”

Despite state efforts to follow the European model of state-mandated feed-in tariffs to promote renewable power, these actions won’t pass Constitutional muster. The Supremacy Clause makes a formidable legal barrier.

Making the business case for the smart grid is an important utility goal. It provides the justification for making or deferring required investments. Utilities might find it necessary to engage in a cycle of continuous strategic planning.