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Rethinking Our Energy System; Leveraging Distributed Generation

At this moment, the U.S. can reinvent how we produce, store, transport, and consume electricity. With an abundance of domestic energy, our country is on its way to becoming “energy independent” by the end of the decade. But powering our homes and businesses with natural gas or other fossil fuels does not mean a reliable, clean, and affordable flow of electricity will follow.

In order to capitalize on recent energy advances, states, regulators, and the federal government must bring the inherent benefits of generating power from on-site renewable energy — what’s called distributed generation — to more Americans. Transitioning our grid to one supplied with more distributed generation in the forms of all types of renewable energy is essential to attaining The U.S.’s true energy independence; independence that allows for the most reliable, affordable, and cleanest energy to flow to every American.

As you can already see across many states like New Jersey, distributed generation is closer to reality than it was a decade ago. In what is a rather common scene these days, many businesses, government buildings, homes, and schools are being powered by on-site solar panels or from near-by renewable energy. This shift to distributed generation stems from the fact that costs for renewables are falling quickly and dramatically.  Solar panel prices have fallen well over 70 percent since 2008, and the cost of wind turbines decreased 40 percent driving the record-breaking growth of renewables across the country. But to ensure this growth continues, utilities and policymakers must support the creation of more distributed electricity system.

The increased use of distributed generation in many parts of the U.S. has been met with resistance by some utilities because they see distributed generation as dangerous to their business model. Distributed generation allows for Net Energy Metering (NEM), which enables customers to sell excess electricity back to the grid from their rooftop solar panels or other renewable energy sources — which reduces electricity costs for customers and profits for utilities at the same time. Instead of utilities resisting this transformation; they would be wise to embrace it.

One big problem with the current utility model is the excessive costs for rebuilding, reinforcing, and operating the grid during periods of peak demand — when electricity is needed the most.  In many cases, peak demand lasts for no more than 100 hours per year, meaning extra capacity sits idle and is wasted.  The obligation to serve these 100 hours of peak demand forces the utility to make an uneconomical investment — and their customers must then help pay for it.  But if the utility could safely forgo those significant expenditures by increasing the use of distributed generation instead of fighting it, the utility could drastically reduce the cost of this unnecessary investment and subsequently save money for all parties involved.

As the U.S. increases the use of distributed generation, distributed energy storage will also become more common. These two innovations — distributed generation and distributed storage — will transform our grid into the ubiquitous self-healing grid that has long evaded us.  As we know post-Hurricane Sandy, we already have some capabilities to improve recovery efforts after major natural disasters by using distributed generation. But we need increased technological and regulatory solution so that solar installations could be used to independently power emergency response centers in schools and municipal buildings — at any time. And given the rise in more frequent and disastrous weather events, these advancements would pay off in big ways.

Many states including New Jersey already have strong programs that leverage private investment into all types of renewables, but issues related to distributed generation have not been addressed at the level needed to create the cleanest, most affordable and reliable electrical grid. Nobody is suggesting that the use of fossil or nuclear fuels will be totally displaced anytime soon, but as old energy sources go offline, we must replace them with the best most versatile technologies available. A choice to promote and encourage distributed renewable generation is not a choice against other forms of power production, but it is certainly a choice for a more resilient and capable electrical grid that will ultimately allow the country to secure its energy independence while helping to ensure our economic and environmental security through the coming century.

Todd Foley, ACORE's senior vice president of policy & government relations, leads strategic integration of policy development, research, external communications and interaction with Federal and state government and regulatory officials. He has over 25 years experience in Federal and state policy, renewable energy market design and business development. Prior to joining ACORE, he directed global and U.S. policy, market development and communications for BP Solar.

Lead image: Transmission lines via Shutterstock

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Stephen E. Morgan is the CEO of American Clean Energy and sits on the Board of Director for the American Council On Renewable Energy (ACORE) and Todd Foley is the Senior Vice President of Policy and Government Relations at ACORE.

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