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The Arab Oil Embargo, Sandy, and Adapting to New Realities

This month marks the anniversaries of two notable events, decades apart yet related in terms of historical impact, awareness of vulnerability, and challenge to business as usual: the Arab oil embargo 40 years ago (Oct. 19-20, 1973) and Superstorm Sandy, which hit the Northeast on Oct. 29 last year. Both events sparked a national and global focus on two concepts I’ve been hearing quite a bit about in recent months: adaptation and resilience.

Much is being written and said about the oil embargo anniversary — one event on Oct. 16 features two former Secretaries of State, two ex-Secretaries of Defense, and the CEOs of GE, GM, FedEx, and Waste Management. The United States, of course, still depends on imported oil, but we have made notable recent progress (after decades of very little) on vehicle fuel efficiency. The administration’s aggressive CAFE standards, with a mandated fleet average of 54.5 mpg by 2025, are arguably President Obama’s signature achievement on climate action to date, and both hybrid and electric cars have good market momentum. It would make for an interesting debate, but I would argue that the U.S. auto industry and its regulators have done more to adapt to new market realities than most U.S. electric utilities.

As the Clinton Global Initiative (CGI) annual meeting convened in New York City in late September, it seemed a fitting symbol when the failure of a Con Edison feeder cable shut down service on one of the nation’s busiest commuter rail lines, Metro-North’s New Haven Line between New Haven, Connecticut and Grand Central Station. This occurred as New York Mayor Michael Bloomberg and others were discussing the need for resilient cities with CNN’s Fareed Zakaria at CGI.

Full train service wasn’t restored for 12 days, costing the Connecticut economy an estimated $62 million. The Metro-North debacle was obviously not climate-related — and was not a failure of the overall grid per se — but that didn’t matter to tens of thousands of frustrated commuters. And it symbolizes the challenge of how best to generate and distribute electric power in the 21st century — whether to a rail line, a manufacturing plant, or an urban neighborhood. 

Connecticut officials, according to the Hartford Courant, are taking another look at a fuel cell-powered microgrid as an alternative to grid power from Con Ed, an option first studied in 2007. If that happens, Metro-North will actually be returning to its historical roots. Then known as the New Haven Railroad, the line was the first in the U.S. to be powered by a dedicated generation plant, the Cos Cob Power Station, built by the railroad and Westinghouse Electric to replace steam locomotives. That happened in 1908.

The Metr0-North power outage is merely one recent example of the unprecedented challenges being faced by traditional, centralized utilities. Microgrids, distributed solar, data-empowered customers, grid storage mandates in places like California, and many other factors are challenging business as usual as never before, for utilities, regulators, and policymakers. They also have to deal with RPS mandates for renewable power in many states, but those are generally met with large-scale wind, geothermal, and biomass plants (and occasional utility-scale solar) that may shift power sources but don’t have to challenge centralized business models. 

The distributed energy revolution is arguably clean tech’s front-and-center issue of 2013. From SolarCity’s rapid growth (the firm now expects its distributed PV installations to nearly double next year) to the smart thermostats from Global Cleantech 100 North America “Company of the Year” Nest Labs, all trends point to more and more electricity that is generated and/or managed at or very near the point of its use. In the face of all this, many (though certainly not all) utilities cling to the centralized, command-and-control paradigm that they’ve perfected over more than a century.

“If Thomas Edison came back today, he’d know exactly how everything works,” said Robyn Beavers, senior VP of NRG Energy and founder of NRG’s San Francisco-based “Station A” innovation unit, at the recent SXSW Eco conference in Austin, Texas. “We’re looking at the disruption of longtime models of generation, distribution and usage. It’s overwhelming and it’s daunting — but it’s time.”

For utilities, adapting to the new realities of distributed energy will also help bring adaptation and resilience in the face of climate-related power disruptions. To date, many utilities, including some large investor-owned entities like Edison International and Xcel, are doing a pretty good job of this. But many others are not, digging in their heels against net metering and other distributed generation-friendly policies. Another speaker at SXSW Eco, Kate Gordon of Tom Steyer’s clean-energy advocacy group Next Generation, suggests they take a lesson from another well-established, entrenched but challenged U.S. industry based in Detroit.

“I’m from the Midwest,” Gordon said, “and I spent years watching the auto companies saying how they owned the market and didn’t need to change. Now, they’re seeing how strong fuel-economy standards might be a good thing and building cars accordingly. Utilities are getting there, but they need to see that their backs are up against the wall; they can’t maintain their market share. Innovative utilities will move ahead — non-innovative utilities will be in trouble.” In industry after industry, that history lesson is always worth learning.

Lead image: Leonard Zhukovsky via Shutterstock

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