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Utility Nightmares: Distributed Generation and Halving Electricity Consumption

While many utility executives attribute much of their predicted market challenges to the rise of photovoltaics and net metering, they actually have much more to worry about.

In a 2013 survey of global utility companies by PricewaterhouseCoopers, the results revealed that the utility industry leaders anticipate major changes to their business model in the near future. Ninety-four percent of international industry representatives surveyed predict that the power utility business model will be either completely transformed or significantly changed between today and 2030, while only 6 percent expect that the utility business model will stay "more or less the same."

In North America, 40 percent of respondents believed that utility companies' means of making a profit will see major changes over the next two decades.  A strong majority — 82 percent — of North American respondents also said future energy needs will be met by a mix of traditional centralized generation and distributed generation, which feeds power from a mix of sources.

But while renewable on-site energy generation offers a major challenge to the electric utility business model, the lower capital cost energy efficiency approaches, will be the hardest hurdle. Not only because the initial capital costs are lower, the payback is faster, and the energy savings are huge. In fact just four effiency options can cut building electricity use by 50 percent, and there are many more options than what I cover here.

Smart Thermostats and Controls: 10 Percent Reduction

The city-owned electric utility, Austin Energy, (Austin, Texas), gave away 90,000 programmable thermostats over a dozen years, at $250 a piece, totaling $19 million, the largest thermostat giveaway in the U.S. Each thermostat unit had a radio controller that gave Austin Energy the ability to change the home's temperature., which wil help Austin Energy work toward a goal of shaving 800 megawatts off its peak load by 2020.  A researcher at Lawrence Berkeley, said even the most perfectly managed thermostat can't reduce a typical home's energy usage by more than about 10 percent.  

Since then, as David Ferris at EE News pointed out, the big boys have jumped into the market. Lowe's, a national home improvement chain, rolled out a $299 package that includes a front-door keypad, thermostat and door-opening sensors that can all be managed with an app. Comcast Corp. has a thermostat that it claims can lower a home's energy use even if the dweller never touches it. Home-security companies Vivint Inc. and Alarm.com are selling connected thermostats, as is ADT Corp., which thinks temperature control is key to its expansion into smart home networks. Most significantly, Google Inc. recently bought Nest for $3.2 billion, the second-largest acquisition by one of the world's largest tech companies.  Ferris noted, “By comparison, Google paid only half as much for YouTube, the world's leading platform for online video. In the words of John Steinberg, a co-founder of EcoFactor, a Nest competitor, "Google wouldn't have paid $3.2 billion just to get a thermostat company."

Lighting: Minimum 10 Percent Reduction in Building Energy

But there’s more. A lighting technology revolution is underway with both LED lights, computerized lighting controls, and solar daylighting (the technology that uses lenses and reflectors to bring in full spectrum light without the heat gain).

EIA reports that early 40 percent of total U.S. energy consumption in 2012 was consumed in residential and commercial buildings, or about 40 quadrillion British thermal units, and over a third of that (34.6 percent) was for lighting in buildings. 

EPA’s Energy Star states that LEDs use at least 75 percent less energy than incandescent lighting, saving on operating expenses and reducing maintenance costs becayse they last 35 to 50 times longer than incandescent lighting and about 2 to 5 times longer than fluorescent lighting — no bulb-replacements, no ladders, no ongoing disposal program. And for solar daylighting, the results are even greater.

The U.S. Department of Energy (DOE) goes even further, stating LED efficiency is as good as or better than fluorescent lighting. The DOE estimates that switching to LED lighting over the next two decades could save the country $250 billion in energy costs over that period, reduce the electricity consumption for lighting by nearly one half, and avoid 1,800 million metric tons of carbon emission with over 20 LED studies.

Solar Water Heating (And Others): Minimum 9 Percent Reduction in Building Energy

The Energy Information Administration (EIA) also reports that 17.7 percent of our energy is for heating water. And solar water heating should meet 50-80 percent of that water heating load, according to the DOE. Waste heat from geothermal heat pumps or cogeneration and CHP systems can reduce that even further, meaning even more cost-effective options for consumers.

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Vampire Loads – 10 Percent of Energy Bills

Vampire loads means electricity is being used for appliances and equipment that are actually not operating, such as electric chargers, televisions and sound systems with remote controls, countertop appliances, etc. In fact, according to the DOE, “vampires are often responsible for adding 10 percent or more to your monthly utility bill.” For instance, the average charger is consuming 0.26 watts of energy when not in use, and 2.24 watts even when a fully charged device is connected to it. By either unplugging or using electric power strips with on-off switches, these expenses and loads vanish.

Now these four approaches, all cost effective, are nearly 40 percent of building electricity use, and guess what a host of 20+ others can give even greater energy savings from insulation and better windows, EnergyStar appliances and office equipment, and super-efficient HVAC systems — just to name a few.

And now add, the headache of distributed generation. The Wall Street Journal notes that big-box retailers to high-tech manufacturers, and other  companies across the country are producing their own on-site power than ever before . Since 2006, the number of electricity-generation units at commercial and industrial sites has more than quadrupled to roughly 40,000 from about 10,000, according to federal statistics.  And most experts (including this one) say the trend is gaining momentum spurred by fear (and actual experience that power outages caused by major storms will become more common and also falling prices for solar, small wind, biogas and biomass generators, micro and kinetic hydropower, geo-exchange, CHP and cogeneration, etc.

And the nail in the coffin, will then become energy storage.

Commercial Energy Storage Set to Rise to 2.3 GW in 2017

According to a new report from IHS Inc., global installations of photovoltaic storage systems for commercial use, currently the smallest part of the global solar energy storage business, are projected to expand by a factor of 700 in the coming years and become the largest market segment in 2017, from only 3.2 MW in 2012. And thus will increase the commercial segment’s share of PV installations to 40 percent in 2017, up from 5 per cent in 2012.

North America is expected to lead the world in commercial PV storage, accounting for more than 40 percent of installations in 2017. So if electric utilities attempt to stifle net metering, energy users will just dedicate renewable-powered battery banks to dedicated loads, pulling them off the electric grid forever since and storage prices are beginning to fall low enough and systems are becoming more standardized and reliable. And since these storage systems do not need utility back-up, and thus no electric grid interface, utilities will be unable to throw up regulatory roadblocks.

The electric utility industries are not monolithic, and in fact the municipal utilities have been ardent supporters and leaders in energy efficiency, distributed generation, storage, and smart controls. In States with pro-active state utility commissions, traditional independently-owned utilities (IOUs) have also jumped on board.

But most of the utility industry is fighting to preserve the old utility supply model of the 19th and 20th centuries just as the phone company(s) attempted to throw their regulatory might against cellular (distributed communications), competition, and grid access.  But the technology choices have already evolved to the point that consumers are willing to take the chance. The manufacturing and distribution economies-of-scale are already maturing in the energy efficiency, distributed and renewable energy, and energy storage industries.

So now it’s just a matter of time as consumers become more aware of their choices, state regulatory utility commissions become aware and accustomed to options in the market that is in many cases already out of their control, and the utility sector itself tries to navigate in a changing world whirring around them. 

Lead image: Transmission via Shutterstock

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