Energy Improvement Districts Promote Common Sense Ingenuity

In digitally-inclined businesses, even a few seconds of fluctuating power, can wreak real economic havoc. A recent U.S. Department of Energy survey found that a particular brokerage operation lost $6.8 million for each hour of power outage. Hewlett-Packard reported that a 20-minute outage at a circuit-fabrication plant would result in a production loss of $30 million. The costs when a hospital or an assisted living facility loses power or experiences poor power quality have a very human face. All together, the total economic damages of the August 2003 blackout exceeded those ascribed to the September 11th terrorist attacks.

To solve the problem, digital-age companies have been at the mercy of federal and state regulators, transmission system operators and utility companies that view electricity more as a tradable commodity than a service vital for economic development and life-sustaining work.

Regulators and utilities typically propose billions of dollars of investments to fortify conventional grid infrastructure: more large, central power plants that have an extraordinarily negative impact on the environment and land use and are connected to customers over wires that can easily be knocked down by weather or human violence. This approach is rife with delays and hidden expenses: time to satisfy the federal, state and local bureaucracies involved, NIMBY reactions, adverse effects on the environment and other disruptions-like tearing up transportation rights-of-way to bury power lines.

Taking a cue from the model by which self-taxing business improvement districts solved crime and sanitation problems in the 1980's, companies in a number of U.S. cities that want to control their own energy destiny are taking local control of electric power in an innovative organization called the Energy Improvement District (EID). EIDs use municipal bonds to plan, finance and install microgrids. The microgrid approach recognizes that, within a city, there can be enormous area- and time-specific costs to providing traditional grid-based power. These are the places where one or all of three tendencies occur: there is a large amount of peak power and/or there is a badly overloaded substation and/or there is a confluence of businesses suffering large power quality loses. To serve these areas, rebuilding the traditional grid requires enormous up-front costs and investment in power generating capabilities that may only be needed for a few hours or days a year.

The EID micrcogrid approach recognizes there are clear benefits to taking the same spatial "foot print" where excessive area- and time- specific costs occur and installing a source of environmentally benign, high quality micro generation. Unlike a conventional plant, EID micro grids take advantage of the excess thermal energy from power generation to heat and cool buildings. From about 30 percent energy efficiency at a conventional power plant (some 70 percent of the energy goes up a smoke stack and adds to global warming or is lost during the electricity's journey from the central plant to where it is used), micro generation can achieve up to 85 percent efficiency.

And this is also an optimal situation to introduce a variety of renewable energy and alternative energy technologies, particularly solar both solar thermal and solar photovoltaic power. Small, on-site fuel cell power plants can also provide additional peaking and crucial back-up power for uninterrupted energy service.

EIDs couple these on-site power installations with energy conservation measures and optimal power use in a micro-grid. In his brilliant new book, "From Edison to Enron," Richard Munson has described the promise of microgrids: "... a growng number of engineers argue that the August 2003 power cascade should provoke a dramatically new approach to delivering electricity. They draw a comparison to computers and their evolution from centralized mainframes of the 1960's to today's decentralized web of networked laptops. These engineers foresee a radical new power network - one that's adaptive, self-healing and compatible with distributed on-site energy sources. It would have sophisticated sensors to anticipate crises, electronic circuits to redirect wayward currents and a computerized "brain" to power down non-critical electricity loads when the system is nearing its capacity. One innovation, the microgrid, already links small generators and sophisticated software based on neural networks can increase power quality and reduce the risks of overloads."

Taking local control of key energy planning, putting 70 percent of waste heat to work in space heating and cooling, eliminating line loss and poor power quality due to wires, and installing electric power generators compatible with the environmental and economic tenor of the community are all common sense objectives which can be achieved with the ingenuity of EID microgrids. Benefits reverberate from local EIDs to entire states and geographic regions as robust economic development and electric power grid stabilization.

About the author...

Guy Warner is the founder and CEO of Pareto Energy. A trained economist, Warner has worked with more than 100 energy and financial planning engagements and provided financial and strategic planning advice to a number of electric and gas utilities in the United States, Europe and South America. He has also served as an economic and energy expert before federal courts and state public utility commissions. Since 1995, Warner has focused his work on developing new energy efficiency, renewable energy and on-site power projects. He has worked on more than 25 such projects in North, Central and South America.