If I were a senior executive at an investor-owned utility (IOU), I would be more than a little nervous about the spread of Renewables, and grid-tied distributed energy generation sources in general. What would happen to the integrity of my operations if these proliferated in dense clusters in my service areas, and over which I exercised limited control? Can I co-opt them or are they competition? AMI, SmartGrid, and "cap and trade" regulations are innovation enough, I might think, do we have to accommodate distributed generation too?

A Familiar Concern

The concerns expressed today regarding the impact of widespread deployment of distributed renewable energy resources, also known as Distributed Generation (DG) on utility operations parallel anxieties expressed by AT&T when the first third-party telephone instrument and the first computer with modem were sought to be attached to their network. AT&T’s Bell system, having overall responsibility for the regulated, end-to-end network, asked: “A computer with a modem connects to the telephone network. Should it therefore be regulated? Should all computers be regulated?” Further it wondered, “How to distinguish between harmful and nonharmful interconnection … to protect the ratepayers’ network?” Will customers be “casting blame on the telephone company from the Bell system” should something go wrong?

AT&T developed an interface device called the “protective coupling arrangement (PCA)” to control potential harm to the network. Despite the concerns, and with the famous Carterphone decision and FCC rulings, the courts and regulators allowed interconnection. Temin’s The Fall of the Bell System describes this in fascinating detail.

The altered interconnection rules opened up the telephony network to new equipment, third party networks and new business arrangements. Eventually, the network itself was broken into administratively distinct pieces that have since remolded together in a new pattern. The telecom industry presents a gripping story of shifts in industry structure, innovation, technology mutations, parsing and recombination of network elements, and absorption of new technologies that led to the emergence of wireless telephony, data services, entertainment and the Internet. The modularization and re-assembly in new ways, like Lego blocks, is among the sources of the industry’s innovative vitality. The changes have been disruptive, and have occurred in overlapping phases. The aggregate effect is rise of the center-less, or multi-centered, converged yet diverging hybrid that is the Information and Communications Technology (ICT) industry today.

Encouragement from the State

The California Public Utilities Commission’s July 2009 solicitation for projects for funding details the risks of adding third party energy sources to the grid, and seeks the research and business community’s assistance to address them. It states, “Utilities lack understanding and familiarity with how PV systems will impact grid operations. Utilities are especially concerned about potential grid impacts associated with high penetration levels of PV that are likely to occur at the distribution level with increased PV market growth.”

Will some areas require and deploy more PV arrays than others? Will fluctuations in power amount and quality affect grid operations and economics? Will the PV or wind turbine deployments be a resource for the utility to offset peak demand, or be a costly headache? The solicitation continues, “To date, distributed PV systems operate within the grid but their operations are not integrated into the electricity system and they are not treated like conventional power plants [emphasis mine]. Due to their small size and historically low market-penetration levels, distributed PV systems have fallen outside the scope of most utility planners and engineers. … In addition, due to the unexpectedly rapid growth in distributed PV systems, utility grid operation models and planning tools lack the ability to account for distributed PV generation technologies and resources.”

Tipping Point

Just like telephony infrastructure once was, the electric energy infrastructure appears monolithic to a telecom observer. It appears to be poised to confront similar issues with about a twenty-five year lag. But if telephony history is any guide — and the analogies that we recognize only go so far — all of these issues will not only be satisfactorily resolved, but rather will lead to innovation and growth, perhaps greater than what occurred in telecommunications. The operators of microgrids, renewable energy resources and DG are the equivalent of telecom pioneers of the past, like MCI, but they are not the only pioneers.

The possibilities for Schumpeterian innovation by “combining things differently” are numerous — variety and quality of energy sources, use of creative financing like solar PPAs, new areas for scientific advance from LED lighting to thin films, new network topologies to aggregate “edge” generation sources, information overlays like the SmartGrid, and the inter-working of low emission automobiles with the electric infrastructure — all of these innovations, coupled with a favorable global and national policy, could lead to incredible leaps for the industry and mankind. Even to think of distributed PV systems, community power plants with “islanding” and “parallel” operations, is bold.

For innovation, “distributed” or “edge” grid elements in large numbers matter; imagine the world of telephony without Blackberry, iPhone and Pre, and only stodgy display-less desktop telephones manufactured, distributed, and managed by a handful of companies in a regulated context.  A green social contagion is loose, of such sweep and of such collective focus that many operational, technical, scientific and political problems will be confronted and solved over the coming years.

In the face of this wave of innovation, what option exists for utilities but to acquiesce, to find accord with the new social force? Joseph Campbell memorably said or quoted with Irish wit, “if you are falling, dive.” Co-opting Renewables and DG actively is the better part of valor, and good business strategy.

Mahesh P. Bhave, LEED AP, is an engineer from IIT, Delhi, and a Ph.D. from Syracuse University.  He is the founder of a communications start-up in San Diego.