Energy Trends

Let’s pick up where I left off in my last post, with trends that motivate consumers to seek alternatives to the increasing cost, declining reliability and undesirable environmental impacts of conventional grid power.

The electric energy sources of the future may include more centralized fossil and nuclear fuel-burning power plants, but environmental, safety and security concerns as well as global competition for fuels may delay or actually prevent their deployment and will at the very least put upward pressure on utility costs. Resulting higher prices will further motivate consumers to reduce and/or better manage their energy consumption through energy efficiency and automation, respectively, and to explore alternatives such as distributed generation, storage and energy management systems.

As the cost of centralized grid power rises while its efficiency declines, the cost of alternatives declines while their efficiency increases, thanks to principles illustrated by Moore’s law. Gordon Moore, a founder of Intel, made a generalization in 1965 that integrated circuits’ computing power would double every year or two, while the cost would remain the same – or, conversely, that every year or two comparable computational power could be obtained for half the cost. Moore’s law has proven true for nearly a half century, actually understating the improvement. The result has been a dramatic revolution over the past four decades in electronics, information and telecommunications technologies and related industries.

A number of experts believe that Moore’s law is just a special case of a more profound principle stated by Theodore Wright in a 1936 paper, “Facts Affecting Costs of Airplanes.” Ray Kurzweil more recently restated Wright’s Law, as it came to be known, as “The Law of Accelerating Returns.” They assert that “practice makes perfect” and there are “economies of production.” The power and economics of desirable new technologies in general, not just integrated circuits, improves exponentially both because we learn by doing how to make them better and the cost of any particular component declines as greater numbers are produced.

This trend has not only improved technologies that can make our legacy grid smarter, it has led to increasingly attractive “off-the-grid” alternatives. The application of advanced technologies to the massive, centralized grid requires expensive, time-consuming, communal action on a large scale. In contrast, consumers can quickly individually embrace grid alternatives that meet their varied desires for economy, reliability, comfort, convenience, sustainability and independence..

Making our legacy, centralized grid smarter is essential, and not just because of the massive investment and drastic impacts of trying to replace it. A new decentralized power system will take decades to deploy and will have to operate in parallel with the legacy network. In fact, even an entirely decentralized network can benefit from local, regional and national physical interconnections.

The technologies we know today – solar PV, batteries, fuel cells, monitoring and control devices, information technologies, consumer appliances, energy management systems – will get better and cheaper at an exponential rate, as will new technologies that we haven’t even imagined. Today we have only about 10,000 utility generation plants, a few hundred thousand transmission / distribution control points and 250 million mostly passive metered consumption points. An increasingly decentralized topology will mean literally hundreds of millions, even billions of generation, storage and control points, including multiple ones behind each utility meter. That will mean an entirely new kind of network

Kurzweil’s Law suggests that exponential technology improvement leads to a singularity in every technology, every technology industry – a moment when change is so drastic that something entirely new emerges. I believe we are gathering speed toward that singularity in the power industry. I am further convinced that this singularity will be a convergence of the legacy grid, the new decentralized grid and the Internet of Things – leading to what Bob Metcalfe has called the “Enernet.” Interestingly enough, Bob Metcalfe, a contemporary of Gordon Moore, made an observation that has come to be known as Metcalfe’s Law about networks. Also proven true and understated for the past four decades, it asserts that the power and value of a network of technologies increases in proportion to the square of the number of endpoints connected to that network. In a future post I will discuss how this will further accelerate the arrival of the singularity in the electric utility business.

Harkening back to the example that I used in Part I of this blog, a DC nanogrid for the home or small business would be a modest start to be sure – it would take only a slice of the consumer’s load out of utility hands. What about consumers’ largest loads? Almost all residential, commercial and industrial lighting, heating, cooling and process equipment operates today on AC. Although those loads could be designed to operate on DC, it’s unlikely that much of the installed base will be replaced soon, much less redesigned for DC. However, these appliances, operating in a hybrid combination of our legacy grid and a new decentralized virtual grid can be connected by Metcalfe’s Enernet to transactive energy markets in which they monitor, analyze and react to price signals and find ways to operate at times and at cycles that economize their energy use while maintaining reliability and maximizing sustainability. I will post more in the future about how this new, combined energy network will increasingly rely on, in fact be a part of the “Internet of Things”

These developments will be a boon to our society, enabling us to meet our future energy needs more reliably, securely and sustainably, maybe even more economically in the long run. But as we’ve seen in the telecom utility industry, technology and industry revolutions are extremely hard on legacy business models and, therefore, on incumbent utilities and their regulators. In the short run, both are likely to try to slow if not reverse the move to consumer independence. In fact, a July 27 article in The New York Times – “On Rooftops, a Rival for Utilities” – documents the utility industry’s hostility to incentives for solar PV installations on customer premises – the tip of the iceberg we’ve just described. But if you look at the history of every technology since fire and the wheel, that sentiment is likely to place utilities on the wrong side of history.

Join Steven Collier on Aug 22nd, 1:00pm – 2:00pm EST for a webinar on The Evolution of Smart Grid

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