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Fight, flight or innovate: How will utilities deal with DERs?

Posted by Malcolm Metcalfe on Aug 3, 2016 2:06:42 PM
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Fight or flight may be the two most common reactions mammals have when facing a threat, but for utilities that perceive distributed energy resources (DERs) as risky to business, there’s another option: innovate.

The rapid pace of disruption

Tony Seba, a clean-technology thought leader, author and Stanford University instructor, believes that the age of what he calls “participatory energy” – user-centric generation, storage, management and energy-market participation – will eclipse the utility-centric model of today by 2030.  

In his book titled Clean Disruption, Seba describes his view on trends that will change the energy and transportation landscape over the next 15 years. In it, Seba points out that disruption doesn’t follow an exponential curve, where transformational technologies rise at a steady, predictable rate. Rather, he says, disruptive technologies follow an “s” curve, which climbs slowly for a while, then takes a rapid vertical rise before leveling out into another slow climb.

As examples, he points to several technologies that transformed society in a matter of years. The automobile is one. In 1903, John Scott Montague, a British Member of Parliament and devoted advocate of motor vehicles, echoed a common belief of the time. “The introduction of motor cars will never affect the riding of horses,” he said. Horses were so ubiquitous that they were downright problematic. 


 In an article from Access Magazine, the publication of the University of California Transportation Center, scholar Eric Morris points out that, “By the late 1800s, the problem of horse pollution had reached unprecedented heights … Vacant lots across America were piled high with manure; in New York, these sometimes rose to forty and even sixty feet.” But, by 1912, Morris notes, “Traffic counts in New York showed more cars than horses for the first time.”

Cell phones are another disruptive technology noted by Seba. He reminds us that when AT&T hired a well-known consulting company in 1985 to estimate the market for cell phones by the end of the last century, that consultancy doubted the market would top 900,000 phones. In actuality, 109 million cell phones were in use by 2000. By 2013, a United Nations study had found more people on earth have access to cell phones than toilets. “Out of the world’s estimated 7 billion people, 6 billion have access to mobile phones. Far fewer — only 4.5 billion people — have access to working toilets,” wrote reporter Yue Wang in Time magazine.

Such dramatic S-curve growth is what Seba anticipates will be coming to the solar and energy storage industries. So, it should come as no surprise that when West Monroe Partners surveyed utility executives in 2015, 66 percent saw distributed energy resources as a both an opportunity and a threat.

And, there are plenty of reasons why DERs could be threatening. First and foremost, there’s loss of revenue that occurs when people start getting some or all of their power from solar and storage installations. Then, there are the expenses DERs bring utilities, which stem from many sources, including the distribution system upgrades necessary to accommodate household PV installations or the time and effort of processing interconnection requests. And finally there’s the waste of over generation, as depicted by the California Duck Curve. In that now-famous graph, the belly of the duck represents the over generation that takes place during the day, when utilities must keep traditional and relatively slow-ramping resources spinning to meet steep ramps at day end, when household energy use goes up and solar generation goes down.

Fortunately, just as solar is growing at what the Solar Energy Industries Association predicts to be a rate of 119 percent in 2016, so is energy storage, a technology that can help utilities smooth duck curves and firm renewable resources. Market researchers at IHS see the energy storage market as set to “explode,” moving from an annual installation size of 6 gigawatts (GW) in 2017 to more than 40 GW by 2022. In 2013, the installed base was only 0.34 GW.

Electric vehicles (EVs) will add to that storage, as well. At the 2015 Energy Information Administration Conference, JB Straubel, chief technology officer and co-founder of Tesla Motors, pointed out that in 2015, there were 60,000+ cumulative Tesla Model S vehicles with 5 GWh of batteries on the road. By 2020, he sees 1,000,000+ Tesla vehicles in service running on 70 GWh of batteries and delivering a potential 10 GW controllable charge load, which can be varied as required by the grid. That is, when demand is high, this charge load could be time-shifted. It’s a form of flexible storage that is highly efficient and non-damaging to the batteries themselves.

It’s half full

Even if a lot of those EVs get charged up with rooftop solar, there is still a huge DER-related opportunity for utilities, because utility-controlled chargers could provide local flexibility for managing peak demand, firming renewables and more. Utilities also can make sure those chargers utilize surplus power when it’s available and avoid power use when rates or demand are high.

In addition, utilities have the opportunity ahead to help the grid operate more efficiently by leveraging local storage to match supply and demand. This would allow remote generation to operate at near constant capacity, maximizing efficiency and minimizing delivery losses.

Likewise, utilities could manage load for the same uses. Like batteries and flywheels, load can deliver process storage, i.e., the flexible storage that’s inherent in electrical processes that can be curtailed or time-shifted according to the grid’s needs.

Utilities need to remember this: Others may now be generating and storing electricity, but it’s always been the utilities and grid operators who are the experts at keeping power in balance. This is a position of power that should not be overlooked or underestimated.


The real opportunity for utilities is in becoming the orchestrator of grid resources, not simply a spectator to the dazzling show of today’s solar and storage markets. Right now, utilities and grid operators are in the best position to make sure all these new energy resources – rooftop solar, storage, EVs and load – work together in synchronized accord.

After all, the grid has never been a single-instrument band. It’s always been an entire ensemble of devices, playing together in concert. So, come on, utilities. It’s time to grab the baton. It’s your chance to ensure that all the new grid instruments that are coming online will work together in harmony.


Topics: distributed energy resources, DERs, utility of the future, utility innovation

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