To Modernize the Grid, Think Smaller

Right now, America’s energy, economic, and environmental futures are at a crossroads. It’s clear that President Barack Obama understands the urgent need to modernize the nation’s obsolete power grid. He sees the connection between infrastructure investment and the opportunity to create new, tech-savvy jobs that can stimulate the economy. By including funding for grid modernization in the American Recovery and Reinvestment Act of 2009, his administration is prioritizing an initiative that is critical to the nation’s globally competitive business success, yet one that has been largely overlooked at the federal level for decades.

Unfortunately, the consumer, societal, and business benefits are less clear, because the vast majority of grid-related stimulus funding appears destined to primarily expand, not cure, the ailing system we have today.

Moving Beyond Centralized Power Systems

Investing mostly in high-voltage transmission projects, for example, moves us away from economic recovery and toward a more centralized power system, while stifling entrepreneurship and innovation. Building a national backbone grid without creating incentives for utilities and technology companies to update local power systems will lead to massive gridlock. Smart energy will be dumped into dumb systems, reducing efficiency and wasting taxpayer dollars.

This kind of conventional wisdom got us where we are today — to a position where we are hobbled by an antiquated power system and policies that block improvements and undermine energy security and sustainability. There is indeed no industry or infrastructure that is more a prisoner of the past or more afraid of the future than the U.S. electricity supply sector.

Instead of focusing on new transmission lines that are politically expedient from a federal perspective, real economic opportunities in grid modernization can be most quickly and cost-effectively achieved through the installation of innovative smart grid technology that fundamentally improves local electricity distribution and service. Moving forward, the U.S. Department of Energy (DOE) should focus on the ways that smart technology can most quickly and sustainably create jobs, reduce our dependence on foreign oil, improve efficiency, and reduce carbon emissions. Smart grid stimulus projects should only be funded if they can demonstrably meet these objectives and the project sponsors, both public and private, are accordingly held accountable. What the DOE will discover is that the most powerful stimulus application of smart grid technology can be made at the community electricity distribution level.

Smart Microgrids: 21st-Century Solution

Federal and state investments should be focused on creating opportunities to optimize electricity supply and demand, not on simply creating more bulk electricity supply. The most effective approach is the development of smart microgrids that focus smart technology on maximizing consumer benefits and eliminating the technology and policy "iron curtain" that now prevents electricity supply and demand optimization.

Smart microgrids work in concert with and strengthen the bulk power grid; however, they also can rely on their own distributed power sources when needed or desired. In this manner, they can be designed to optimally serve entire communities, office parks, universities, and even individual buildings. Aside from the jobs that microgrids can create, countless companies are standing ready to produce and install available technology that gives residents and retail businesses real user-friendly control over energy use, plus the opportunity to sell electricity back to the grid based on price incentives. In the end, all citizens — homeowners, small business owners, mayors, and community leaders — win when they are supplied with absolutely reliable, efficient, affordable electricity that they are able to control.

So rather than caving in to the status quo, policymakers need to change the counterproductive rules restricting retail service competition at the state level so that entrepreneurs, private investors, and consumers can all contribute to grid modernization in the most meaningful, constructive ways. In the spirit of economic revitalization, the administration and Congress must set federal mandates for utilities and state regulatory agencies to clear these barriers standing in the way of creating local power systems that are smarter, cleaner, and produce more jobs. Removing these currently restrictive regulations that stunt the growth of local green economies will grant entrepreneurial innovators the opportunity to step in and implement energy technology locally that can produce major long-term sustainable savings for consumers, communities, and utilities alike. Simply put, if this action isn’t taken, federal funding will end up being taxpayer money down the drain.

We need to revolutionize the nation’s power system today, and smart distribution microgrids are essential building blocks of the 21st-century solution. We need federal pressure on states not only to fund energy infrastructure improvements but also to implement sustainable energy plans and policies that can benefit consumers and communities now, while paying ever-growing dividends far into the future.

Kurt Yeager (kyeager@epri.com) is the executive director of the Galvin Electricity Initiative and coauthor of Perfect Power: How the Microgrid Revolution Will Unleash Cleaner,  Greener, and More Abundant Energy.