David Crane, president and chief executive officer for NRG Energy, reached out to Solar Power World and asked if we would be interested in getting his thoughts on the future of distributed generation in the United States — and why utilities are going to have to live with it. We, as you might imagine, said yes.
By David Crane, Special to Solar Power World
Utility companies, like the phone and transportation monopolies before them, believed the sun would never set on their role as keepers of the all-powerful grid. But their business model is now in jeopardy due to the rise of distributed generation.
First, the sale of system power has entered a period of decline. Trends like stagnant population growth and a greater commitment to sustainability will accelerate the pace of demand destruction in the energy industry.
Another factor is automated at-home conservation, which can smooth out the daily load curve. As solar and wind sources take over the system, they will match electricity usage both when and where it is being produced.
And that is why renewables, like solar, are disrupting utilities. Solar can be produced anywhere that people live and consume electricity.
Twenty years ago, who would have imagined that we would disconnect home phone lines? But clearly, the cell phone won. That same future is in store for our industry. Distributed generation will take over because it will perform the central function of our business — providing affordable and sustainable energy.
Americans will soon produce most of the power they consume at homes or offices, through distributed solar arrays on their roof or over their driveways. If they come up short, they can tap the battery in an electric car or an energy converting appliance in their basement. They will only use the grid as a last resort.
Over the next decade, three trends will pave the way for consumers to leave the rate-based power industry behind:
- Cheap Distributed Solar. Solar panels continue to become more efficient and affordable. Soon, people and businesses will be able to generate their own power.
- Automated Conservation. Estimates of electricity wasted in the US vary from 20 to 30 percent. However, once conservation behavior is automated through motion sensitive thermostats, electricity waste will decrease.
- Extreme Weather. Our wood pole-based electric distribution network cannot withstand 21st century weather, such as storms like Hurricane Sandy. New underground systems will preserve power access during times of disaster.
The utility companies tried to win politically. As we saw in Arizona last month, their strategy involves net metering constraints and absurd interconnection charges. This is not to say there is no role for utilities in the future. But that prize will go to those that evolve with the times and NRG plans to be one of the leaders.
Solar will soon become dirt cheap, but nothing can change its fundamental intermittency. Utilities should compensate solar customers fairly by buying back the excess supply that coincides with peak use, and solar customers will still need to pay for grid use at night or on cloudy days.
Long-term, off-grid solar needs a reliability partner and the solution is the natural gas distribution system that can connect a home ‘appliance’ to convert natural gas into electricity. Currently, 34 million American homes are served by electricity and natural gas distribution systems.
NRG is developing a gas conversion machine with Segway inventor Dean Kamen. Known as the Beacon 10, it operates like a refrigerator compressor running backwards. Heat from natural gas goes in and out comes 10 kilowatts of electricity to supplement solar on the roof. The Beacon 10 also emits heat as a byproduct, which can supplement a hot water heater or home heating system.
The future of our industry is up for grabs, but one thing is for sure, it will no longer be dominated by the status quo. Put simply — we can’t act like utility companies anymore.
Albert Franklin Rodriguez says
Great article about the future of the Monopolistic Utilities. We need someone gutsy like Judge Green, who
busted the AT&T and BellSouth Monopolies, who would end the current monopolies of the Utilities and this would accelerate the process. Solar will cease to be “intermittent” once better “storage devices” devices are developed. It is already happening thanks to the electric auto industry. Currently Solar City is using the TESLA batteries for their Solar PV Installations.
RevPhil Manke says
I appreciate the perspective. Why is there no interest in SRECs? The idea lays more value onto solar as distributed energy at a higher value than the other RE offerings because of it’s harmlesness to nature and ourselves while distributing the income fairly in such a way as to enable covering the cost of money to install it in the first place. It is interesting that WDC has the most viable SREC program to date. 5 other states are struggling to make it work in a contentious political climate that seems fearful and ignorant of the energy provisions on earth.