September 21, 2009

By the end of this week, Galvin Electricity Initiative Executive Director Kurt Yeager hopes micro-grids will be better understood as championing the consumer, Yeager told us Friday.  Energy and environmental leaders at GridWeek in Washington, DC, will discuss micro-grids Wednesday in a panel led by Galvin Electricity Initiative Deputy Executive Director John Kelly.  That afternoon, Yeager will take part in a media roundtable he hopes will raise consciousness about how consumers will benefit from the smart grid.

          Yeager is perhaps the leading authority on micro-grids.  He discussed in June the merits of micro-grids with US Energy Secretary Steven Chu -- and Yeager's belief that the federal government needs to provide more leadership in the smart grid since state's rights are standing in the way of the national good (SGT, Jun-12).

          Micro-grids are often mischaracterized, said Yeager.  “The micro-grid is not an end in itself; it's a means to the end,” he noted.  “When we talk about the smart grid transformation, the focus needs to be on the local distribution system.  Sometimes when you listen to FERC or others, it sounds like it's a matter of stringing some transmission lines from some new wind farms in the Dakotas.  And while that certainly can be an integral part of a comprehensive smart grid, that is really very much a minimal side of it.  The real value in terms of efficiency and reliability improvement is a focus on the local distribution system.”

          Micro-grids would serve to “break down the ‘iron curtain' between supply and demand that exists today, where consumers are basically held hostage behind the meter, if you will, and really have no control over their participation in the business,” said Yeager.  “The micro-grid seamlessly connects supply and demand so the system can be optimized.  The system we have today, both in terms of technology and in terms of policy, was established back in the 1920s and ‘30s to electrify the country.  For that purpose, it was a good model.  But while we finished electrifying the country 50 years ago, we're still operating under the same basic rules that incent utilities to sell more and more electricity rather than to optimize their service.”

          The electric utility industry “pits consumers against stockholders,” said Yeager.  “In almost every other industry, you make money by serving your consumers.  Here, the consumer is the regulator and his or her interests are not always aligned with what I'd say the consumer's are, in terms of minimizing costs, optimizing efficiency and incorporating distributed generation -- converting buildings from power pigs to power plants.  A smart grid allows buildings to become producers as well as users of electricity.  And that reduces the need for new central generation, for new transmission lines and so forth,” thus cutting utilities' capital costs.

          GridWeek may well involve more federal policymakers than most smart grid conferences due to its location in the nation's capital, said Yeager.  “Most of the local distribution systems are regulated at the state level,” he added.  “The federal government has very little say in that, although we've encouraged them to provide more leadership.  EISA had much of the right language in it but was deferential to the states.  States rights are important but if they get in the way of the national good, the federal government has to stand up and say, ‘This is not working'.”

          When they met in June, Secretary Chu and Yeager “mutually emphasized to each other the importance that the smart grid money [DOE is about to dole out in the form of matching grants] be focused on maximizing the consumer benefits,” Yeager recalled.  “But he also said they were under a lot of congressional pressure to get the money out quickly and to spread it around widely on what might be called ‘shovel-ready projects' -- not necessarily to really focus on building a truly smart grid.”

          DOE was “able to carve out of that $4.3 billion about $800 million to be spent on regional demonstrations,” said Yeager.  “Those will really show the real benefits” to consumers.

          Chu told Yeager he was hopeful about a greater federal role in smart grid leadership, “but he wasn't very optimistic about that,” Yeager noted.  “DOE traditionally is, of course, a technical organization.  It remains to be seen how much authority they will really have to make the most effective decisions” about the smart grid.

          DOE reports to Congress, which in turn makes recommendations to FERC, and FERC is “very limited in its willingness to step in and interfere with the states in any way so I think it's going to end up being a few states that really show leadership and demonstrate the value [of micro-grids], and then other states will follow.”

          New Mexico has “focused leadership from the top,” Yeager noted.  The state's “green grid initiative” wants about $50 million in DOE smart grid regional demonstration project grant funds to support the building of five micro-grids throughout the state.  It also secured a $30 million investment from the Japanese government (SGT, Sep-04).

          Under the micro-grid plan for the smart grid, “the savings are a large multiple of the cost,” said Yeager.  “A lot of that won't show up in electricity bills.  It shows up in job creation and improved productivity.  It's a lot of big-picture items including the incorporation of renewable energy and plug-in hybrid vehicles which is why more and more communities and states like New Mexico are willing to put money on the table on behalf of their residents,” he added.