Self-generation and Prosumers key to grid sustainability

Challenged with radically modernizing and transforming the U.S. electric grid over the next several decades, energy companies are touting self-generation and improved customer engagement as the blueprint for creating a more efficient and reliable grid.

Gathered at the 2011 National Electricity Forum in Washington, DC, energy executives focused on the need to shape business and investment strategies in order to create sustainable energy business in the 21^st century. This is especially critical as many states have implemented renewable energy standards, which will force a fundamental rethinking of both energy transmission and distribution. In addition to state mandates, a federal standard could also be on the way.

"In the short term...we are going to have to figure out how we make an intelligent, methodical, consistent advancement towards introducing affordable renewables in our portfolios," said Doyle Beneby, President and CEO of CPS Energy.

But with many utilities struggling to keep generation up, costs down and infrastructure intact, resources are wearing thin. This means coming up with new methods of beefing up renewables that don't further drain utilities' already dwindling resources.  

One way to do this is to turn end users of energy into producers -- and sellers -- of electricity, according to Dave Crane of NRG Energy.

"The opportunity we see ultimately, both with EVs and with distributed solar, is that it changes the basic paradigm," Crane said. "Right now almost everyone in society is an absolute user of energy, not a producer of energy."

Encouraging the development of "Prosumers" is an idea that has been gaining traction in the industry recently, especially as users look to save energy and install their own renewable generation. The California Public Utilities Commission, for example, has developed a five-tiered pricing system to encourage moving away from utilities. Customers in this program can earn $2 per watt generated by PV installations.  

"As technology continues to advance...there is a significant incentive -- and indeed it is being marketed to them aggressively -- to self-generate," said Ted Craver, Chairman, President and CEO of Edison International.

Implementing these changes, however, likely won't be easy.

"I am very much a believer in a transformation of the electric power business," Craver said, but cautioned that the next several years "will be messy."

He added, "Many things are going to be tried. There are going to be several failures and it's going to be a painful process."

Part of the challenge is the simple fact that renewable self-generation remains prohibitively expensive for many consumers. Craver noted that, as more people invest in self-generation, the costs rise even higher for others on the grid.

"Those with means are beginning to seriously consider moving off the system, however those who don't have the means to do that are the ones that are increasingly picking up the burden of the costs for maintaining that backup system for everyone, including those who have moved off to self-generate," he said.

Craver said the pace of the transition will also be a shaping factor. "The faster this happens, the more disruptive and the more economic casualties."

The panelists agreed the one effective way to ease the transition for everyone is to make sure any changes are as simple and easy for the customer to understand as possible.

"I believe that we are going to have to come up with some system that saves money but also is very passive and operates in the background that they don't have to operate themselves," Beneby said. "I don't think we are going to get to a point anytime soon where that's going to be a central thing that people think about."