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Ripe for Change: It’s Time to Consider Microgrids

Ripe for Change: It’s Time to Consider Microgrids

Fourth article in our series about microgrids.

What received a D+ rating and is in need of major updates and improvements? No, not the Denver Broncos’ coaching staff! The answer is the U.S. electric grid.

The United States electric grid is still an engineering marvel, but much of it was built before the twenty-first century, and most of its transmission and distribution (T&D) lines have a lifespan of 50 years and were constructed shortly after World War II. In 2017, the American Society of Civil Engineers gave it a D+ rating and stated that the majority of T&D lines are ill-suited to meet today’s energy demand.

Under the current structure, centralized power plants must connect to cities via long transmission lines—this is especially true for industrial scale renewables because optimal locations are often miles from densely populated locales. It’s an overly cumbersome and esoteric method of electrification.

To replace the grid’s aging plants, according to Joshua D. Rhodes, a researcher of energy at the University of Texas at Austin, it will cost around $2.7 trillion, and this figure doesn’t account for other needed infrastructure.

America is at a crossroads. It can pay to maintain the grid, rebuild it using the current structure as a model, or it can look beyond the status quo and build a more robust, distributed model that improves the system as a whole.

Recently, experts have begun realizing the business structure is shifting away from the previous centralized platform. Companies like Apple and Google have started to produce their own power, and hospitals, universities, and manufacturers have installed their own on-site fuel cells. In the words of Chris Martin and Will Wade, two writers for Bloomberg, “It’s a monopoly industry that’s now facing a fundamental threat because customers who once had only one choice for purchasing electricity now have the option of producing it themselves.”

Steve Holliday, a former CEO of National Grid, the company that operates the United Kingdom and the North Eastern United States’ transmission networks, said in a 2015 interview that decentralized platforms (i.e. microgrids) would likely replace the industry’s current, centralized model of operation. In his opinion, the power sector needs to start focusing on kilowatts instead of megawatts.

A distributed, neighbor-to-neighbor model isn’t simply an abstract theory, though. Cities around the world are already looking into how microgrids can be adopted and utilized. Perhaps the most important and innovative microgrid in America is the one Brooklyn, which uses blockchain technology to coordinate how much power is available and the trading of it between neighbors. In fact, the Brooklyn Microgrid’s first peer-to-peer transaction occurred in 2016. The technology is there; now, it’s time to implement it.

Here at the Independence Institute, we’re embracing this innovative push. We believe the energy sector’s future is a distributed model that utilizes a variety of resources, from residential solar plus batteries to modular nuclear power plants to natural gas-fired generators. In the coming years, as the sector becomes more and more decentralized, distributed sources could supply energy to one or two homes or fulfill the electricity demand of large and small commercial operations.

Rhodes said it best: “There is no path that does not require investment – even just maintaining what we have will cost hundreds of billions, if not trillions, of dollars over the next decade. The bigger question is: As we continue to replace and rebuild this amazing grid, what technologies should we focus on?”

We believe “Uber for Energy” is the future. Of course, the transition won’t take place overnight, as centralized baseload capacity will still be needed in the ensuing years. But as utilities start to replace or upgrade the aging grid, ratepayers must ask themselves whether they want to continue paying the middlemen for the upgrades or pursue a neighbor-to-neighbor platform, a liberty-based model that could potentially generate a supplemental revenue stream for individuals rather than monopoly utilities.

Article 1, Article 2, Article 3Article 5

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