Getting the New Electric Power Grid Right (or Wrong)

There is a great deal of interest, study, deliberation and conflict about how to manage and pay the electric power grid as it evolves into a system characterized by multidirectional energy and information flows. As distributed energy resources (DER) such as solar, storage, efficiency, and demand response become more widespread throughout the grid, utilities are looking for ways to ensure that they can deliver electricity reliably and affordably to their customers. The old business and regulatory models were developed in response to the technology that has been used for more than a century to provide power to consumers. New technologies are now prompting the need for new business practices and regulations.

Now that there are smart meters, electric vehicles, and of course, a rapidly growing number of solar PV systems installed on houses and buildings to deliver onsite generation, along with a feared "death spiral" for electric utilities, the ideas for reimagining the grid are proliferating rapidly.  The general trend seems to be the introduction of variable rates based on time of use,  new net-metering rules, demand charges, or other customer charges to compensate utilities for the services they provide to customers whose net electricity usage from the utility may be rather small.

For example, in Arizona the major utilities - Arizona Public Service and Tucson Electric Power -- are allowed to charge customers who use onsite solar generation a monthly fee. Customers using net metering also receive something less than the full retail price for the excess electricity they generate and sell back to the utility. Other proposals being floated around the country call for the adoption of time-of-use rates for residential customers, payments to DER users for the value of the energy they produce during peak hours.

Such proposal seek to introduce a level of granularity to the grid, to accommodate the various ways in which market actors engage the grid. The idea of making the grid "fit" ones needs and interests is attractive. However, if the solution involves making customers more educated about or interested in their energy use and costs, or introduces a level of complexity into the system that requires a great deal of time and attention from consumers, then my expectation is that such solutions are not likely to succeed, or at least deliver on their full potential.

The virtue of the grid and the utility business model as it has existed has been that the complexity of the system has been masked by the utilities. People tend to not need or want to be energy experts, they want to have the services they need, and then pay the bill. The utility provides this. The power stays on, the bill is affordable. What's the problem?

To the extent that an evolving grid will need to address flat growth curves in demand, climate concerns, transmission congestion, demands for energy choice, the falling cost and rising popularity of solar, along with other concerns, then we will be well served by devising a system that continues to mask complexity for the consumer as we seek to accomplish these other goals.

To me, the gold standard in taking complexity out of the consumer's hands is Uber. Imagine trying to get a cab in the rain, or on a busy afternoon. If you're in New York city, you might be able to hail a cab quickly, but not always. So you have to wait a while and hope an empty cab drives by. Then when you get frustrated, you call the cab company who tells you a cab will arrive in about 20 minutes. Meanwhile, you're running late, getting wet, etc. Uber takes all that out of your hands. You simply tap the button on your phone, type in where you want to go, and in a minute or so, you get a call from someone who is on the way to get you. In only a few minutes, you have a ride. You can track the car's movements, and you don't even have to pay or ask for a receipt at the end of the ride. That's the ideal user experience, and the one that we should strive for in imagining and building the grid of the future.

The way I think we should want the grid to work is like a smartphone. It allows for both individualized experiences that fit the users interests (I like particular apps, news sources, and games), while also being connected to a larger network that allows the user to interact with people all over the world via voice, text, email, video and social media.  And it has a camera too!  Moreover, the complexity of the smartphone is completely hidden. My children (everybody's children) can use an iPhone with ease, and the adults also do pretty well.

If the electric power grid we have years from now combines the power, efficiency, individuality and simplicity of the telecommunications sector, that will be a victory.

 

THINKING ABOUT FREEDOM IN AMERICA

We’re having a problem with freedom in the United States. We can’t agree on what it means and how to pursue it. And this is making our politics and society increasingly divided and hostile.

On the one hand, there is a view that freedom means that the reach of government is limited. The achievement of freedom, in this view, entails continually striving to block the expansion of government into people’s lives, whether this comes in the form of taxes, health insurance, regulation, and even at times law enforcement. Along the political spectrum in the United States, there can be selective application of these views. The Republicans are supportive of restrictive laws and regulations that have a significant impact on women’s reproductive health and their freedom from government interference in this realm. They also have sought to ban same-sex marriage, another example of government hindering people’s freedom. At the same time, the Democrats currently find themselves in the unusual position of championing the concept of states rights when it comes to the adoption of laws legalizing recreational marijuana usage in a handful of states. (Democrats, however, don’t use the term “states rights,” which is closely connected to slavery and the Civil War, and more recently to upholding laws and practices that permit racial discrimination and the violation of civil rights).

In spite of these selective applications, it is the conservative movement and the GOP that overwhelmingly subscribes to this view of freedom as the curtailment of government powers and programs. This view is manifested in the Tea Party movement, the Freedom Caucus in the House of Representatives, and numerous legislative proposals to cut or privatize government programs, even popular ones like Medicare and Social Security.

At the same time, there is a second view of freedom in the United States that gains wide acceptance. In this view, freedom means that individuals have the right to equal protection of the laws to pursue their interests. In practice, this means that the populations that have been most vulnerable, marginal and discriminated against – in both public policy and their private lives – are in need of government action to secure their political and social equality. This includes racial, religious and ethnic minorities, women, people with disabilities, and those whose sexuality or gender identities are seen (by themselves and others) as being different from the majority of the population. Those who subscribe to this view of freedom see the need for greater government action, policies and programs to rectify the sins of the past and present, and to secure the ability for all to be free from political and social discrimination and marginalization. This view also tends toward supporting public policies that regulate and police business and market activities (minimum wages, workplace safety, financial regulation), and that redistribute wealth toward the poor and the elderly, with the aim of diminishing the burden of poverty, and ensuring that those with higher levels of income and wealth are not able to unfairly exploit those advantages at the expense of those with less income and wealth.  The common theme in the support for this range of policies and government actions is seen as the protection of vulnerable populations. This is the territory that Democrats overwhelmingly occupy.

These two understandings of freedom, and what the American ideal of freedom means in practice, have increasingly come into conflict with one another in our political discourse. One view necessitates that the scope and reach of government be reduced, or at least limited. In theory, this sounds reasonable. Who wants government extending deep into their lives? But as critics point out, in practice this seems to mean that those with power, wealth and status are better able to preserve those privileges, and to do so at the expense of limiting and withholding things from others with fewer of these advantages. The second view of freedom, by contrast, requires that the role of government is necessary to maintain or even extend in many realms. In theory, this also sounds quite reasonable. Who doesn’t want equality of all enshrined in the law? (Unfortunately, it looks like plenty of people in the country.) But as critics point out, equal rights also tend to look like special privileges and rights, when employers and universities take race, ethnicity and gender into account in hiring and admissions. The supporters of each of these views are quite adept at highlighting the inherent goodness of their theoretical ideals, while criticizing the practices and impacts of the other side. This is both a common, and perhaps effective, debating strategy. (As he often did in many ways, that great philosopher and catcher for the New York Yankees, Yogi Berra, captured this paradoxical dilemma when he said, “In theory there is no difference between theory and practice. In practice there is.”)

What do we do about this political and social divide? Are these irreconcilable differences? It is now our tragic fate in this country to have the Democrats and Republicans try and wrest control of the federal government to enact the policies that privilege one view over the other, only to revert back again when the opposition controls the government? This situation, as George Washington pointed out, seems itself to be a form of tyranny. As our first president said: "The alternate domination of one faction over another, sharpened by the spirit of revenge, natural to party dissension, which in different ages and countries has perpetrated the most horrid enemies, is itself a frightful despotism."

I’m not sure of the answer to these questions, but I do believe that freedom is not a “finite good,” limited in the amount that can be achieved. Some things can be used without being used up, and freedom is one of those things. It should be possible for a white, straight, wealthy man to be free from undue government interference in his life and business without necessarily taking something away from a poor, gay, Latina woman. By the same token, a lesbian couple should be able to marry, an immigrant should be able to get a job, a black man should be able to gain admission to college, and a poor or unemployed person should be able to get health insurance without necessarily diminishing the freedom of others to access these same opportunities and their own freedom.

This ideal suffers from the same defect I pointed out above in others, because the disconnect between theory and practice is likely to be significant. Nonetheless, at its best, the wisdom of our political system is that it seeks to foster compromise, not dogmatism or taking one’s ideals to their (il)logical consequences. A big, diverse country such as ours tends to require a number of cross-cutting political alliances to achieve big political and social change. When we find a way to come to agreement to get some of what we want, even if we can’t have all of what we want, we tend to see broad support for such changes, at least over time. This isn’t universal. Sometimes political change means fighting and winning, beating the opposition, not finding middle ground. But we should be aware of the limitations and impacts of always using the clenched fist over the outstretched hand. Our current political dysfunction in Washington is clear evidence of this.

Perhaps an example of a path forward comes from our foreign policy. During the Cold War, if the United States or the Soviet Union had taken their competing ideologies to their extremes, they would have fought one another to the death. But they didn’t. Instead, they found a way to stay relatively true to their ideologies, interests, goals and ideals, without ever giving up their opposition to one another. Each gave up something of their ideal world to maintain a world in which we could all live. If Russian communists and American, democratic capitalists could do this, certainly Republicans and Democrats can.

The World of Energy - A Surprisingly Quick Change

The use of coal to produce electricity in this country is diminishing. The US Department of Energy reported that more electricity came from natural gas than from coal in April 2015. This is a first (most likely an anomaly as opposed to the new normal, but nonetheless a first). Coal still accounts for more electricity generation annually, but this one-month victory for natural gas is a big deal. Coal accounted for 50% of all electricity generated in the US as recently as 2000. In the Short Term Energy Outlook for July 2015, "EIA forecasts coal's share of U.S. total generation will average 35.6% in 2015, down from 38.7% in 2014. In contrast, the natural gas fuel share averages 30.9% this year, up from 27.4% in 2014." 

An article in Slate Magazine that is certainly worth reading characterized things quite well. It said that "Coal Is Losing the War on Coal." Between cheap natural gas, ever-cheaper solar and wind power, and new environmental regulations governing power plants, coal's market share will continue to go down.