Get a group of energy innovators in a room and watch the debate begin over energy terms. This isn’t surprising. Change is happening fast, and everyone wants to ensure they’re on the same footing. This article attempts to get us in synch defining the decentralized grid.
Grid decentralization certainly isn’t the only big change happening in energy now. Still, I think it will likely have the most profound influence on economics, consumer behavior and climate over the next decade. That’s why it’s the focus of Energy Changemakers.
What follows is my take on the decentralized grid and its larger implications. Feel free to disagree with me or add to my definition. You know where to find me!
Sometimes, the best way to define something is to describe what it is not.
So let’s state the obvious to get it out of the way. The decentralized grid is not the conventional grid, which delivers power to electric consumers from large power plants over long distances through transmission and distribution lines. That’s because a decentralized grid operates near where its energy is consumed.
The decentralized grid and DERs are not the same
Second, let’s make clear that the decentralized grid is not distributed energy resources (DERs) – solar, batteries, electric vehicles, etc. Or rather, it’s not these resources operating in isolation. This is an important distinction because naysayers will point to a solar panel’s lack of capacity or the short duration of a battery. The strength of DERs lies in their ability to work together via intelligent software to create reliable, consistent power.
So what is the decentralized grid? Here is my simple dictionary-style definition.
The decentralized grid is an electric network of distributed energy resources and end-use customers that interact with each other or with the central grid to improve efficiency, lower costs, reduce emissions, enhance both local and system resilience, and provide greater local control and capture more of the economic and local health benefits of energy assets.*
Decentralized grids can be as small as a home and as large a utility There are many examples, from a water heater participating in a demand response program to a solar-fed electric vehicle fleet providing power to the grid to an aggregation of batteries in buildings acting as a virtual power plant.
Sometimes, the DERs operate within a neighborhood or business park. Homes or businesses with solar and batteries might feed any excess energy into a larger, central neighborhood battery that supplies services to the central grid.
Why the decentralized grid
Those are the mechanics of the decentralized grid. What are the societal and economic implications? Here’s where it gets interesting.
The decentralized grid challenges the status quo operation of the $1.1 trillion US utility industry, particularly investor-owned electric utilities.
If a home or business can generate its electricity, then the infrastructure that utilities have built becomes less relevant. Decentralized grids may render some of these investments stranded over time. Moreover, they pose a challenge to utilities’ plans to build transmission to meet the growing demand for electricity created by data centers and the electrification of buildings and vehicles.
How often energy networks displace larger infrastructure, like transmission lines, remains to be seen. Few state regulatory bodies seriously consider decentralized grid technologies as an alternative, which is unfortunate given that 60% of utility-scale power comes from fossil fuels.
If I were to place bets, I’d say communities will prove to be the strongest backers of decentralized grids as they seek to control their energy supply and shift energy wealth to the local governments or households.
That remains to be seen. For now, let’s agree on defining the decentralized grid because having a clear definition marks the first step in bringing weight to an argument.
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*Special thanks to Lorenzo Kristov for pointing out a few things I missed in my original definition that was in an earlier version of this article.
