Ken Horne was watching Minecraft on YouTube with his 10-year-old child when an ad popped up about residential solar. What surprised Horne was how unsurprised he was by the ad.
“An advertisement for a solar storage microgrid for a residential homeowner on YouTube? That would’ve just blown my mind a decade ago,” said Horne, who is the director of portfolio operations at Spring Lane Capital.
Horne told the story on stage at this year’s Microgrid Knowledge conference to illustrate how far distributed energy resources (DERs) have come in a short time.
Talk to any old-timer in the industry and they have similar incredulous tales about growth in clean energy tech. My mind goes to a 2003 conference in Washington, DC, held by the American Council on Renewable Energy. The organizers were thrilled by the ‘record’ crowd (almost 100 people!) and the fact that many of the participants were in business suits rather than Birkenstocks and not necessarily from California. Flash forward just five years to 2008 and renewable energy events in the US were attracting 12,000 people.
Clean energy history inspires optimism
So if you consider the line of history, you can’t help but be heartened. Solar has attracted $51 billion of private investment in the last decade, and prices have dropped 40%, with installations rising 24% per year, according to the Solar Energy Industries Association.
Heck, you don’t have to go far back to be gobsmacked. From 2022 to 2023 solar capacity increased 51%.
Of course, the solar figures don’t tell the tale of distributed energy since it’s just one DER technology, and much of the growth occurred in utility-scale solar. Residential solar grew 12% in 2023, according to Wood Mackenzie. Still, it’s a level of growth many industries envy. So why, then, is the mood oddly glum lately among those I talk to who are trying to advance distributed energy resources?
The slog of developing distributed energy today
Developers tell me stories about promising DER projects that suffer long delays or death because of red tape, utility resistance to competition, poorly crafted regulation, or a lack of knowledge or interest by political decision-makers. The financing exists, the customers are eager, and solid plans are on the table. But still, the projects languish.
If you’re relatively new to the field, it can feel bleak, as long-time clean energy developer Ben Parvey described at a recent Energy Changemakers livestream forum:
“When I see these young people coming into this industry with the same excitement to change the world that I’ve had for so many years. I want to help make it easier for them. I want them to be able to focus on the actual action of developing and building clean energy infrastructure, not learning to wade through bureaucratic, governmental and utility barriers that are only getting worse. How much wasted talent and time is spent on absolute nonsense,” said Parvey, who is the CEO of Blue Sky Power and a speaker and author.
Switching the narrative from ‘big energy’ to ‘local energy’
Part of the problem is that the prevailing narrative today focuses strongly on long transmission lines as the key to meeting the growing demand for power. Utilities have good reason to emphasize the construction of transmission lines and power plants over decentralized and local energy. They can earn a sizeable return on capital-intensive projects while distributed energy can siphon away their kilowatt-hour sales.
In some states regulators have attempted to push utilities to consider non-wires alternatives — which include distributed energy resources — in their integrated resource planning. The idea has been around since 1991. But for the most part, utility efforts have been modest.
Need for new thinking
Economics aside, there may be another reason utilities fall back on conventional solutions to meet the rising need for electricity, as Jigar Shah pointed out in a recent episode of the Energy Gang podcast.
“The problem that we have is that the vast majority of the players around the table haven’t been in this situation for 20 years,” said Shah, director of the Loan Programs Office at the U.S. Department of Energy. “So [for] their entire careers in the electric utility sector, they haven’t seen growth. And you see that there’s a huge amount of turnover. I think 10% of utility CEOs have resigned recently because they’re like, ‘I’m out. I don’t want to learn new stuff. I’m going to let somebody else come in and figure this out.’”
He added later in the podcast, “We need to learn again how to live in a growth environment. For 20 years we’ve been playing hungry, hungry hippos with the same number of marbles. Well, the marbles are increasing now, so we need all these other technologies to scale up.”
The future grid is decentralized: Deloitte
In any case, we can’t count on new transmission and distribution to keep up with growing electric demand, according to a new Deloitte report, which found the world will come up short by 1.3 million miles of T&D lines. The report emphasizes the need to focus on decentralized energy to meet what it expects to be a 150% growth in electricity demand by 2050.
So what’s to be done? The report advises a three-phased approach:
- Strengthen and harden the grid backbone by adding energy storage, smart controls, high-efficiency conductors and other advanced technologies
- Catalyze grid-connected decentralization. Some jurisdictions are already ahead of the game. Distributed energy is expected to contribute up to 45% of Australia’s electricity generation by 2050 and 83% of EU households could become prosumers “indicating a significant shift toward decentralized energy models,” says the report.
- Create an interconnected energy landscape: This means “fostering an ecosystem where diverse elements like electric vehicles, smart streetlights, and home energy management systems speak the same language—the language of efficient energy management,” says the report.
Setting a moonshot goal for distributed energy
That sounds good. But how do we get there. How do we catalyze distributed energy in a serious, methodical way?
No doubt distributed energy growth will, to some degree, be driven by consumers, especially as more households and businesses purchase electric vehicles, which appear to be a gateway to their interest in other forms of distributed energy.
But as we’ve seen before, having a plan or goal for an energy technology can move it along more quickly. Witness the state renewable portfolio standards and 100 renewable electricity campaigns that helped spur renewable energy growth.
That’s where the idea of a moonshot goal comes into play — an idea raised by Parvey during the May 8 livestream in the Energy Changemakers Community.
“I’m not sure we collectively see the destination for the distributed energy industry,” said Parvey, during the livestream. “A unified moonshot for clean energy would get us rowing in the same direction.”
Such a program would set a goal for a certain amount of distributed energy to be built by a target date.
How much DER capacity is there?
It would be valuable to first understand the DER potential in the US. A 2016 study by the National Renewable Energy Lab (NREL) found that distributed solar could supply 39% of total national electric-sector sales. Of that, 29% would come from small buildings (under 5000 square feet).
It’s an impressive number, but the study is old and I’d wager new data would raise the percentage, particularly if other DERs are incorporated, such as flexible demand, energy storage, and virtual power plants.
Collective brainstorming
One of the reasons I created the Energy Changemakers Community is because, as Ken Blanchard says, “None of us is as smart as all of us.” So, I’d love to hear others’ thoughts on the ‘moonshot’ idea. Is it a good idea? Could it help advance distributed energy? What data would we need to set a realistic goal? How would it work?
Let’s talk about it. Please post in the comments below or email me at elisawood@energychangemakers.
The full live-stream discussion is available to members of the Energy Changemakers Community. Contact Veronica@energychangemakers.com for information.
On the Moonshot idea, I like it, and….it’s going to be challenging because:
—Moonshots have mostly been single national efforts. Kennedy told the head of NASA that he would gut his budget if he didn’t commit to the moon landing. DOE made SunShot work by focusing lab and industry efforts, at a time when market forces were pushing in the same direction. The way US electricity markets are regulated, however, means that we will need 50 shots, plus some push from FERC. But FERC only has jurisdiction over organized wholesale markets.
—DER is sometimes compared to the distributed computing story. But the IT world quickly figured out key hardware and software addresses to enable that story, from USB ports to IP addresses, URLs, and HPML. We are not there yet with DER, either on the customer side with standardized data access or on the DER provider side with standardized power signatures for inverters.
—Privacy and cybersecurity issues will need to be addressed. With potentially millions of customer-owned devices interacting with the grid, the potential for malware, theft, and bad actors multiplies. I remember my grad school trip to PJM’s control center in Valley Forge, PA in the 70s. It was like getting into NORAD’s control center—unmarked building, lots of security, facility several stories underground. That mentality is not going to change easily.
—Investor owned utilities need to see a path to earnings growth. I remember during the National Action Plan for Energy Efficiency effort 20 years ago, I was in a small meeting with Duke CEO Jim Rogers. He basically said he would love to invest in DSM—he just needed to show his investors an earnings growth curve like those he used to show for traditional asset investments. New York REV is perhaps a good model for how states can hash out the regulatory issues in this space; their long stakeholder process has dealt with many of the key issues.
—I’ve been involved in some utility grid modernization planning efforts, like what Mass. requires. The initial plans I’ve seen focus on maximiizing utility asset investment and thus earnings potential, and don’t fully explore the non wires solutions potential. I predict that, like what Duke experienced with its proposed Save A Watt business model 15+ years back, utilities will get a lot of intervenor pushback to force more DER/NWA analysis and investment, which will likely reduce utility earnings potential unless broader utility regulatory reforms come to pass.
—On regulatory reform…most states still use the old return on ratebased assets model, though performance based ratemaking is advancing in some states. This area needs more work.
I like the moonshot idea – esp on a quantified type of DER – like buildings less than 5000 sf.Can we agree on a few other parameters?
Being able to see the goal and the type of projects that would move the needle with a lot of repetition brings hope to those of us who keep doing different designs – which are not getting us any traction.
Specialization would help profits climb out of single digit to double digit through economies of scale. I don’t know that I’m seeing anyone super specialized on certain applications but I think it’s going to have to come to that for the returns needed to score a lot more investment.
The concept of having a vision for the future and then sharing it and working towards it is 100% valid. We also share the vision for DER becoming a solution for the grid (increased resilience, reliability, redundancy, while also reducing emissions). Rather than being percieved as a problem, DER can and will becoming a major part of the solution. Whats left now is to work on the impediments to this reality becoming true. I work with a dedicated team who have been doing just that for a very long time now. Much of what we have done is open source, but we now also offer a SaaS solution to make this easier for everyone to leverage. This recent blog post is a reasonable place to start (but there is much more to what we are doing, so please do reach out if you want to learn more): https://ecosuite.io/2024/05/23/no-silos-no-friction-part-ii-betting-the-solar-farm-on-silo-busting/