A Holistic Exploration of Energy Decentralization

CLAREMONT MCKENNA COLLEGE
A HOLISTIC EXPLORATION OF ENERGY DECENTRALIZATION
SUBMITTED TO DR.EMIL MORHARDT AND DEAN GREGORY HESS BY POOJA REDDY KANIPAKAM
FOR SENIOR THESIS IN SCIENCE AND MANAGEMENT SPRING 2010 26 APRIL 2010
ii
ABSTRACT
This study explores the issues surrounding our current energy production and distribution infrastructure. Conventional wisdom in developed and urban areas holds that companies and households need to be connected to the grid. This grid is in evolution as it is both inefficient and unidirectional; energy is flowing from producers to consumers in only one direction. In both the US and Europe we are slowly moving towards a smart grid with smart metering; where everybody becomes a consumer and producer of electricity. Although restructuring will take a long time, given the current state of renewable energy technologies, urban areas will gradually move towards the localization of electricity production through the use of distributed energy generation (DG). These are small energy utilities located close to the end users and within the electric distribution system, either connected to or isolated from the grid. This study identifies three major areas of conflict: reliability of supply, environmental sustainability, and economic efficiency. In addition it addresses the voices of several notable leaders in the energy scene, but specifically illuminates the views of theorist and futurist Alvin Toffler; who believes that the The great growling engine of technology is coming face-to-face with a society that is unable to keep up with technologys speed and, in turn, scarring the face of our earths environment and climate. Hypotheses like these make it clear that change is occurring and necessary and one of the best ways to approach our crisis is through restructuring our energy production and distribution systems. I focus primarily on DG using clean technology and renewable resources. From my study, I discover and convey that though there are several drawbacks to DG, especially in lieu of the desynchronized nature of technological advancement, societal demand and governmental implementation, DG has the potential to bring about a wealth of benefits for society.
TABLE OF CONTENTS
Abstract ......................................................................................................................................... i Introduction ...............................................................................................................................3 Chapter 1: Observing Trends in the Electricity Scene ...............................................7 Introducing Holistic Thinking ...................................................................................................... 7 Historical Patterns and Waves ..................................................................................................... 9 A Time of Centralized Energy .....................................................................................................12 Chapter 2: Analyzing DG in Parallel with Centralized Generation .................... 18 Outlining Energy Generation and Distribution...................................................................18 Defining Distributed Generation ...............................................................................................20 Identifying the uses of Distributed Energy Resources ....................................................22 Analyzing the Issue of Power Quality.................................................................................24 Analyzing the Issue of Transmission and Distribution .............................................27 Analyzing the Issue of Reliability .........................................................................................29 Analyzing the Issue of Efficiencies.......................................................................................30 Applying DERs to Individual Households..............................................................................33 A Smart way of Wrapping up the Issues ............................................................................34 Chapter 3: Environmental Issues with Todays Energy: An Important Tangent...................................................................................................................................... 38 Environmental Impact ...................................................................................................................38 Water: Identifying Future Electricity Tradeoffs in the United States; Based on -a study By Sovacool and Sovacool ..........................................................................................39 Air: The Reality of Emission Reduction Required for -Stabilizing Climate Change .........................................................................................................43 Making Sense of it All .....................................................................................................................45 Chapter 4: Cost Analysis Cuts Corners .......................................................................... 47 Discussing Distributed Generation Expenses......................................................................47 Case: The Unfortunate Situation of Photovoltaic Energy Generation Costs ..........48 My Stance on Economically Valuing DG and Avenues for Further Studies ............52 Conclusion: Reintroducing Prosumer Culture ............................................................ 55 Appendices ............................................................................................................................... 69
3 ACKNOWLEDGMENTS
I would like to express my sincere appreciation for Dr. Emil Morhardt for his mentorship in the preparation of this thesis and patient listening of my thesis related stressed rambling. In addition, I would like to thank to Dr. Cutter whose familiarity with the needs and ideas of my topic was helpful especially during the initial stages of my thesis development. I would also like to give a special thanks to Srihari Boregowda for spending a lot of time with me discussing my topic and inspiring me to think about the bigger picture of our societys current energy issues and each of our personal responsibilities to think and act towards a environmentally nurturing future. It was Srihari Boregowda that first encouraged me to read A Revolutionary Wealth by Alvin and Heidi Toffler; which changed the way I think about all of the environmental issues we face today. I would also like to thank my professors and friends who talked me through some of the complexities of my subject matter: Dr. Alexander van de Putte, Dr. Scott Gould, and Dr.McFarlane. Thanks also to Ayesha for her support, advice, and encouragement: which served as the impetus behind my thesis; Meghana for late night tea breaks and discussion; and Siya for companionship, peer editing, and midnight munchies. Finally, thanks to my parents (Praveen, Bhanu and Priya) for being extremely supportive and caring throughout the semester. I wouldnt have been able to complete this study without all of your support. Thank you.
4
INTRODUCTION
This study explores the issues surrounding our current energy production and distribution infrastructure. Conventional wisdom in developed and urban areas holds that companies and households need to be connecting to the grid.1 This grid is in evolution as it is both inefficient and unidirectional; energy is flowing from producers to consumers in only one direction. In both the US and Europe we are slowly moving towards a smart grid with smart metering, where everybody becomes a consumer and producer of electricity. Although restructuring will take a long time, given the current state of renewable energy technologies, urban areas will gradually move towards the localization of electricity production through the use of distributed energy systems (DESs). These are small energy utilities located close to the end users and within the electric distribution system, either connected to or isolated from the grid. For such a large system makeover to be possible, a smart grid will be critical. Through the following discourses, we identify three major areas of conflict in the energy: reliability of supply, environmental sustainability, and economic efficiency. In more rural areas, being grid connected may not be the right solution. What is important here is that the most geographically relevant energy technologies (hydro, solar, wind, etc.) are being deployed. India, for example, is still quite rural and grid connecting these rural areas would be a waste of time and resources. This
Definition of the grid: The grid is an interconnected network that connects distributes energy from suppliers to consumers.
5 doesn't mean that rural areas have to continue to experience energy poverty. Energy poverty is the lack of energy supply for basic needs such as warmth. This poverty is a product of post-second wave effects when we abandoned the agrarian economy to embrace the industrial economy.2 Muscle power, (domesticated animals, humans) and other natural sources of energy (water solar, wind) were replaced by large scale energy plants to accelerate growth of industrialization. These plants were guzzlers of fossil fuels and other unsustainable resources. Energy poverty can be reduced quite dramatically in both urban and rural areas. The chosen solution depends on the local availability of energy resources and the degree of urbanization. We are at a juncture where our energy needs may not be fulfilled which, in turn, paves a path towards energy poverty: a manmade problem. It is clear that issues revolving around climate change and energy management are global ones, but to simplify the understanding of this macro issue; I predominantly focus on the grids current situation in the United States. The main objective of this thesis is to help my reader understand why it is important to look at the foreseeable decentralization of Americas energy systems from a holistic perspective. A holistic perspective incorporates all forms of thought from economic and scientific to socialistic and humanistic. This holistic perspective is best represented by the notable author and futurist, Alvin Toffler, who believes that:
The central question, then, is not whether we will overcome the energy disaster heading toward us but how soon. And that will depend on the outcome of wave conflict between vested interests still benefiting from our industrial-era energy
2
Refer to page 4 for a definition of the second wave.
6
system and the pioneers researching, designing and fighting for breakthrough alternatives.3
Through an exploration of the ideas of several intellectuals such as Toffler (primarily regarding his monumental work, A Revolutionary Wealth), in conjunction with an examination of select case studies and academic papers in the rapidly changing field of environmental research, this thesis is able to make certain valuable claims by merging the voices of academia and futurists. Chapter 1 outlines patterns and trends observed in the history of electricity generation and distribution while also introducing you to the definition and importance of holistic thinking. Chapter 2 delves into the technical aspects of DG and its benefits specifically by looking at the current dilemmas faced by the todays grid system. Chapter 3 reminds you of the negative impact our demand for energy and electricity currently has on the environment. Chapter 4 looks at the costs of DG implementation: an area of high controversy. Through engaging with a variety of primary resources, including recent scientific journals, groundbreaking interviews and critical discussions between Toffler and many other notable leaders in the energy industry, I hope to ultimately convey that the slow but ongoing movement towards distributed energy systems (DESs: small energy utilities and adaptive systems, such as solar photovoltaic panels,
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006.
7 wind, and biomass, located close to the end users and within the electric distribution system) has the potential to bring about a wealth of global benefits.
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CHAPTER 1: OBSERVING TRENDS IN THE ELECTRICITY SCENE
Introducing Holistic Thinking To step foot into the complex topic of distributed generation, I invite you, my reader, for a moment, to journey through a Toffler paradigm. Although entirely disconnected from the authors Alvin Toffler and Heidi Toffler themselves it is interesting to ponder the energy scene through Tofflerian insights. It is particularly through the ideologies of Alvin Toffler that I am able to understand, in a more holistic sociological manner, why we are heading towards a decentralized future and the importance of this movement. The term Holistic as defined by Aristotle is where the whole is greater than the sum of its parts. I believe that this is the right approach to solve the problem from a societal viewpoint and against the second wave or industrial era of thinking; a way of thinking that divided the energy problem at a purely technical point of view4. Alvin Toffler is popularly known as a futurist and refers to himself as an American writer. His most famous publications include: Future Shock, The Third Wave, and his most recent novel: Revolutionary Wealth. Though he discusses paramount ideas regarding the communication revolution, digital revolution and technological singularity, I believe that the fundamental ideas in his writings prevail in our complex societies today and are extremely relevant. His ideas particularly emphasize on the power of change and knowledge.
4
He narrates our present
Refer to page 4 for a definition of the second wave.
9 complexities and hopeful future through his doctrines of change and knowledge. The great growling engine of technology (Toffler, Alvin) is a cannibalistic element of our society that feeds upon itself only to grow more and sometimes escalating multiple problems in our society. 5 This is apparent by observing our evolving energy systems in response to increasing energy demand, decreasing energy resources, and decreasing societal synchronization (particularly in the relationship between citizen demands and governmental response to citizen demands). It is easy to apply the Toffler concepts to current events of today. For instance, in March 2010, the Obama administration proposed to open up vast areas of water off the eastern coast in the United States, north Alaskan coast and eastern Gulf of Mexico to oil and natural gas drilling for the first time in US history. This proposal stood as an environmental compromise and a short term economic gain, which of course stirred a conflict of interest amongst several people. Future shock is the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time. (Toffler, Alvin) The words of Toffler resonate in the recent phenomenon of off shore drilling. The rapid economic, social, technological and most importantly climate change is smothering individuals faster than their ability to counter balance the change. Thus, the Obama Administrations proposal to unleash offshore drilling was likely in hopes to slow down the rapid rate of change. A more bipolar response would be to ban use of all non-renewable energy resources in the name of energy security. But, I believe, with its existing strong dependence on coal
5
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006.
10 and oil, our society would not be able to withstand such a drastic change. This may, in fact, be the explanation behind the more middle-ground, moderate political approaches on environmental problems being taken today. In the Presidents own words: Ultimately, we need to move beyond the tired debates of the left and the right, between business leaders and environmentalists, between those who would claim drilling is a cure all and those who would claim it has no place, because this issue [energy crisis] is just too important to allow our progress to languish while we fight the same old battles over and over again.6 As experts have said in mass media, the good oil is almost over. The deep shore oil and others sources we may explore is, again, not infinite and not going to be as cheap as Gulf oil. Thus short term solutions are not beneficial to our society as a whole in the long run. Historical Patterns of Innovation and Waves An interesting element of Tofflers work is his approach towards historical development. He understands history in a series of disconnected time periods or waves: each of which contributes to the colonization of the next wave to a certain degree while also pushing older cultures and societies aside. It is important to understand and identify each of these waves to realize certain historical patterns that similarly pertain to the evolution of our energy systems over time.
Broder, John M. The New York Times. 31 March 2010. 18 April 2010 <http://www.nytimes.com/2010/04/01/science/earth/01energy.html?src=un&feedurl=http%3A%2F%2F json8.nytimes.com%2Fpages%2Fscience%2Fearth%2Findex.jsonp>.
11 The First Wave is a movement out of hunter-gatherer cultures and into an agricultural era. People discovered how to farm and produce for themselves. Drastic change was in place as family structures changed, people learned a new way of earning, and most importantly people obtained agricultural knowledge which allowed them to digress from their nomadic lifestyles. The Second Wave was the progression into the industrial revolution (this refers to the both the 18th and 19th centuries when several changes in mining, transportation, and manufacturing were being made causing immense changes in socioeconomic and cultural conditions). The 18th century splurged with innovation; in particular the introduction of steam power which primarily utilized coal. The
industrial revolution then furthered in the 1850s with the introduction of steampowered ships, railways, and later in the 19th came the internal combustion engine and electrical power generation. The power of innovation during the 19th century plagued the agricultural societies of the first place and replaced them with societies keen on production, consumption, and monetization of everything produced. The 1950s was the opposite of dull. In addition to production and the growth in the nations blue collar (factory workers) population, the white-collar (semi-professional workers) population boosted even further. In their homes, one began to find the presence of televisions, a technology that was rapidly being universalized. Finally on the larger scale of things, was the initiation of the space age. The Soviet Union had launched the very first earth orbiting Satellite, Sputnik, on October 4th 1957. Though the launch was a triumph for Russia, it served as a humiliation for the United States,
12 as the country was now being perceived as being technologically behind. Yet, Sputnik became United States new found impetus to accelerate scientific and technological innovation. Till that point in time, the government and academia did not walk hand in hand as the government only felt the need to work with academics during limited periods of time; like during wars. Through financial funding, an increased stress was placed on education in the physical sciences while social sciences werent provided with similar financial benefits. Twenty years later, in 1977, a quarter of the Federal budget was going towards prestigious colleges and sixty five billion dollars was invested in space. As one can see, the nation was working hard to be in synch with the rapid changes in their society. Perhaps at the time, in the 18 and 19th centuries, the country was working towards maintaining their global prestige.7 But with our problems today, in the 21st century, we are once again faced with rapid change (specifically in terms of climate change), but this time we are working towards maintaining the well being and health of our global human population. Finally there came a Third Wave; the wave we, the people of the 21st century, are currently riding. After years of production and capitalism, societies were becoming dependent on intangibles. The term intangibles refer mostly, in this case, to knowledge. Though Toffler does mention in his book that the beginning of a knowledge based industry began a long time ago in the 1960s, societys awareness and involvement in it has immensely increased and knowledge is now a product of
7
Utley, Brian. Technology Evangelist. 3 October 2007. April 2010 <www.technologyevangelist.com/2007/10/the_sputnik_shock_wa.html>.
13 society that is often shared without a price tag. The blogosphere may be the biggest example of this involvement. The blogosphere is only one example of our increasingly networked societies. Bloggers are using the internet to do what journalists are paid to be doing. Toffler explains that the intangible component of property is protection and as long as property is unprotected, it is not property.8 What this means is that we have built ourselves a knowledge based economy; one with several lucrative components because of the inability to price a lot of the intangibles (knowledge) involved. This movement into the third wave has created a phenomenal transformation in our way of life. Just through defining the three waves, we see that societies have always tried to adapt accordingly to the change. When people discovered farming, they created a system of exchange or trading agricultural produce. Once people began trading, they developed a monetary system. Once they created a monetary system, they began developing a more complex institutional structure by driving federal funds in the right direction. If humans have adapted so efficiently to changes in social structure over time, why then does it seem that America is spending so much time growing around an aged stagnant structure of energy production and distribution?
A Time of Centralized Energy Surprisingly very little has changed on the fundamental level of our current grid system since the 1950s when Thomas Edison introduced the first commercial power grid in the United States. Black and white televisions during the 1950s and 1960s in
8
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006., pg384
14 America blared with the tiny voice of electric utility provider PG&Es bubbly cartoon icon Reddy Killowatt.
I wash and dry your clothes, play your radio, I can eat your coffee pot! I am always there, got lots of power to spare cause I am Reddy Killowatt!9
This melodious uplifting jingle played during an era when power supply was thought to be bottomless. Kilowatt provided American citizens with their initial understanding of the fundamentals of the electric grid by emphasizing on use and consumption. A few decades later of course, the single black out that turned lights off in Eastern USA and all the way up to Canada for around fifteen million people sparked Americas first major concern on its electricity supply systems. The biggest predicament with the existing grid system in the United States is the fact that it was built in the industrial era: a time when the nation was highly structured and highly regulated to ensure relatively fair access to all citizens. Though we do not have a national grid, the monstrosity of what evolved into three interconnected power grids (see Figure 2) have developed a cloud of complexity in physics, politics, and academia. The United States started out with over 4000
9
Reddy Kilowatt Commercial . 4 August 2007. 10 April 2010 <www.youtube.com/watch?v=PnZ3mL00>.
15 individual isolated electric utilities in the start of the 20th century. Appropriate to the electricity demand of the time period, these utilities tended to use low-voltage connections between generating plants in the vicinity and the distribution lines to customers. Unlike high voltage lines, low-voltage lines are extremely inefficient at transmitting electricity and as demand began to increase, more so in the post-World War II era, the infrastructure began to evolve accordingly. Utilities began interconnecting their transmission systems and using high powered lines along with transformers to step down voltage to a lower level prior to reaching homes and offices. 10 Interconnection was a sublime introduction in the grids history. Utilities began building larger power plants by sharing the benefits of larger generators to serve combined consumer demand at significantly lower costs (a benefit from increased economies of scale). In order to maintain reliable supplies of energy, utilities stored extra capacity to hedge their service. Interconnectivity allowed this stored capacity to be reduced just by reducing the number of duplicative power plants available. Developments were also being made in the organizational structure of generating companies soon after the 1965 blackout in the eastern coast of the United States. Before the blackout, each company maintained its own standards and policies regarding safety and generation relative to their consumers and demand. Yet, as interconnection increased, the policy structure had to be homogenized to maintain
10
Step down transformers are required to reduce the primary supply voltage so that the voltage from electrical outlets can be used by consumers (e.g. step down transformers can be used to decrease a supply voltage of 220 V to a product of 110 V)
16 coordination between utilities. This development of interconnected systems was a sign of an industrializing society delving further into centralization. Figure 1: Map of Interconnected Power Grids in the USA
Source: EIA
Today, in the 21st century, amidst the continuous growth of the global energy crisis, a new means of thinking is essential for environmental well being. At the start of the 21st century, world energy markets were buying and selling about 400 quadrillion BTU of energy every year.11 Around 40 percent of this energy was produced for non renewable resources such as oil. By looking at data from the Department of Energy (DOE) which lists the total production and consumption of energy in the United States, we find that the majority of the domestic energy
11
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006., pg384
17 production in 2008 is composed of non renewable energy resources (petroleum and coal). This is not including the Net Imports of energy which is composed of only nonrenewable energy resources. What this means is that our hurdle into climactic distress is greatly affected by this kind of energy consumption and will worsen as consumption is forecasted to increase 14.5 percent by 2035.12Assuming that a predicted increase in consumption is proportional to increase in demand, the DOE reassures the United States that fossil fuel prices will remain relatively low and in addition convey that alternative energy resources will not be much competition in the energy market unless governmental policies are appropriately changed.13 When it comes down to rapid development in the energy industry, Alvin Toffler says that we should expect nothing too exciting.14 Currently, the Kyoto protocol calls for greenhouse gas emissions that are 5% below 1990 levels by 2008 and 2012 15 But, in fact, though this does represent efforts of emissions via policy implementation, it is actually much less than what is necessary to attain an emission-free scenario. Firstly, our communities have become immensely dependent on CO2 as a by-product of how our civilization is powered. Secondly, large emission cuts are feared by countries as a large economic burden and precisely why the United States withdrew from the Kyoto Protocol in 2001. Finally, countries dont
12
U.S Energy Information Administration. "Annual Energy Outlook Early Release Overview." Independent Statistics and Analysis. 2010. 13 Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006., pg384
14
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006. Martin, Hoffert L. "Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet." Science AAAS 298 (2002): 981-987.
15
18 feel they have technologies capable of bringing down emissions by an environmentally desired degree. But, it is still argued that the preeminent way to reduce CO2 emissions is through modifying the way we produce, store, distribute, and convert our energy. It is here we begin to discuss the relatively neoteric idea of decentralized or distributed energy systems16.
16
At an even smaller note, we have what is called nano-generation. In India, for example, mobile phones are being built with small solar panel that allow the phone to charge in a remote location where there is no access to the grid or any other electricity soure.
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CHAPTER 2: ANALYZING DISTRIBUTED ENERGY GENERATION IN PARALLEL WITH CENTRALIZED GENERATION
Outlining Energy Generation and Distribution Figure 2. General Picture of how Electricity Reaches Households
Source: EIA
It is important to think about how power grids work in order to identify problem areas and point to solutions or possible alternatives. Think about how electricity reaches your house today. Though the grids wires are spider webbed out in the public for everyone to see and produce an essential intangible product, electricity, most people do not ponder about its presence and how
20 it makes their light bulbs glow until the lights turn out and electricity goes missing. The fundamental structure of the grid can be divided into three functions: generation, transmission, and distribution. Electricity starts off from a power plant producing power for residents in your area and flows through transmission lines after which the electricity is stepped down to a lower voltage and travels within distribution lines to get to your house. Though there are several different kinds of power plants (e.g. nuclear, hydroelectric, coal, amongst many others: refer to Appendix A. to see a map of all the major power plants in the USA), all power plants contain some form of a spinning electrical generator. This spinning generator can be spun in a multitude of ways: by gas turbines, diesel engines, water wheels in hydroelectric dams, or most commonly by a steam turbine (refer to Appendix B). In the latter case, nonrenewable resources such as coal, oil, and natural gas are used to heat water and produce steam that ultimately turns the electrical generator which always generates three-phase alternating current (AC) power. What you receive from the outlet in your house is single-phase power which is generally 120-volt AC current. Alternating current is what is naturally produced by electric generators, so it would not make sense to use an extra step in the process to convert current into DC, or direct current, for transmission and distribution. In particular, transformers cannot operate unless the current flowing through the grid system in alternating, and without transformers, voltage cannot be stepped up and down to appropriate levels for transportation and consumption which would result in huge efficiency failures. In addition to transformers, regulator banks are located along the lines (either underground or in
21 the air) in order to avoid undervoltage and overvoltage within the lines. This is one of the challenges faced by the grids: significant amounts of energy cannot be stored, so the amount of electricity generated must always equal the amount used. If this balancing act fails, electricity outages can occur. After miles of traveling, electricity finally reaches the poles near your home. At this point, electricity is at 7,200 volts. A small transformer drum usually sits at the top of these poles in order to step down the electricity even further: from 7,200 volts to 240 volts. Regardless of whether these distribution lines are above or below ground (the latter often found in suburban neighborhoods), the same procedure occurs from generation sites to load sites, or lighting up your home.17 Defining Distributed Generation As defined by Ackerman et al., Distributed generation is an electric power source connected directly to the distribution network or on the customer site of the meter.18 A more official definition set by The International Council on Large Electrical Systems, says that DG is:19
17
Electric load is the demand or power requirement for any devices that convert electrical energy into any other form of energy (mechanical, chemical, thermal, light)
18
Martin, Jeremi. Distributed vs. centralized electricity generation: are we witnessing a change of paridigm? . Thesis. Paris, 2009. Nadarajah, Dr. Mithulananthan. "Interconnecting Industial DG to the Main Grid." Asian Institute of Technology, 07 September 2006.
19
22 Not centrally planned; Not centrally dispatched; Usually connected to the distribution network; Smaller than 50-100 MW;
For the purposes of this study, we will also assume that the DG being discussed uses clean technologies and renewable resources. Unlike large centralized energy generation systems, DERs do not have to be connected to the central grid but rather can be remotely located (island DG). Examples of distributed generation technologies include compressed air or fuel reciprocating engines, gas turbines, fuel cells, and renewable sources. One example of island DG using a renewable source would be the implementation of solar panels on leased rooftops of warehouses, corporate buildings, or residential buildings. A recent case in Marina Del Rey, California exemplifies the usage of solar DG technologies. The United States Postal Service (USPS) located in Marina Del Rey has worn its vintage faade of energy infrastructure since 1776. In effort to follow the presidents executive order 13123, this federal facility hopes to reduce its energy consumption by 30%. Thus in 2001, to do this, they chose to implement on-site solar panel powered generation along with demand control measures which helps them manage the on-site demand, and in turn decrease energy consumption. The panels on the rooftops of the facility spread over more than 15,000 square feet
23 which is enough energy to power 120 or more homes. This is tactfully the amount of energy being produced using USPS untapped assets (rooftops and parking structures). Additionally, due to the installation, they are able to save 80% of their usual demand charges on their utility bill. This combination of DG energy technologies and standards were then mirrored in three different USPS sites in Oakland, San Francisco, and Sacramento which is predicted to reduce carbon emissions by over 4000 tons in 25 years. The prestige of a facility such as the United States Postal Service, which handles 42% of global snail mail, helps promote the importance of encouraging other facilities, companies, and individuals to do the same.20 Identifying the Uses of Distributed Energy Resources The positive results in the Marina Del Rey factually prove the potential for individual households, institutions, or company buildings to establish similar efficiencies. However, there is a lot more to understand about the logistics and technical reasons that make DERs an appealing option. There are several benefits to using DERs. The following list includes a few of its several advantages and will be explained in greater detail by looking through the lens of current day problems we face with energy generation and distribution. As an exception to the rest of the factors in the list, a more in depth analysis of
20
SunPower. United States Postal Service. 2006. April 2010 <http://us.suncorp.com/business/successstories/united-states-postal-service.php>.
24 environmental issues will be discussed in chapter three instead of in chapter two. In identifying the problem areas, we find that there is a pressing need to search for and implement alternative means of production and circulation. I have summarized the advantages of DG in the following diagram:
Figure 2. Benefits of Distributed Generation (DG)
Source: Kanipakam, 2010
25 Analyzing the Issue of power quality On March 19th 2009, the president of the United States was heard stating the following:
So we have a choice to make. We can remain one of the world's leading importers of foreign oil, or we can make the investments that would allow us to become the world's leading exporter of renewable energy.21
Currently, one of the biggest problems with our centralized distribution systems is its lack of potential to capacitate an increased amount of energy generation from renewable energy resources. Unfortunately, this setback does not work in favor of the Presidents proposed benefits from the $6.3 billion dollars to be invested in both state and local efforts in increasing renewable energy use and energy efficiency.22 The technical problems with our grid system are traced back to the fact that that renewable energy generation is usually located in rural and remote areas in which there often exist very weak grid infrastructure. Take wind energy resources for example. The primary technical constraint for connecting wind generated power to a weak grid system is its effect on voltage-quality. In his research paper, researcher John Tande from the Norwegian Electric Power Research Institute conveyed the major concerns with regards to the technical constraints of connecting wind power to weak grids. Firstly, it affects the steady-state voltage level. Wind turbines are dependent on the location and speeds of the winds in its area. Thus the output,
21
U.S. Goverment. the White House. 2010. March 2010 <http://www.whitehouse.gov/issues/energy-andenvironment>. 22 U.S. Goverment. the White House. 2010. March 2010 <http://www.whitehouse.gov/issues/energy-andenvironment>.
26 instead of being steady, is always variable, resulting in voltage fluctuations. Normally, voltage level is only allowed to flu (Teal)ctuate 10% of its nominal value when delivered to customers. This range is not maintained when a larger amount of power is injected into a weak grid network. As a result, voltage waveform distortions can be created by wind turbines with the electronic converters. Figure 3 visually represents the effects of input voltage disruptions on 3phase voltage oscillations in the grid: the creation of sags and surges (also referred to as dips and swells). Disruptions such as these can be really problematic in your home. Whether the voltage stress is due to low or high voltage, devices in your home may suffer from function failure, overheating, or erratic operation. Figure 3. Voltage Disturbance (or Voltage Sag) in one Phase of the Current
Source: Teal, 1999
Voltage regulation is critical, especially for power systems and supplies, in maintaining a constant voltage over a large span of load conditions. Back in the 1970s most devices were far more sensitive to voltage stress and were powered by
27 Linear Power Supplies which required highly controlled input voltages. These devices usually did not have any internal voltage regulation and thus was extremely dependent on external voltage regulation to maintain reliability of power systems. To cope with this weakness, it became very common to use internal voltage regulators. With the advance of technology over time, Switched Mode Power Supplies (SMPS) started taking the place of Linear Power Supplies. SMPS technologies are able to produce a stable voltage output over a much larger input voltage range. Today, we find a plentiful amount of voltage regulation being used by industrial equipment; thus, most areas no longer use or require external voltage regulation.23 All of these technical issues are faced by all forms of renewable energy generation being connected to the grid systems in place today. In the EIA Energy Outlook and Modeling Conference in 2007, it was conveyed that to significantly reduce CO2 emissions, the grid infrastructure must have the reliability and capacity to operate with up to 30% intermittent renewable generation.24 A great way to achieve this goal is via using a combination of smart grid infrastructure and decentralized energy systems. Alternatively, island DG can be implemented as it bypasses distribution lines, in turn, minimizing consequences of ambiguous power production incurred by most renewable resources.
23 24
Teal. Voltage. 1999. April 2010 <http://www.teal.com/newsletter/AppsNote02.pdf>. U.S. Energy Information Administration. EIA Energy Outlook, Modeling, and Data Conference. 2007. 2010 <http://www.eia.doe.gov/oiaf/aeo/conf/handouts.html>.
28 Analyzing the Issue of Transmission and Distribution The major technical problem with centralized grids is that it bypasses the costs of electricity transmission and land space which are greater in traditional centralized energy generating systems. Historically, large amounts of energy loss through transmission and distribution were reduced during the shift from using alternating current to direct current. Unfortunately, transmission and distribution (T&D) losses are still relatively high in the United States. According to data from the Central Electricity Authority of India (CEA), T&D losses in the United States are around 6 to 8 percent. These losses are, in fact, significantly larger in developing countries such as India (33 percent), Nigeria (38 percent) and Nicaragua (30 percent)25. Several electricity losses are incurred when electricity is flowing from the transmission network to the distribution network due the voltage conversion required by network specifications. Aside from the direct effects of line losses, there are also implicit costs relating to greenhouse gas emissions. This is because fuel is being used to generate electricity that is not being used by the end consumer: yet another economic and environmental inefficiency.
25
Sasi, Anil. The Hindu Business Line: Power T&D loss in India among the highest. 2 Dec 2005. 2010 <http://thehindubusinessline.com/2005/12/03/stories/2005120303300900>.
29 Figure 4. Production and Transmission Losses
Source: Alexander Van de Putte26, Kanipakam, Pooja
Dr. Alexander Van de Putte, a senior director and operating officer at PFC Energy international and a Professor at Cambridge University, created a simple diagram to visually represent the losses incurred during production and transmission (Figure 4).27 From this diagram, we see that there are three sources of losses in electricity generation, distribution and end use from a coal fired plant: generation losses (62%), transmission losses (about 2%), and heat losses (about 34%). Figure 6 is based on a coal fired power plant which does not have a high thermal efficiency
26
The Diagram was digitally re-created by Pooja Kanipakam according to Alexander Van De Putte explanation during a personal Interview.
27
PFC Energy. Van de Putte, Alexander. <http://www.pfcenergy.com/contentDispatcher.aspx?id=4589>.
30 (38%). CCGT have much higher thermal efficiencies. However, the general picture of production and T&D losses portrayed by Figure 5 is still applicable in scenarios involving any type of power plant. When asked how these losses can be decreased, Dr. Van de Putte responded:
The generation losses can be reduced by using more efficient power plants, such as Combined Cycle Gas Turbines (CCGT), while the heat losses can be reduced through the use of light bulbs which undergo less heating, such as Light Emitting Diode (LED) bulbs and spots.28
Though all of these methods would improve the efficiencies in our system, Dr.Van de Putte also vouches highly for the use of DG. Distributed generation can be a useful way to bypass transmission and distribution lines which rids the significant amounts of energy lost through electricity transportation. Analyzing the Issue of Reliability Distance problems are easily addressed by DG as they are able to make use of a significantly more diverse range of fuels than can be accommodated by traditional centralized generation. DG allows us to digress away from our dependence of coal, fuel, and natural gas and opens new avenues of generation using renewable resources. This is particularly beneficial for rural areas currently suffering from fickle energy supply. The flexibility of energy supply allows for geographically convenient energy production to be deployed depending on the local availability of resources.
28
Personal Interview with Dr.Alexander Van de Putte
31 It is apparent that reliability is inversely related with electricity demand. As demand increase, plants are more prone to technical hurdles with both the machinery and the power supply. In large centralized systems, we find that a rather large amount of extra energy is generated in order to hedge against times of utility maintenance and other contingencies. Typically, a plant will produce 20 to 30 percent more energy than the annual peak load (or the maximum demand for energy, usually for short periods of time).
29
Even so, customers of electricity risk
network problems and operational failures of centralized systems. DG is often used for back up generation; noticeably used in critical locations such as hospitals and corporate buildings. The characteristics that allow DG to be used for this purpose (e.g. ability to be isolated from the grid network), make it an ideal candidate to cure dilemmas surrounding reliability. Analyzing the Issue of Efficiencies Circa 1960s, large power production plants were being connected to transmission networks in order to pool electricity resources that would compensate for each others energy losses, thereby reducing the dependence on each customers specific electricity production facility. At the time, power plants were also benefitting from economies of scale; marginal gains of energy efficiency increased as the size of the plant did. However, over time, as population size swelled, and electricity demand
29
McGraw-Hill Dictionary of Scientific and Technical Terms. Electric power generation. Ed. Inc. McGraw-Hill Companies. 2003. 2010 <http:///www.answers.com/topic/electric-power-generation>.
32 increased within power plants, higher temperature and pressure was galvanized and began wearing out production equipment and machinery. To combat this loss and increase energy efficiency, cogeneration plants were designed to reuse excess heat and steam for purposes such as district or neighborhood heating. This type of merged purpose production plant achieves around 90 percent increase in total energy efficiency. Contrarily, it increases electricity generation by only around 40 percent.
30
Yet, even with this fact, one can justify using disturbed generation
because the overall benefits of combined cycles are positive, and their byproducts (heat and steam) cannot easily be transported over long distances. When comparing Figure 5 to Figure 6, we find that, though the power output remains similar, the amount of energy waste produced by distributed systems is significantly reduced in comparison to energy waste produced via conventional systems. Though large facilities integrated in centralized systems are more capable of withstanding higher pressures and temperatures of steam used in electricity generation, it has been shown that the costs of maintenance and operation offset these benefits.31 In contrary, DG, specifically using clean technologies and renewable resources, has low pollution costs and high efficiencies.
30
Pearce, Joshua M. and Paul J. Harris. "Reducing greenhouse gas emissions by inducing energy conservation and distributed generation from elimination of electric utility customer charges." ScienceDirect (2007): 6514-6525. Martin, Jeremi. Distributed vs. centralized electricity generation: are we witnessing a change of paridigm? . Thesis. Paris, 2009.
31
33 Figure 5. Inefficient: Residential Sector Consumption and Waste Scales
Source: Herig, 2000
Figure 6. Efficient: Residential Sector Consumption with DER
Source: Herig, 2000
Applying DERs to Individual Households Though academia, environmentalists, and politicians may have tried to deliver information on long-term DER benefits through the public, most people still wonder: What are my short-term benefits? In order to encourage the spread of
34 distributed generation, governments have begun to provide individuals with financial incentives. Typical distributed power systems follow a Feed-in Tariff (FIT) scheme in which DERs are provided with long term contracts for the electricity they produce, guaranteed grid access and energy purchase prices appropriated to the cost of the renewable energy generation32. Under FIT schemes, regional or national grid utilities are obligated to buy renewable energy. The main idea behind FIT schemes are to encourage governments to adopt renewable energy sources and actively help push the pricing of renewable energy closer to grid parity, or the point where [renewable rivals or becomes cheaper than conventional nonrenewable
electricity]
electricity33. By implementing policies such as long term contracts which subsidizes the cost of purchasing relatively expensive micro generation systems, national grid utilities are manufacturing demand for renewable energy. Consumers are also being convinced that domestic power generation products are great investments with decent tax-free returns (e.g. around 7-10% in the UK)34. In the United States, the IRS has listed similar incentives under Section 1122: Residential Energy Efficient Property Credit. This is a tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal
32
Gipe, Paul. Wind-Works.org. 2010 <http://www.wind-works.org/artcles/feed_laws.html>.
33
Vaughan, Adam. Cost of Solar Energy will match fossil fuels by 2013|Environment|gaurdian.co.uk. May 2009. 2010 <http://www.gaurdian.co.uk/environment/2009/may/solar-energy-price-fall>. (Hickman) 34 Hickman, Leo. Is it time to generate your own domestic power?|Leo Hickman|Environment|gaurdian.co.uk. 8 March 2010. 2010 <http://www.gaurdian.co.uk/environment/blog/2010/mar/01/ask-leo-domesticmicrogeneration>.
35 heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property. Unlike the UK, the USAs tax incentives for renewable energy use through using tax credits. Regardless, both countries have developed encouraging financial incentives to increase the use of micro generation, although the UK did pioneer the tax-free returns system and perhaps the rest of the world can pick up and follow in suit.35 (U.S Department of Energy)
A Smart way of Wrapping up the Issues By analyzing just six issues, the advantages of distributed generation technologies are already very clear. Now, if our society were to use DG technologies more abundantly, we would come across yet another benefit. Moving from a centralized to distributed model is to have a self (societal) adaptive system of stabilization of both demand and supply. During an interview, a futurist and business consultant Mr. Srihari Boregowda compared this to a simple anecdote from nature:
Coyotes and Foxes have some sense of knowing when the draught season is and their litter size always seems to be proportional to the rainfall as they have abundant supply of water.36
Humans must also optimize their resources through similar ways as nature. Until recently there was very little or no foresight of future power quality or power
35 Note the difference between Tax free (exempt) earnings and Tax credits: Tax exempt earnings (like municipal
bonds) will reduce your taxable income. Tax credits, though reduce income tax liability on a dollar per dollar basis
36
Personal Interview with Srihari Boregowda
36 outages. The economic losses incurred in blackouts are huge: The Northeast blackout resulted in $6 billion in regional economic losses.37 Knowing the potential benefits of DG, countries are developing the smart grid. A smart grid is a network system that allows for efficient and transparent two-way distribution through the use of digital technology that monitors and controls consumption of electricity. Through constant real-time metering, distribution management systems increases insights and communication systems we never had before. This is known as demand side management. Affordable metering devices such as AwareTM developed by SRI international are already available for customers to use for remote physical monitoring. 38 Most people are reluctant to understand the costs listed on their utility bills. But, with a closer look, they find quite a few delivery costs adding up to the total amount owed. These costs cover transmission, distribution, transition charges (a charge that helps cover old costs incurred prior to 1997), and other charges usually for fund programs financing renewable energy use and energy efficiency. 39 All of these costs are defined as infrastructure mortgage and can be up to 33% - 50% of your utility bill costs.40 With current speculations on increasing energy demand and,
37
U.S Department of Energy. "The Smart grid: An Introduction." 2009.
38
SRI International . Technologies for the "Smart Grid". Washington D.C.: SRI International , 2009. Attorney General Martha Coakley . VIew a Sample Electric Bill . 2010 <http://www.mass.gov/?pageID=cagoterminal&L=4&L0=Home&L1=Energy+%26+Utilities&L2=Util ity+Billing&L3=Electric+Bills&sid=Cago&b=terminalcontent&f=energy_utilities_sample_electric_bill& csid=Cago>.
39
40
37 in turn, increasing construction of power plants and transmission line expansions, electricity will only get more expensive. For this very reason, the smart grid will be coupled with smart meters to provide consumers with luxuries such as day ahead pricing or hour ahead pricing that help customers plan their electricity usage according to price patterns, simply by shifting to lower cost times. This is only more evidence that using DG is especially beneficial on the demand side of energy network systems.41 The smart grid allows us to make use of the benefits of DG technology, by being able to withstand the variability of its output. Furthermore the smart grid will help stabilize our ever-so turbulent distribution systems today. Today, during peaking hours or days, grid operators must frantically turn on polluting peaker plants or turn to expensive volatile spot markets to assure a reliable flow of energy to their customers.42 We must remember that power plants have already been environmentally and financially inefficient by storing large reserves of energy for the purposes of volatile peak loads. The smart grid provides grid operators with a plentiful supply of information on customer real-time electricity demands. This helps reduce traditional peak capacity and decreases environmental harm.
41
42

Peaker plants or Peaking Power Plants are power plants that only run during high demand. Because of its inconsistent operation, peaker plants are usually built to function far more inefficiently that base load plants in order to meet economic needs.
38
CHAPTER 3: ENVIRONMENTAL ISSUES WITH TODAYS ENERGY: AN IMPORTANT TANGENT
Environmental Impact You now have a better grasp of the current movement in energy infrastructure and its logistical, technical and financial benefits. But, it is important to step back and think about the bigger victim of our current energy practices: the environment. This chapter will emphasize that the dramatic changes in global climate requires us to change how electricity is produced and supplied. I examine two academic papers to elucidate the degree of our current environmental impact. I would like to place emphasize on what I believe are our main energy related environmental issues at hand. The two biggest problems revolving around energy are the abuse of our earths two other prime, precious perishables, water and atmosphere. Decades of overexploitation have resulted in surface water pollution, depletion of our aquifers, biodiversity loss and the words that define our decade: climate change. Our current problem cannot be solved by continuing to place immediate economic costs first. It is important to look beyond quantifiable costbenefit analyses in order to address the long-term problem of environmental and societal impact. In order to do this, we must look to add non-monetary value to our most precious resources, water and air.
39 Water: Identifying Future Electricity Tradeoffs in the United States; Based on a study by Sovacool and Sovacool As population continues to grow, so does our demand for energy. The total annual electricity consumption rate is currently 1.3% which indicates that the demand for electricity may double before the year 2050. Thermoelectric power plants generate electricity via the combustion of oil, natural gas, biomass and waste. During the process, there is a large amount of water withdrawal and consumption; water that is never returned back to the local water table. Future demand for water in several basins in the United States will exceed the supply and researchers Sovacool et al. point out specific geographical locations in the USA that will be hit the hardest by the adverse effects of water scarcity.43 According to the US Geologic Survey, thermoelectric power plants in the USA use around 47% of the nations total freshwater resources. This is significantly more than the freshwater used for irrigation, public supply, and industrial or domestic purposes. This means Americans are using three times more water by their electrical appliances and lights than by turning on their water taps or watering their gardens. Thermoelectric power plants are often built with closed loop or recirculating cooling systems that have the potential to withdraw up to 90% less water. But in retrospect, since a lot of water is required for cleaning and a significant amount is converted into steam and evaporated into the atmosphere, these power plants use a lot of water that
43
Sovacool, Benjamin K and Kelly E Sovacool. "Identifying Future Electricity-water tradeoffs in the United States." 2009.
40 is never returned to its original source. Studies in New York show that increased withdrawals from water sources such as the Hudson River is very harmful to aquatic environments, reducing populations of phytoplankton, zooplankton, and fish.44 Projections of increasing populations and life-spans, and migratory trends show people moving to water scarce regions like California. Thermoelectric sectors face great pressure to meet the projected increasing demand in thermoelectric generating capacity resulting from this population growth and shift in demographics. Thus, new coal, hydroelectric or nuclear plants may be rejected of their operating permits as a consequence of their impacts on water depletion. Environmentalists are convinced that several metropolitan areas will face severe water based challenges and complexities in the United States, four of them being: Houston, Atlanta, Las Vegas, and New York.45 Of the four areas considered, Houston metropolitan area reports plan on adding the most amount of thermoelectric capacity (26,989) between years 2000 and 2025. Houstons main source of drinking water was initially groundwater, but unfortunately due to rapid depletion of groundwater supply, only around 67% of drinking water now comes from a ground water source. Thus the city began to increase its withdrawals from nearby rivers such as: the Trinity, San Leon, and San Jacinto. The distribution of surface water such as river water during times of water
44
Sovacool, Benjamin K and Kelly E Sovacool. "Identifying Future Electricity-water tradeoffs in the United States." 2009. Sovacool, Benjamin K and Kelly E Sovacool. "Identifying Future Electricity-water tradeoffs in the United States." 2009.
45
41 scarcity unfortunately has a negative impact on agriculture sectors downstream, since water is diverted away to supply power plants and drinking water systems. Historical evidence from 1991 recalls a total economic loss of $6.5 billion for Texan agriculture and agriculture-related industries. In effect, there were large losses in crop production which contributed to job losses, income drops, and food price inflation.46 Another example of a city heavily affected by water problems is Georgia. In late 2007, Georgia faced serious effects of drought which lead to rewriting navigation control manuals for US Army corps travelling through shallow waters and federal government interventions with Georgia and its neighboring states (Alabama, Tennessee and Florida). Georgia depends on surface waters more so than Houston, Texas. Lake Sydney Lanier, Chattahoochee River, Chestatee River, and a government owned reservoir are significant providers of drinking water for Atlanta. Thermoelectric plants in Georgia consume more than half of the states surface water resources. If Atlanta is unable to sustain itself with its current water resources, it will have to in tap into shared ground water in the center of the state and involve in more inter-basin water transfers, which will only lead to further deterioration of water quality and supply. Political issues have already arisen between Georgia and its neighbors. Georgia believes that holding back more of the water along its basins may extend water sustenance. Florida and Alabama on the other hand believe that this would impede the supply they require for agriculture and fisheries out-of-state.
46
42 Another concern caused by limitations on Georgias water supply is a reduction in Georgian electricity production which provides electricity to out of state plants; such as Farley Nuclear Plant, Alabama. This tri-state water issue was resolved after eight lawsuits by annexing part of Tennessee to Georgia, thereby increasing their water supply.47 Based on these water challenges, electric utility planners and policy makers of both the state and the nation are developing suitable modifications in current energy policies. Energy efficiency and responsibility is very important to manage the demand side of our problem. But, it may be more important to look at policy reform on the supply side. One of the main solutions is reduction of water use by thermoelectric plants. For one, improvement can be made in the cooling cycles and new technologies can be researched to enable these power plants to produce their own water. Water vapor can be captured by fly gas, or, heat released from the plants can be reused to desalinate water. Another option to reduce water depletion by thermoelectric power plants would be to suspend the construction of all plants using once-through cooling cycles. Finally, introducing more solar panels and wind turbines would help displace any new thermoelectric plants that could potentially be constructed. Currently the United States has 2,998,000 MW of wind and solar PV energy potential, but only 1% of this potential has been used till 2008.
47
43 If water management trends continue as we see them today, we will soon face direct water tradeoffs in the United States. At least twenty two metropolitan cities will be severely affected, though in different magnitudes and natures distinct to their regions. Climate change is responsible for the amount and frequency of rainfall which factors into the severity of drought. But while climate change is far more difficult to manage, water resources are something we can. It is predicted that power plants will continue to improve in efficiency. Yet, as population size grows, total demand for electricity grows as well. Thus, the total amount of electricity the plants will have to generate in the future will be significantly greater. Research by Sovacool et al., does not account for other fuel cycles needed by thermoelectric plants like coal mines, natural gas, oil wells, refineries, cooling ponds and storage. Accounting for these fuel cycles would increase the magnitude of the adverse affects of current water use trends even more.48
Air: Discussing the Reality of Emission Reduction Required for Stabilizing Climate Change Carbon dioxide induced climate change continues to be a problem with difficult solutions. The United Nations Framework Convention has been trying to emphasize on reducing dangerous anthropogenic interference with the climate system since
48
44 1992.49 Seven years ago, much thought was put towards the development of noncarbon emitting primary energy sources. This would involve the development of advanced technology such as sequestration of carbon from fossil fuels, nuclear fission and fusion, fission-fusion hybrids and even solar power satellites and geoengineering. In 2002, researchers felt that using technology to make energy production, distribution and consumption more efficient would be the best way to reduce CO2 emissions. The research required for such developments was unfortunately not emphasized in all countries: for instance, policies in the United States preferred to place emphasis on domestic oil production over research in energy technology, mainly as a result of governmental subsidies. 50 Yet, despite developments in energy technology, the reality of the quantity of carbon emission reductions required for a healthy climate is a dreary one. How much must the world reduce carbon emissions to stabilize climate? Research from 2008 found that stable greenhouse gas concentrations did not result in stable global climate. Experiments were carried out using the Victoria Earth System Climate Model to calculate the amount of change in emissions required to reduce temperatures to a desired level. The experiments look at anthropogenic CO2 emissions; which were simulated electronically along with predictions of temperature patterns using a
49
Martin, Hoffert L. "Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet." Science AAAS 298 (2002): 981-987. Martin, Hoffert L. "Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet." Science AAAS 298 (2002): 981-987.
50
45 centennial scale (over centuries of future time). Over 500 years, natural mechanisms such as ocean and land carbon sinks help remove up to approximately 65% of atmospheric carbon, but unfortunately anthropogenic carbon has a very long lifetime. The remaining 35% of initial emissions are predicted to remain in the atmosphere. Carbon sinks increase CO2 absorption over time and a decrease in atmospheric CO2 results in reducing thermal radiation being forced back onto earths surface. Since Ocean heat uptake also diminishes, the effects are balanced out. Research by Martin Hoffert found that stable global climate cannot be made by stabilizing radiative forcing. Instead it is essential to reduce atmospheric green house gas levels. The extent to which greenhouse gas emissions must be reduced is near zero or complete elimination. This is perceivably the only way to completely avoid climate warming caused by humans.51
Making Sense of It All Disappointingly, the United States is currently responsible for 25% of the worlds greenhouse gas production even though it makes up only 4% of the global population. As Al Gore continuously reminds us, Each passing day brings yet more evidence that we are now facing a planetary emergency, a climate crisis that demands immediate attention.52 Though the term decentralized systems encompasses a large variety of
Matthews, Damon H., and Ken Caldeira. GEOPHYSICAL RESEARCH LETTERS." Stabilizing climate requires near-zero emission. 2008. 2010 52 The Global Challenge Institute. What the Experts Say . 2010 <http://www.worldinnovationchallenge.org/what-experts-say>.
51
46 generation options, the only ones that are truly beneficial are those that use renewable resources. We hear Al Gore tell us to work towards living a carbon neutral life, yet research by Martin Hoffert conveys that this is only impossible with complete elimination of carbon emissions today.53 Similarly, just as a customer barely thinks about the origin of the energy lighting his or her desk lamp, or even less so about using an online carbon calculator, very few think about the less obvious consequences our energy use has on a resource as imperative as water. Before thinking about the monetary costs of DG technology, we must think more about a very obvious cost: the environment.
53
Gore, Al. 15 Ways to Avert a Climate Crises. 2010 <http://www.tedxgreen.com/2010/02/15/al-goreon-averting-climate-crisis>.
47 CHAPTER 4: COST ANALYSIS CUTS CORNERS Discussing Distributed Generation Expenses We now come down to DGs last hurdle: cost competency. It has been extremely cumbersome for economists to try and justify the value of DG through cost analysis. First and foremost are the costs of various DG technologies. Figure 7 represents results from research carried out by researchers Strachan and Farrell. Table 1. Cost Comparison between various DG Technologies
Source: Stratchen et Farell, 2009
Based solely on the prices listed above, the total costs (capital, fixed and variable costs) for DG are less than for combined cycle gas turbines (CCGT) and coal steam turbines (CST); both of which are centralized generation. However, due to the inexpensive fuel required by the latter, centralized generation technology still remains competitive. Thus in order to increase the competitiveness of DG, we must place monetary value on intangible positive externalities. One example of this would be to place a price on the ability of DG to use combined cycles to produce both heat
48 and electricity. Another example would be to place a price on the ability of DG to decrease the detrimental effects we are having on the environment today. In order to get a clearer picture on how economists today value DG technologies, again particularly with regards to renewable resources, lets examine the following case study. After the case make my stance on evaluating the economic efficiency of DG technologies using methods alike to or similar to the selected case. The following case summary looks into a cost benefit analysis of solar photovoltaic technology conducted by a professor and economist named Severin Borenstien.
CASE: The Unfortunate Situation of Photovoltaic Energy Generation Costs Solar photovoltaic (solar PV) cells capture sunlight or solar radiation and directly convert it into electrical energy. Solar PV power is very expensive, but the worth comes from its advantages in relation to timing and location. Solar PV produces the most amount of energy during peak times when demand is conveniently the highest. Dr. Severin Borenstein, a professor of business administration and codirector of the Energy Institute at UC Berkley found that the degree by which solar PV power increases its value depends on the extent to which wholesale prices peak with demand; which, in turn, varies depending on the proportion of reserve capacity held within the system.54 Location is another cost benefit of solar PV power as it usually on-site and close to users reducing shipping and transmission costs (e.g. line losses) of
54
Borenstein, Severin. The Market Value and Cost of Solar Photovoltaic Electricity Production. Working Paper Series. Berkeley: CSEM, 2008.
49 electricity and thereby being more cost efficient. In terms of cost, Bornstein found through his research that in the current US system, which has a significantly large reserve capacity, the premium value of solar PV power increases by around 0%-20%. However, if the system was based more on peaking prices (which are extremely high) and price-responsive demand and, then you would find that the premium value of solar PV power would increase by about 30%-50%. This is significantly higher in comparison to today typical prices. When looking solely at direct costs of solar PV power, it is widely acknowledged that PV power is, in fact, significantly more expensive than other sources of renewable energy and fossil fuels. However, advocates of solar PV panels argue that the temporal and location-based characteristics of solar PV power are almost always left out of value calculations. One of the biggest advantages of solar PV power is that it produces the greatest amount of energy during times of highest intensity of sunlight and sunshine. Conveniently, these are also the times of highest demand. According to data collected by Severin Borenstein most of the power produced from PVs in the US is produced disproportionately during times when electricity is of highest value (Figure 7).
50 Figure 7. Average Hourly System Demand in relation to Hour of Day
Source: Borenstein, 2008
Based on the simple partial-equilibrium supply and demand model, the demand for energy fluctuates inversely with the quantity of energy available for consumption. The electricity value is thus much higher when system demand is high. This high value is caused by two factors: Firstly, when demand is high, the wholesale price of electricity supplied by the grid is higher. Secondly, the amount of electricity dissipated as heat (transmission and distribution losses) increases proportionally to the increased amount of electricity flowing through the lines. These losses are absorbed with the use of PV power as it is an on-site generating system. Advocates of PV power emphasize on the on-site characteristic of PV generation because of the significant reduction in capital investments that are saved
51 and should be accounted for in energy cost analyses. Conventional centralized power stations require a large amount of investment for the infrastructure required for transmitting and distributing electricity. Borenstein feels that any cost analysis that ignores the transmission and distribution savings and uses average costs of energy generation is actually undervaluing PV power generation. The intermittency of power supply is another characteristic that should be accounted for when valuing solar PV power. The productivity of PV panels varies throughout the day and seasons depending on sunlight availability. Unfortunately, system operators cannot foresee the amount of power that will be produced by PV power until one to two days in advance. Secondly, due to the variability in energy production, grid stability is also affected, especially during times of rapid changes in the energy outputs from PV panels. The supply intermittency is often captured through long-term contracts for the availability of a certain amount of energy. In addition, fluctuations in energy production also create short-term price spikes which incent sellers to have more energy on hand. This is how the intermittency of power supply would capture its effects in a healthy wholesale market. Borenstein accounts for these effects along with T&D losses in his empirical analysis of the value of PV produced energy. Yet, in his valuation, Borenstein found that the market benefit of Installing current PV technology were significantly smaller than the costs, even after reduced T&D losses and location benefits into account. In addition, the external or social benefits of implementing PV technology (reduced GHG emissions) did not compensate for the
52 benefit-cost deficits either. Thus according to Borensteins study, under today current technology and costs of them, investing in photovoltaic technology is not a socially beneficial investment.55
My stance on Economically Valuing DG and Avenues for Further Studies I am generally very supportive of Economic Cost Benefit Analysis (ECBA) to assess the impact of a project on society. However in the case of projects working towards the health of our environment, I choose to make an exception regardless of my short term returns. It is common for companies to use Discounted Cash Flow (DCF) methodology to assess the impact of a project for a particular stakeholder. The premises of both DCF methods and ECBA methods are similar. Both methods look at cost and benefits and assess the impact with a particular stakeholder in mind.56 The problem with DCF is twofold: for one, it does not take societal impact into account; secondly, it considers the relative short term (around 15 to 20 years). ECBA addresses this problem, the externalities, as it is concerned much more with society at large. I approve of Dr. Borensteins techniques to incorporate costs of factors that are generally neglected when calculating the value of DG technologies: benefits and time. However, the environmental benefits were still not accounted for in the analysis. When thinking about a sustainable DG project, we must be sure that the project meets both the shareholder and societal objective (as measured by DCF and ECBA respectively).
55
Borenstein, Severin. The Market Value and Cost of Solar Photovoltaic Electricity Production. Working Paper Series. Berkeley: CSEM, 2008. The stake holder for DCF is the provider of risk capital, while the stake holder in ECBA was the society.
56
53 Because this is an area of heavy controversy as many people find it hard to place a monetary values on intangible benefits such as environmental betterment and societal happiness or utility. There are many overall potential cost benefits from using a combination of third wave technologies such as DG, renewable energy resources and smart technology. I have summarized the potential cost savings as listed by the DOE in the following diagram to give us a better idea of how much money we could be saving, despite the monetary drawbacks as conveyed by studies such as the one by Dr. Borenstein.
54 Figure 8. Cost Savings with DG, Renewable Energy and Smart Technology
Source: DOE, Kanipakam, Pooja
As a recommendation for further study, it would be interesting to explore the joint gains between shareholder and societal value from DG technologies implemented in the near future.
55 CONCLUSION: REINTRODUCING PROSUMER CULTURE In the beginnings of the electric power industry in the 20th century, most electricity for heating, lighting, cleaning and all other necessities were produced near the point of consumption. Stepping back even further, we remember the self sustaining ways of the agricultural-era people. The benefits mentioned in chapter two along with more benefits integrated and discussed in later chapters of this thesis make one realize that the best way to move forward in the energy industry is to move backwards: a return to small scale production. At present most energy is currently produced in large central power stations. An increasing demand for electricity by 21st century consumers along with ecoawareness will lead to an interesting role reversal in our current energy markets. In all of Tofflers books, he repeatedly uses the word prosumer. Transparent as the definition may be, a prosumer is a consumer who is also a producer for themselves.57 Rules such as DOEs Public Utilities Act (which enforces electric power utilities to buy back power generated by consumers using renewable electricity generation) will give birth to a large sum of prosumers.58 In contrary to agriculturalera-prosumers, contemporary prosumers place an additional interest in production for other members of society. The advantage here is that a large amount of energy
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006. . Revolutionary Wealth. New York: Alfred A. Knopf, 2006.
57
Toffler, Alvin and Heidi Toffler. Revolutionary Wealth. New York: Alfred A. Knopf, 2006. . Revolutionary Wealth. New York: Alfred A. Knopf, 2006., pg. 188
58
56 will be able to flow backwards from consumers to producers, from cars and homes working off of fuel-cell technology, for example. Toffler conveys that two billion dollars in fuel-cell research and development has already been invested by large auto firms. Shai Agassi is the Founder and CEO of Better Place; a company whose mission is to reduce dependency on fossil fuels by creating a transportation infrastructure that supports electric cars. Agassi believes that countries around the world should develop financial incentives to change the minds of consumers, who may not actively notice their negative impact on the environment. Denmark has chosen to wean itself off gas powered autos by placing180% tax on gasoline and 0% tax on zero emission cars; Agassi feels that other countries should do the same.59 The concept of kilowatt-hours on wheels is only one more example of society becoming increasingly involved in growing a bi-directional system. The ubiquitous internet that allows you to connect with people also allows us to connect to devices and systems. Distributed energy systems can thus leverage off the internet to maximize communication between energy consumers and producers. As mentioned in the introduction, such technology must be in sync with a smart grid. During the 2009 Super Bowl games, audiences all over the United States saw GEs ad on smart grid technologies with the classic Wizard of Oz song If I only had a brain
59
Agassi, Shai. Shai Agassi's bold plan for electric cars. 2010 <http://www.ted.com/talks/shai_agassi_on_electric_cars.html>.
57 playing in the background. The ad promotes GEs new priority on ecoimagination.60 I believe that the misleading aspect of this ad is that it may make consumers believe that there is a direct correlation between the smart grid and green technology: this is false. Most renewable resources perform optimally in the day time, thus electricity used during the night usually comes from polluting coal fired power plants. This is exactly why this thesis emphasizes the necessity to think about environmental sustainability and hence provides discourse solely on DG using clean and green technologies: technologies that are changing in phase with our Natural Environment. Contrary to this concept, our aged grids are burdened with rapid demand growth, yet we see that the United States has built only 668 extra miles of interstate transmission lines since the year 2000. Research and development in USAs electric utilities amount for less than 2% of the total percentage revenue earned. With such low investment efforts, system constraints will continue to only worsen over time. We cannot get trapped in straight line extrapolation. Usually the trend is developed linearly. That is an extremely nave way to forecast and rules out big changes that come and surprise us. Alvin Toffler said in an interview. His words reflect upon the fact that we cannot effectively use our current infrastructure as we continue to move toward higher levels of load demand. We must decentralize.
60Section
10: VAT, payroll tax and environmental taxes. 2008. 2010 <http://www.skm.dk/foreign/english/taxindenmark2008/6649/>.
58 None of this is to say that the centralization of power infrastructure at during the industrial era wasnt beneficial for society at the time; in fact, it optimized investment and operation efficiency which produced eminent tangible benefit (monetary profit). However, change is historys primary driver. We find that with any change comes only more change. Famous for his belief that change was the central element of the universe, an ancient Greek philosopher named Heraclitus said, You cannot step in the same river twice, because by the second step it will already have changed.61 This doctrine of change is directly applicable to every player and factor in our current economy and society. Unfortunately, as we see today, a lot of this change can occur extremely slowly. During a Google Tech Talk in November, 2009, Kristina Johnson, the Under Secretary of Energy at the US Department of Energy, spoke about the constraints faced by organizations that play the largest roles in the process of revitalizing our global energy systems. Three of the biggest constraints being funding, time, and scale.62 Through climate change, Nature has developed a time constraint we cannot escape. We must speed up our green movement. Additionally, we must also think big. A large challenge is permeating the message to consumers to replace and use renewable energy resources. On the supply side of the scale issue is the fact that
61
Burnet, Josh. Essays on Ancient Greek Philosophy. <http://faculty.evansville.edu/tb2/courses/phil211/burnet/ch3.htm>. Google Tech Talks: Innovation and the Transformation of the Global Energy . 2009. <http://www.youtube.com/watch?v=YYHiN6cWes>.
62
59 we must also scale our workforce and manufacturing base to meet total load demand at all times. To reinstate, the main point of this paper was not to discuss the current political and economic controversies, but to rather inform the reader of the many complexities of our energy scene. There is a conflict of interest, a struggle, between cost benefit and economic health. There is an albatross: the well established traditional grid system and large industrial era power plants. Yet, as stated in the introduction, the movement towards a decentralized generation, digitally optimized consumer-producer communication, and renewable energy usage is inevitable. All we need to do is ground ourselves in the trinity of holistic thought (Figure 9): think reliability, think economically and think sustainability.
Figure 9. Creating a Holistic Solution
Source: Kanipakam, Pooja
60
61 BIBLIOGRAPHY
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65 U.S. energy Information Administration. "The U.S. Electric Power Industry Infrastructure: Functions and Components." n.d. U.S. Goverment. the White House. 2010. March 2010 <http://www.whitehouse.gov/issues/energy-and-environment>. Utley, Brian. Technology Evangelist. 3 October 2007. April 2010 <www.technologyevangelist.com/2007/10/the_sputnik_shock_wa.html>. Vaughan, Adam. Cost of Solar Energy will match fossil fuels by 2013|Environment|gaurdian.co.uk. May 2009. 2010 <http://www.gaurdian.co.uk/environment/2009/may/solar-energy-price-fall>. Western Governers' Association & U.S. Department of Energy. Western Renewable Energy Zones-Phase 1 Report. Report. Denver, Colorado: Western Governers' Association , 2009 . Wiser, Ryan, et al. Tracking the Sun II. Research Report. Lawrence Berkley National Labratory. Berkely : Berkley Lab, 2009.
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Appendices A. Map of the Energy Generation Diversity in the USA
B. Steam Turbine

A Holistic Exploration of Energy Decentralization

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CLAREMONT MCKENNA COLLEGE

A HOLISTIC EXPLORATION OF ENERGY DECENTRALIZATION

Refer to page 4 for a definition of the second wave.

He narrates our present

Refer to page 4 for a definition of the second wave.

Utley, Brian. Technology Evangelist. 3 October 2007. April 2010 <www.technologyevangelist.com/2007/10/the_sputnik_shock_wa.html>.

Reddy Kilowatt Commercial . 4 August 2007. 10 April 2010 <www.youtube.com/watch?v=PnZ3mL00>.

SunPower. United States Postal Service. 2006. April 2010 <http://us.suncorp.com/business/successstories/united-states-postal-service.php>.

Figure 2. Benefits of Distributed Generation (DG)

Source: Kanipakam, 2010

Source: Teal, 1999

29 Figure 4. Production and Transmission Losses

Source: Alexander Van de Putte26, Kanipakam, Pooja

PFC Energy. Van de Putte, Alexander. <http://www.pfcenergy.com/contentDispatcher.aspx?id=4589>.

Personal Interview with Dr.Alexander Van de Putte

Even so, customers of electricity risk

33 Figure 5. Inefficient: Residential Sector Consumption and Waste Scales

Source: Herig, 2000

Figure 6. Efficient: Residential Sector Consumption with DER

Source: Herig, 2000

Gipe, Paul. Wind-Works.org. 2010 <http://www.wind-works.org/artcles/feed_laws.html>.

Personal Interview with Srihari Boregowda

U.S Department of Energy. "The Smart grid: An Introduction." 2009.

U.S Department of Energy. "The Smart grid: An Introduction." 2009.

U.S Department of Energy. "The Smart grid: An Introduction." 2009.

Gore, Al. 15 Ways to Avert a Climate Crises. 2010 <http://www.tedxgreen.com/2010/02/15/al-goreon-averting-climate-crisis>.

Source: Stratchen et Farell, 2009

50 Figure 7. Average Hourly System Demand in relation to Hour of Day

Source: Borenstein, 2008

Source: DOE, Kanipakam, Pooja

Figure 9. Creating a Holistic Solution

Source: Kanipakam, Pooja

Appendices A. Map of the Energy Generation Diversity in the USA

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