In Massachusetts, Jonah Decola teaches locals to build home power systems, like Sue Butler's 5.5-Kilowatt setup. | Photograph by Bob O'Connor
Rooftop solar panels, for example, currently cost at least 25% more per watt installed than utility-scale solar, but that's without the cost of remote transmission (up to $10 million a mile) and the 10% line loss. And you can get the power started in months, rather than years. What's more, instead of the utility model, in which ratepayers ultimately feed the profits of the utilities and their shareholders, with the microgrid, a return comes back to the folks who invest in saving and generating their own electricity, creating a positive feedback loop of consumer demand.
The scale of the microgrid can deliver unforeseen benefits, too. Amory Lovins, the green wise man of the Rocky Mountain Institute, is among the biggest and most influential fans of micropower; he's written a book, Small Is Profitable, laying out 207 reasons why. Among them: "Distributed generation" means a redundant, resilient, secure infrastructure -- that's why military bases and hospitals have their own power plants. Micropower can be more reliable, given that 98% of all blackouts originate in the grid. And it creates thousands of local jobs near population centers in design, installation, and maintenance. "Micropower, as of three years ago -- the latest global data -- was a third of the world's new electricity and one-sixth of the world's total," he tells Fast Company in his trademark pressure-wash style. "Micropower growth is very rapid, and it's [currently] almost wholly financed by private capital. Distributed renewables in 2007 got $91 billion of new private investment... . There are several quite distinct reasons for thinking that these stats I've just given you are the leading edge of a tsunami of change in the power sector." Small Is Profitable concludes that because the scale lowers capital risk, the economic benefits of a dollar invested in distributed renewables can be an order of magnitude (factor of 10) greater than the same dollar invested in conventional power plants.
No wonder big companies are starting to make bets on the potential of the microgrid. "It's dawning on major suppliers that there's been a Richter 8 under their feet," says Lovins. "Two of them -- large companies that manufacture heavy electrical equipment for power plants -- have called me in the last week to have a strategic meeting about micropower."
Then there's GE, a leading wind-power manufacturer, which in April announced a $10 million co-investment in Southwest Windpower, the world's largest manufacturer of small turbines. Southwest's Skystream model, mounted on a 40-foot pole, supplies anywhere from 40% to 90% of an average home's electricity use. Retailing for $12,000 to $18,000, it's available to homeowners today with a four- to five-year payback after incentives, depending on local energy prices and how good the site is for wind. Managing director at GE, Kevin Skillern, sees huge growth in distributed generation: "The small-wind market is currently just $100 million in total sales but has been growing 40% to 50% a year for a handful of years. The combination of stimulus programs and technology advances make this a highly economic purchase for nearly half of the U.S. population.... From the perspective of both our venture-capital group and some of the senior people within GE Energy, distributed generation is going to happen in a big way."
David Shepler of IBM Research moved into a brand-new, four-bedroom home in New York's Hudson Valley in April; it combines highly efficient design with geothermal heating and cooling and 10 kilowatts of solar panels. The house is the first in a planned development called Green Acres and a showcase for Shepler's work as well. He calls energy the "challenge of our time." And IBM's vision, he says, is "achieving true distributed energy on a massive scale -- where it's not just me in New Paltz and a couple of eco-freaks here and there, but a third or a half of the roofs in cities or towns with solar panels." To make that possible, IBM is focusing on smart-grid software to manage the complexities of a system that might have 2,000 variable power inputs over 100 square miles, instead of two power plants. It's also developing cheaper photovoltaics (prices are already projected to fall by 20% to 30% this year), and Shepler has been working with the federal government to write recommendations for incentives and R&D investments. Allan Schurr, the VP of strategy and development at IBM's energy and utilities group, says simply, "Distributed energy is happening."
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Recent Comments | 17 Total
July 5, 2009 at 2:52pm by rick winrod
How is this even possible?
"He calculates the payback on Butler's $60,000 system at four-and-a-half years or less."
The homeowner would need to sell back to the utility at about 40 cents per kwh to make those numbers work. And that takes into account the $25K grant.
July 6, 2009 at 5:29pm by Dan Miller
Yes I too cringe every time I see big government jumping in to save us from ourselves. Wouldn't it be wonderful if we just encouraged the natural entrepreneurship process in moving us forward?
July 15, 2009 at 3:00pm by J. C. Scott
Great article!!! Couple the microgrid, local-generation concept with regionalization of the economy and you've got a terrific new socio-economic model for a better world.
This is not a big government versus free economy issue. That too is an old paradigm that has to morph. Entrepreneurial spirit also drives the big companies, whose lobbyists torque government policy to their self-preservation. Get with it guys, it's time for getting technology plus a lot of open-minded creative local businesses to push the old utilities into the history books like the harness business was.
July 15, 2009 at 3:00pm by J. C. Scott
Great article!!! Couple the microgrid, local-generation concept with regionalization of the economy and you've got a terrific new socio-economic model for a better world.
This is not a big government versus free economy issue. That too is an old paradigm that has to morph. Entrepreneurial spirit also drives the big companies, whose lobbyists torque government policy to their self-preservation. Get with it guys, it's time for getting technology plus a lot of open-minded creative local businesses to push the old utilities into the history books like the harness business was.
July 15, 2009 at 4:46pm by Jeremy Rifkin
The work that I just completed in San Antonio deals with many, if not all, of the issues that were mentioned in this article. I’m eager to discuss with you on a personal level how the Third Industrial Revolution has taken into account the points you've mentioned.
I’ve been trying to relay the Third Industrial Revolution message to the public by providing a space online where information and ideas can be passed, discussed, and suggested. It would be great to hear your personal thoughts, http://thirdindustrialrevolution.ning.com/
July 23, 2009 at 5:01pm by Jay Turner
If we set it up right, power generation would literally become a "mom and pop" business, where homeowners could invest in energy generation (and energy savings) which would generate a little extra income as well as add to the value of their property. What I have now is a 2.5Kw photovoltaic system that with net metering and time-of-use pricing brings my electric bill down to just the connection fee. Unfortunately, there's no incentive to expand my system or to conserve more because the utility gets to keep any excess credit at the end of the year. If the homeowner could get an annual check, then there would be an incentive for me to conserve more aggressively and to add more generation capacity. Imagine what it would be like if the market favored small providers? Imagine what it would be like if new construction and renovations had to include energy conservation and or generation capabilities?
July 23, 2009 at 5:40pm by Jay Turner
In response to Rick Winrod: The payback calculation might be subtracting the resale value that the generation system adds to the home. The payback point is where the value returned from the power system + the residual resale value of that system adds up to the purchase price. The return on investment is all the value returned after that point, less any further depreciation of the power system as an asset.
July 24, 2009 at 5:33pm by Brooke Williams
Seems as if the big obstacle is upfront costs. What if instead of building a massive wind or solar or god-forbid, a nuke, along with the miles of transmission lines, a power company 'loaned' at interest, each homeowner the money to outfit their house, who would then for say 8 years, pay for it with the same money they would otherwise paying their utility bill. It seems like this could work by tweeking the number of years to full ownership.
July 31, 2009 at 12:49am by Andrew Ehrnstein
The article did not mention the Federal Solar Investment Tax Credit (if 2009 tax year) of 30%. That's a significant reduction of the real cost. Also, since she bought batteries, too (not necessary for grid-tied) and has that time-of-use meter, she can easily sell back at peak times, and 40 cents is not unrealistic. Customers in California on tiered billing are paying 55 cents a kWh WITHOUT time-of-use, just based on overconsumption per meter. Her cost after the tax credit being lower, she could hit payback with a less-than-40 cent rate in that timeframe.
August 1, 2009 at 9:55pm by Russell Turnage
Microgrids already exist along the tracks of DC powered urban trasit trains running at 800-900 Volts Direct Current. Now if the solar cells on your house could pay your monthly fare on the transit system maybe more would ride. Or maybe the transit system needs to start ferrying your whole vehicle from one side of town to the other. How can electric companies straining and complaining to keep up with the load now, possibly have enough fight left to stop solar power from keeping them in business? That three phase stuff they put out is better for industry than home use anyways. We should make home voltages above the UL listed safety limit of 50volts a thing of the past anyhow in this super safe organic society, at least around children, lot's of responsible electrical professionals think so. Probably half that, about 24volts would be so much safer for the Alzheimer's suffering public. Urban rail systems now ought to be upgraded to battery backup to keep from stranding people during outages as well. With solar cells becoming a printing process more and more, like silicon chips; the power wasted in transmission may be better suited to rotating machinery anyhow. They have to get the large factories to cut back during high useage times now, when they'd much rather keep every one running at full blast all the time. They build variable frequency drives that allow you to connect the DC power from your solar cells into the DC bus of the VFD input and output and run your air conditioner mostly off the DC from your cells when the sun's shining on you the hotest, trainig air conditioning guys is the difficult part. If the electric company can make money transmitting your power to someone else they'll probably figure out how to make money off that faster than we can rant about it.
August 4, 2009 at 3:48pm by Charles Fisher
I like the article, it has lots of good info and positioning, and the microgrid is the way to go. For the sake of us all, though it would be much better if you would do the math before publishing claims. The description of a 6 kWh system covering three houses, and $60,000 for 6 kWh paying out in 4.5 years just doesn't add up. I'm in Ohio and use Gas to heat, but still use 40-70kWh per day, so at 12 hours a day, this system would cover my house at it's peak, and a little extra, and you won't get 12 hours a day of sun and wind in Boston (or Ohio). Also, you offset your average charge rate with net metering, and I pay average $0.11 per kWh, but if you make extra, you sell it back at a producer rate of less than that, say $0.04 per kWh, by offsetting usage I can make up to $7.70 per day or a little more. If I save it all up and sell it at peak rate, that's still only about $0.28per kWh and might get you to the 4.5 years payout, but won't happen. Then, how does the $25,000 subsidy get paid out? That is actual money that you and I pay as taxes, so treating it as free in the equation is not credible. If I put this system in based on an expectation to pay out in 4.5 years, I'd be angry at the installer.
August 4, 2009 at 3:49pm by Charles Fisher
I like the article, it has lots of good info and positioning, and the microgrid is the way to go. For the sake of us all, though it would be much better if you would do the math before publishing claims. The description of a 6 kWh system covering three houses, and $60,000 for 6 kWh paying out in 4.5 years just doesn't add up. I'm in Ohio and use Gas to heat, but still use 40-70kWh per day, so at 12 hours a day, this system would cover my house at it's peak, and a little extra, and you won't get 12 hours a day of sun and wind in Boston (or Ohio). Also, you offset your average charge rate with net metering, and I pay average $0.11 per kWh, but if you make extra, you sell it back at a producer rate of less than that, say $0.04 per kWh, by offsetting usage I can make up to $7.70 per day or a little more. If I save it all up and sell it at peak rate, that's still only about $0.28per kWh and might get you to the 4.5 years payout, but won't happen. Then, how does the $25,000 subsidy get paid out? That is actual money that you and I pay as taxes, so treating it as free in the equation is not credible. If I put this system in based on an expectation to pay out in 4.5 years, I'd be angry at the installer.
August 5, 2009 at 9:21am by Thomas Robertson
The electricity infrastructure is in place because the utility companies are able to spread the cost to do so. I wonder what their reaction will be to carrying this cost in the scenario presented. The article discusses big utilities fighting this concept. I can imagine a knee-jerk reaction that would cause some level of fear in these companies, but ultimately this will help solve their renewable energy mandates. However, it should be considered that at some level of widespread adoption a "tipping point" is reached where the cost per KH drops due to the reduction in overall fossil fuel cost. When this occurs the payback will change. This would encourage early adoption - "get your system paid off while rates are high". Of course the cost of solar should continue to drop dramatically over that time.
August 6, 2009 at 6:41am by Riki Taiaroa
The more you fight the Utilities the more irrational and protective they will became. The mirocgrid has to be pitched in a way that the Utility providers think its a good thing, for them and their shareholders. They have installed networks and power plants. Without the network there is nothing for the Microgrid to sell into, and if everyone is on the microgrid, who is buying the power? Flip the whole thing... The Utilities broker power produced by individuals to Industry. Instead of investing in power plants (often built for big users like Smelters, who get subsidised power because of their huge usage) the Utility subsidises communities to join the grid (creating more individual power suppliers) and use Micrgrid generated power to supply big industry. They act as the broker and transmission provider of power to industry, with the existing power plants there as backup for guarenteed uninterrupted supply. The Utilities need to reinvent themselves, and the Microgrid movement might need to help them do this rather than fighting them head on.
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