In Massachusetts, Jonah Decola teaches locals to build home power systems, like Sue Butler's 5.5-Kilowatt setup. | Photograph by Bob O'Connor
In fact, wherever a little public funding has gotten the ball rolling, consumer appetite for micropower has been essentially bottomless. To see just how fast the microgrid can emerge, there's no better place to look than Germany, where the market has been blown open thanks to what's known as a feed-in tariff. If net metering is simply the right to sell your power back to the grid at retail price, a feed-in tariff adds a little sweetener on top, paid for by a surcharge on all customers' bills. In effect, feed-in tariffs offer the same financing deal to citizens at large that utilities get on any power plant they build. The tariffs have been successfully adopted in 47 countries -- but Germany is by far the global leader. The policy was introduced there back in 1999, and the incentive increased in 2004, guaranteeing the small rooftop-solar producer four times the market rate for 20 years for any electricity he sells back to the grid. That year, installations of solar panels jumped from an average of less than 6 megawatts annually to 600 megawatts; the total 5.4 gigawatts of solar now operating in cloudy Deutschland make up a jaw-dropping third of the entire world's supply. That increased volume, meanwhile, has sent the price of solar panels plunging and created a world-leading industry with a quarter-million jobs. All this for just an extra euro on the average monthly bill, a charge that can be avoided by anyone who becomes a net-power producer.
In March, Gainesville, Florida, became the first U.S. locality to adopt a feed-in tariff, targeted to add 4 megawatts of solar a year for the next 10 years. The city reached its 2009 cap in just three weeks and its 2010 cap days later. Entrepreneurs are moving in to finance, install, and maintain solar panels on homes and malls across the city. The idea, here and elsewhere, is that eventually higher volume will bring down prices enough so that incentives can be phased out.
If there's so much potential in the microgrid, why hasn't it already hit gigawatt scale in the United States? One answer is that it pits local producers against the utilities themselves. If the distributed-generation scenario resembles cell phones, that casts the utilities in the role of Ma Bell -- as outdated, monopolistic incumbents. Ed Legge of the Edison Electric Institute, the lobbying organization for the utility industry (and leader of the national effort to oppose federal renewables targets), is surprisingly frank on this point: "We're probably not going to be in favor of anything that shrinks our business. All investor-owned utilities are built on the central-generation model that Thomas Edison came up with: You have a big power plant and you move it and then distribute it. Distributed generation is taking that out of the picture -- it's local."
This attitude is understandable. After all, if utilities don't own it, they can't bill for it. And with close relationships between power companies and state regulators, they can and do throw up a variety of roadblocks to see that rooftop-solar programs and the like remain tiny. The nonprofit Network for New Energy Choices puts out an annual report called "Freeing the Grid," tracking the growth of microgrid-friendly policies. These are trending up -- 42 states now have rules allowing some form of net metering. But based on the fine print, 28 of those states earned Ds or Fs because their rules are too restrictive to allow the average person to participate. James Rose, who wrote the report, singles out Texas as an egregious example: In June 2007, Governor Rick Perry signed into law House Bill 3693, a big efficiency and conservation bill. Though the new law called for net metering to be deployed "as rapidly as possible," the report explained, utilities took a "hard line" against it at the regulatory level, and ultimately state regulations allow no such thing. "There was the feeling that some of the people who were interested in not having net metering had a lot of say in how net metering was defined," says Rose, choosing his words quite carefully.
The tactics utilities deploy to protect their profits can make a reasonable person's head spin. "In Arizona a couple of years ago, we got a renewables incentive passed," says Adam Browning, executive director of Vote Solar, a national advocacy group. "A local utility proposed that it collect money for all the electricity that you didn't buy from it. The argument was: We've got fixed costs associated with maintaining the transmission and distribution grid. So if you don't buy from us, we want to charge you for your 'fair share' anyway," which it reckoned as everything but the avoided fuel costs -- the oil that you don't burn by choosing renewables. So regular customers would pay 11 cents a kilowatt-hour, but customers with solar panels on their roofs -- not even using the utility -- would still have to pay 6.8 cents an hour. "We hired a lawyer contesting this, and eventually we won," says Browning. Today, Arizona has decent, though not finalized, net-metering rules.
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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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