The next transformation of the energy industry is happening at the fringes—the last mile—placing the traditional, centralized mode of delivering electricity under increasing pressure to adapt. In fact, centralized is no longer the model to power life in the 21st century, as the electrical grids that deliver the energy we use are evolving to a de-carbonized core and distributed power generation at the edge of the network. Reliable and renewable power at the fringe are required to support the re-definition of our modern life brought about by our mobile phones, smart homes, electric cars, and the Internet of Things (IoT).
The edge does not need to be dark.
The energy transformation that acclaimed futurist Jeremy Rifkin referred to in his 2011 book The Third Industrial Revolution is here. The edge of the network played a key role in his vision for our industry. In his book Rifkin wrote, “Millions of buildings will become power plants that will load renewable energy.” This future is here. Technological innovations such as Tesla’s Solar Roof, home wind electric systems, and Hydrogen 2.0 will all serve to further drive transformation at the edge, which will help our environment, benefit consumers, and reshape utilities.
Our challenge is not whether to make it happen or not (this new way to power our life is upon us), but to devise a business model for generating energy at the edge of the electric grid that makes sense for consumers, alternative energy companies, and utilities. When it comes to understanding the mechanics and cost drivers of receiving electricity at home, it helps to look at an analogous way in which the telecommunications industry delivers media to people. In fact, it was the telecommunications industry that coined the term ‘last mile’ to refer to the “final leg of the telecommunications networks that deliver telecommunication services to retail end-users (customers),” as Wikipedia puts it. People use the term to allude to the cost and effort of connecting individual homes and businesses to the telecom network, which was literally done by laying the ‘last mile’ of wire that went from the street poles (the network) to the home.
Energy Variability and the Grid
One of the least understood ballot issues in Florida’s election last November was related to the understanding of how the electricity grid works. It related to the ability of companies to raise utility fees for users of solar panels. The day after the election, The Miami Herald wrote, “Utilities see solar as a threat to their traditional energy distribution system.” The issue, however, goes deeper than just a threat to the status quo way of doing things. It is a fundamental business model problem that we must collectively solve.
A week after the Miami Herald article, we wrote in this blog that users of solar panels expect lower energy charges from their utilities; after all, they are supplying part of their own power. The main issue with solar panels is that they do not provide power 24/7. When the sun goes down, unless they use a battery bank (i.e. Tesla Wall), consumers need the grid to get electricity. Maintaining the grid is expensive. If too many households and businesses go off the grid for a portion of the day, it cannot simply shrink. The cost of maintaining it remains the same whether we use it for a portion of our power or all of it.
What to do? When it comes to the use of wind and solar, utilities were the early adopters. They installed huge wind and solar farms to feed electricity into the grid, just like they do with coal, natural gas, and hydroelectric power. The next step for these early adopters is to adapt their model, and their network, from traditional, centralized energy delivery to one that combines central and distributed (local) power generation (as the latter is a wave that can’t be stopped). While utilities in the U.S. and around the world are concerned by the financial implications of changes now underway, there is no intrinsic reason why consumers and energy providers cannot cooperate. The key is to embrace technology at the edge and allow the consumer premises to be an extension of the utility, which is exactly the concept Rifkin talked about when he referred to buildings becoming power plants.
Living on the Edge
Today, there is not enough electricity being generated at the edge of the grid to support those periods when it is most needed. Brownouts occur when the energy stress is on the last mile during peak periods, such as when everyone turns on their lights and charges their electric vehicles. During nighttime, homes with solar panels are no different from homes that depend 100% on the grid unless the power has been stored in batteries.
Climate change is expected to add further stress to the grid. A recent article by Utility Dive explained how global warming is already adding pressure on centralized energy. They wrote, “Average temperatures are rising across the U.S., pushing grid operators to examine whether they have adequate capacity to meet higher power demand and sharper spikes in peak load.”
The fact is, whether change comes from off-the-grid, sustainable technologies or increased peak periods caused by rising temperatures, we need a new model to reflect the transformative changes in the generation and the use of energy. Under this new model, the edge of the network will work in concert with the core grid to make for a more reliable, affordable, and sustainable way to power our communities.
Off the Grid does not Have to be Off the System
Hydrogen 2.0 can be one of the answers to the problem of reducing stress on a centralized network in a sustainable way. This technology constitutes a system of clean, distributed power at the edge of the network that can provide 24/7 energy on location without carbon emissions. Hydrogen 2.0 can work in concert with variable, renewable sources that are off the grid, such as solar and wind, to augment their capacity.
Hydrogen 2.0 is also a promising way to provide much needed clean energy to the approximate 1.3 billion people who live in off-grid locations. Remote locations that generate their own electricity usually do so in a dirty way. Their sources for cooking, heat, and limited lighting is by way of carbon-emitting noisy diesel engines and coal or wood-based fires. The carbon-based fuels they use pollute indoor and outdoor air, as well as the aquifers, making water undrinkable. These aquifers then pour into the sea, which further produces acidification and the loss of entire marine habitats. Furthermore, the cost of electricity in these locations takes up a disproportionate amount of budgets.
The Last Mile can be the Transformational One
The problem of the last mile in energy can ultimately be solved in the same way that the telecom industry solved theirs: by adapting new technologies to deliver the service, redesigning business models to account for distributed delivery, and providing a better product to meet today’s new reality. Just like you now have the choice of having separate television, internet, and phone services or bundling them together; in the future, you will be able to choose the energy mix that makes the most sense for you.
It’s a win-win-win. Buildings and homes are already becoming the once futuristic “power plants” as envisioned by Rifkin. The good news is that in the energy delivery ecosystem of the future, there is a place for everybody, provided we use the opportunity to transform our industry into a better one for consumers, energy companies, and the planet.
As the Hydrogen 2.0 ecosystem gains momentum, we’ll be sharing our views and insights on the new Hydrogen 2.0 Economy. We also update our blog every week with insightful and current knowledge in this growing energy field.