The U.S. electricity grid is a mind-boggling mess. For one thing, it is two large and three small grids, rolled into one. Two types of organizations, independent system operators and regional transmission bodies, control their slices, which may cover several states. Each state has its own utility laws. Then there are eight regional reliability councils that work with the North American Electric Reliability Corp., which is overseen by the Federal Energy Regulatory Commission. The two break down the grid into different, overlapping regions.
Nobody knows the true state of the national grid until something goes badly wrong, as it did in October 2012 when Hurricane Sandy left almost 8 million people powerless, some for weeks. The number of big outages, defined as those affecting more than 50,000 people, has more than doubled in the past 10 years.
The power industry talks about creating a "smart grid," a digitally connected network, automatically monitored and balanced, to solve the problems. This would involve individual utilities — the country has more than 3,000 — putting in modern control systems and installing "smart meters" to track consumption. This helps to manage demand, improves efficiency and allows connection of renewables to the grid. But it has little effect on the grid's overall ability to handle weather-related onslaughts that hit wide areas or a big cyberattack.
Self-contained, dependable power
Microgrids, with their own electricity-generating capacity, are a better bet. Most of these local grids are operated by private organizations such as military bases, industrial plants and universities, which need more dependable power than the national grid can offer. The biggest U.S. microgrid powers 150 buildings at the University of Texas at Austin with almost complete reliability.
Bringing microgrids to the masses is harder. Capital costs are high. So some utilities, with a nod to the trend in the computer industry to offer software as a service, now want to provide customers with microgrids as a service.
Central Hudson Gas & Electric has 300,000 customers in New York state. It plans to build, own and operate such systems in areas that are remote or have facilities that need reliable power. In return, customers will pay an extra fee on their bill. Taking another cue from the tech industry, the utility is also building a mesh network to control systems. These can still communicate even if one or more individual connections fail.
Major utilities showing interest
Regulators in states from California to Connecticut are nudging their utilities in the same direction. In Maryland a state task force recently recommended utilities be permitted to own and operate "public purpose" microgrids that serve places with high reliability needs, like hospitals. The state will offer financial incentives and eventually wants to see independent companies run them, too.
Big Maryland utilities such as Pepco and Baltimore Gas and Electric are showing interest. The last thing they want is other operators grabbing revenues the utilities view as theirs by regulatory right. They also smell higher profits. Microgrids offer utilities the best chance to recapture sales they lose to customers who hitherto had no choice but to build and run their own facilities. Through economies of scale they might offer customers a cheaper way to break free from America's graying grid.
Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.