Supporting Generation on Both Sides of the Meter

By Joseph Wiedman of Interstate Renewable Energy Council, Inc and Tom Beach of Crossborder Energy

  • View the policy recommendations from Distributed Generation Policy.
  • Download the executive summary [PDF].
  • Download the full Distributed Generation paper [PDF].
  • View the version printed in Elsevier’s Electricity Journal.

The Situation

Total energy generated from privately owned, grid-connected solar panels has increased by 500 percent over the past seven years. Many experts expect this trend toward on-site generation to accelerate. Consumers are demanding a new relationship with the energy they use — they want to own it, use less of it and make it cleaner.

The increasing use of on-site energy generation for homes, businesses, schools and factories, has been compared to the rise of the Internet. It has the potential to bring greater resilience and independence, and reduced costs for the consumer.

But energy production owned and controlled by customers is a major problem for utilities. The Edison Electric Institute has warned that self-generation, and greater efficiencies from smart grid technologies, could result in a “vicious cycle” of declining revenues for utilities. As NRG Energy CEO David Crane has warned, “Consumers are realizing they don’t need the power industry at all.”

While this transformation is often compared to the telecom industry, where cell phones rapidly replaced wired phones, we are far from the point where going off the grid will be as cheap and convenient as staying connected.

But if self-generating “smart customers” are going to be participating in the grid, it suggests a new relationship between the utility and the customer. The customer is no longer passive, but is actively providing value in a two-way relationship.

The key sticking point is money. If customers no longer buy energy, but do still use the grid, then how do they pay for that service? And if customers are providing services for the grid, and benefits for society, how should they get paid? Is there a greater business role for utilities in promoting distributed generation? How far can we push new business ideas opened up by distributed generation, like shared solar?

To modernize America’s power system, we will need to take advantage of both centralized and distributed resources. The transmission section of America’s Power Plan describes policies that will help us access valuable clean energy resources, while this section describes policies and market designs that can help level the playing field to foster competition between central and distributed alternatives. The right balance between centralized and distributed generation will evolve over time as costs and availability evolve.

A fair policy reform will support distributed generation by first acknowledging customers’ right to generate their own energy, by charging them a fair price for grid services and by paying them a fair price for the grid benefits they create.

America’s Power Plan paper on Distributed Generation Policy is designed to help policy-makers maximize the benefits of distributed energy for consumers, while allowing utilities to properly value the energy that power companies and their customers generate.