This commentary is by Brandon Fowler of St. Johnsbury, a consultant with 35 years of experience in the energy sector, and Jock Gill of Peacham, an internet communications consultant who served in President Bill Clinton’s Office of Media Affairs and is chair of the Peacham Energy Committee.
By not including the cost of externalities the power companies ignore, such as health and environmental impacts, we are undervaluing the services provided by equipment at the edges that is paid for by end-user capital. These services require fair compensation.
The urgent need to adapt our energy system to mitigate climate effects requires a revision of the regulatory and accounting practices that guide investment decisions. Grid technology is evolving toward a network design featuring distributed generation and storage that augments the current central station generation/transmission model by adding resiliency and expanding the potential for onsite renewable resources.
The impact is likely to be amplified by the upcoming merger of the grid and transport sectors — accompanied by increased electricity demand, along with massive volumes of electric vehicle battery storage capacity that can be called upon to compete with conventional peak power generators.
A transition to a more interdependent network system presents a challenge to the traditional commercial relationship between utility providers and dependent consumers that impedes progress by restricting novel solutions while prioritizing short-term business objectives.
Also, by failing to acknowledge or account for the cost of environmental degradation and its effects on public health, an implicit subsidy is maintained that sustains the carbon-based system with pernicious effects.
Addressing this issue, global market trends indicate that consumers — energy buyers — are gaining the physical capability to also be sellers of valuable energy services that strengthen grid operations with a reduced environmental burden and cost. To accelerate this process, accurate valuation of the benefits provided by distributed assets will be necessary.
For example, here in Vermont, over the past three years, a tracker in Peacham with 16 320-watt panels has produced, on average, 8,600 kilowatt-hours per year. In the next 10 years or so, there will be new panels in the same form factor that will allow the tracker to be upgraded. These new panels may be two or even three times more powerful. Thus, we expect that the tracker will reasonably soon be producing at in the range of 20,000 kilowatt-hours. Are the regulators and energy companies planning for this?
Now add in vehicle-to-grid and rolling micro-grids. Further add in Tesla-style Autobidder software that will allow end-user power systems to buy and sell energy in real-time using artificial-intelligence-powered software. These factors strongly suggest we will need a new energy paradigm designed to counter price distortions that favor suppliers of conventional energy and provide an investment path to system improvements.
At this point, it should be clear that technology purchased with end-user capital will be providing significant and very important services to the grid. The providers of these services must be compensated.
These services include but are not limited to energy generation and storage, environmental mitigation and health services. Nobody would expect these services to the equivalent of a free lunch. Thus, to begin with, we must replace the word “subsidy” with “compensation” for services provided.
This is a very important distinction. It is a distinction that should prevail, but is not. Today’s false arguments over incentives blinds us to the fact that we are actually talking about services for which compensation is the usual and normal business practice.
The question is what are the Vermont state government, Public Utility Commission, Department of Public Service and the utilities doing to prepare for this brave new world? Will they oppose it or encourage and support it?
Embracing it is the surest way alternative energy can help the state meet its goals. This may be essential in order to avoid even worse outcomes.
