Why Transformation of the U.S. Electricity System is Critical, and How to Approach That Change

""By most accounts, the U.S. is not on track to achieve the greenhouse gas reductions scientists and other experts say are needed to mitigate climate change, abate the frequency and severity of super-storms like Sandy, and protect our populated, shrinking coast lines. In fact, the Energy Information Administration’s 2013 Annual Energy Outlook early release forecasts U.S. greenhouse gas emissions in 2040 well above 1990 levels—rather than approaching the 80 percent below 1990 levels by 2050 called for by climate experts.

A critical lever for addressing the United States’ contribution to global greenhouse gas emissions is transformation of the electricity sector. The U.S. electricity system is responsible for ~40 percent of the nation’s greenhouse gas emissions. And while climate is a major driver of change facing the electricity system, it is by no means the only one. Grid security, grid resilience (especially in the wake of multiple natural disasters that have left millions without power for extended periods), economic development, and the increasing empowerment of customers enabled by rapidly developing technology are all equally relevant drivers of change.

But in the face of what many see as an imperative for change, that change is happening slowly. Progress on national climate legislation is stagnant. Regulations enabling renewables, efficiency, and other distributed energy resources are being re-evaluated; friction between renewable companies, utilities, and customers is growing; and regulators and grid operators are seeking solutions to reliably and cost-effectively integrate ever-higher levels of distributed energy resources into the system. The electricity industry must find new approaches to cut through current gridlock, minimize conflict, and develop real, practical solutions.

Why is change in the electricity system so challenging? In part, it’s because changing the electricity system shows signs of being what Rittel and Webber called a wicked problem. Wicked problems have ill-defined boundaries and include many—often conflicting—technical, economic, and social dimensions. They are novel and unique, have not been solved before, and do not have a “right or wrong” answer. They are not conducive to trial and error—every action has real consequences, and there is no immediate test of whether a solution works. Indeed, transforming the U.S. electricity system has been appropriately likened to trying to rebuild an airplane in mid-flight.

Further, the utilities that have provided affordable, reliable power to U.S. customers for more than a century are facing significant challenges. Power plants and grid infrastructure are rapidly aging and will require significant investment in the coming years, yet those long-term investment decisions must be made in a rapidly changing environment. Utilities are being asked to support increasing levels of efficiency and renewable energy, but frequently the regulatory construct that governs their business models does not accurately compensate or incentivize those actions. The electric grid will continue to serve a critical role in reliably and cost-effectively integrating efficiency, renewables, and other distributed resources, and the rules of the game must be modified to align the business interests of utilities with those of other actors and customers.

At Rocky Mountain Institute, our attempt to answer these challenges is the Electricity Innovation Lab (e-Lab), which opens a dialogue and much more. e-Lab’s approach leverages best practice facilitation strategies, key thought leaders, and real experimentation to drive innovation in the electricity system, and its goal is to develop practical solutions to the most important technical, economic, regulatory, business, and social barriers slowing progress in the sector. To make progress on the wicked problem of electricity system transformation, RMI’s e-Lab incorporates three crucial elements:

  • An integrated, whole-system perspective

The electric grid is the largest manmade system in the world. By identifying the interconnections between problems, we can avoid (or at least anticipate) unintended consequences and look for opportunities to leverage one solution to create many more. By taking this perspective, we can develop solutions that are more likely to stick because they are flexible to changing conditions, anticipate future actions, or drive more cost-effective options.

  • Participatory solution development

More than 30 thought leaders and decision-makers comprise e-Lab, representing a microcosm of the electricity system—utilities, federal and state regulators, renewable energy companies, smart grid companies, large customers, and NGOs—who convene regularly to share insights, collaborate to develop breakthrough ideas, and dialogue around the issues that can create conflict. In addition, e-Lab is driving several in-depth projects to flesh out issues and develop real solutions. By taking this kind of participatory approach, we can develop solutions that reflect the needs of different actors, thereby potentially speeding uptake and preventing the kind of gridlock that currently slows movement.

  • An environment that fosters creative, generative thinking

Wicked problems are novel—they cannot be solved by dusting off a best practice solution that “worked last time.” e-Lab is employing proven innovation approaches to facilitate new, creative, practical solutions, often developed by putting together pre-existing ideas in a different and unique way.

Both connected to e-Lab and beyond it, there are emerging examples of the need for new types of solutions and of real progress being made. Imagine what may be possible if:

  • California can successfully develop a “net metering 2.0” concept, potentially including new rate structures or utility business models, that supports the continued growth of the distributed solar industry while also fairly compensating utilities for the services they provide to customers.
  • The city of Fort Collins, Colorado, can successfully demonstrate a 45MW net zero energy district, called FortZED, whose success requires close collaboration between city government, the municipal utility, Colorado State University, the Colorado Clean Energy Cluster, and many other community stakeholders.
  • The U.S. Navy can use distributed energy resources and smart grid controls to demonstrate a more resilient electricity grid so that the severity and duration of power outages such as those experienced due to Superstorm Sandy are minimized.

The U.S. electricity industry is at an inflection point where the risks facing the industry are severe and the promise of practical solutions is real. The sector is at a crossroads—the Brattle Group estimates that the electric utility industry will need to make a total infrastructure investment of up to $2 trillion by 2030, just to keep the system running. That money could be invested in more of the status quo, or could be used to seize the timing of this opportunity to make real change.

To do so, the industry must get the rules right—creating an environment that fairly compensates all actors (utilities, renewable and other resource companies, customers) for the services they provide and supports flexibility and innovation. Leveraging and scaling the opportunities created by new technology and new ideas can support a transition to a more sustainable, secure, affordable electricity system. Capturing them requires new approaches, an increased willingness to take risks, and real dialogue between all the actors who will collectively decide the path forward.

This post also appeared on Greenbiz.

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