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Smart Grid Investment: Different Priorities Could Lead to Similar Results

energy investmentIn the developed world, we take for granted the infrastructure fundamentals that give us the good life.  Healthy drinking water?  Naturally.  Reliable electricity?  Of course.  But in the developing world, this infrastructure is out of reach for at least 1 billion people.  Last week the Center for Science, Technology, and Society at Santa Clara University in Santa Clara, California hosted an event that featured entrepreneurs who are making positive impacts in the lives of people in Africa and India.  For people living in energy poverty, electricity is as game-changing a technology as it is for us.  The hierarchy of needs around electricity has interesting parallels to how we might define the prioritization of a limited amount of electricity – particularly if we do not engineer grid resiliency in our buildouts of Smart Grids.

In developing countries, electricity is first allocated to light.  Lighting extends hours of productive work or study, and it provides safety.  The second priority is for charging mobile phones.  Developing economies are highly reliant on mobile communications, and mobile banking, which allows small businesses to flourish without requiring a financial services infrastructure complete with branch banks in remote villages.  Providing the power to keep mobile devices running helps keep their virtual finance systems running.  After these two needs are met, electricity is then used for entertainment – powering radios and TVs.  And finally, electricity is allocated to power agricultural equipment – running pumps for irrigation.

The entrepreneurs who spoke at this event are stimulating incremental changes that add up to economic, social, and political empowerment – not just in providing electricity, but providing new livelihoods and career options for underserved regions and populations.  What is happening would not fit the classic definition of a Smart Grid, but it is slowly building a grid, and doing it in very smart ways.  Contrast that to the level of activities to upgrade today’s grid, the greatest machine of the 20th century into a Smart Grid.  In our developed economy, our focus is much more on financial and regulatory innovation as opposed to technology and business model innovations for developing economies. And while developing economies would be happy with reliable electricity, their highly distributed, small scale electrical generation deployments deliver inherent resiliency that our grid is lacking.  This is where our Smart Grid investments need to be focused.

The financial innovations are ongoing.  The Master Limited Partnerships Parity Act was re-introduced for consideration this year in the US Congress on April 24, with bipartisan support from Democratic and Republican senators and house representatives.  As noted in last week’s article, Master Limited Partnerships or MLPs are traded on public stock exchanges, offering cheaper access to capital than bank loans.  Making this financial mechanism available to renewable energy and energy storage projects would be a wonderful market-based stimulus for these types of projects, and accelerate deployment of distributed energy resources (DERs) into the grid.

Last week Solar Mosaic announced its latest investment opportunity for California-based investors.  As this and other models of crowd-funding proliferate, utilities will have to more rapidly adapt their own operations to support integration of these DERs into the grid.

It’s the evolution of regulations to allow for grids to become more resilient as well as reliable that is the area of greatest need in developed economies.  The real challenges are in creating regulatory roadmaps that allow for a graceful evolution of utilities from managers of assets that deliver electricity to managers of services that oversee electricity delivery and much more.  This will be one of the topics of discussion at this week’s webinar hosted by The Energy Collective on May 1.  Get more information about the event and register to attend by clicking here. We need ongoing discussions about how to change our existing business models to accommodate DER.  Without an evolution of business models, we could be left contemplating which devices in our homes and businesses get highest priority for electricity delivered from a grid that lacks resiliency and results in reduced reliability.

Christine Hertzog's picture

Thank Christine for the Post!

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