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Back to the Basics: A Simple Analogy to Visualize the Evolution of the Modern Grid

image credit: Dean Chuang, 2020

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Dean Chuang is an independent consultant providing advisory services to energy industry clients.  Dean has held a number of roles over a 13-year career in the energy industry, from financial...

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The modern electricity grid is a complex system of systems, operating in a highly politicized monopolistic environment, that is bounded by the technical potential and economic realities of ‘steel-in-the-ground,’ and balanced through a combination of regulated market operations and unilateral dispatch towards planning constraints.  

Sound complicated?!?  Like many in the Utility world, I’ve struggled at times to explain “what I do” to industry outsiders, or even to colleagues working in a different utility arena.  A simple analogy, that explains without trivializing, can help establish a common framework to discuss the challenges (and opportunities!) currently facing an industry in transition. 

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There have been a number of fantastic posts[1] on Energy Central discussing the evaluation of alternative resources (i.e. non-central plant) within the traditional utility resource planning process.  As fitting for an evolving multi-stakeholder process, these conversations reflect a wide range of perspectives, from policy, to planning, sustainability, and system operations. 

I’ve shared my perspective on one potential impact of DERs on the grid, but feel it would be helpful now to take a step back, and share a framework that I’ve used to facilitate multi-discipline discussions of the challenges presented by the modern grid. 

With apologies for my limited artistic capabilities:

Imagine the electric grid as a bucket of water.  Water is constantly leaking from this bucket, and the role of a utility is to balance the outflow using a combination of supply side (i.e. generation, or water flowing in) and demand side (i.e. demand response and DERs) assets.  Generation is water flowing into the bucket, while consumption is water flowing out.  Water can flow into the bucket from a variety of sources, and flows out through an assortment of differently sized holes (representing the variances in customer consumption).

Philosophically, the right of a utility to exist as a natural monopoly is based upon the ability to reliably and cost effectively maintain the level of water within the bucket.  This challenge is complicated by the physical limitations of the existing system.  To visualize, imagine a line drawn around the circumference of this bucket. 

  • If the water level is not maintained within a few millimeters of this line (i.e. operational range), customers will be impacted.  As the water level falls below the range, customers begin to lose power; if the water level exceeds the range, then customer (and utility) devices may be damaged. 
  • While the rate of leakage can be forecasted, outflow at any given moment in time is highly variable, due to variances in customer behavior in response to economic and environmental conditions; the size of each hole contracts and expands over the course of each day.      

Within this analogy: 

  1. Central generation plants are hoses feeding into the bucket.  Central generation is the easiest way for utilities to maintain the overall water level (e.g. base load), with large, predictable, and easily controllable flows.  However, just as it takes time for water to flow through a hose, each type of central generation is limited by a ramp rate; and not all technologies can respond to instantaneous changes in demand.  Additionally, just as a faucet is not always accessible, central plants tend to be located some distance away from demand.       
  2. Utility Scale Renewables are funnels that catch and direct naturally occurring water into the bucket, and are illustrated with dotted lines to represent the intermittency of renewable resources.  Different renewable asset types present different patterns of intermittency; the flow through these funnels is weather dependent and, without energy storage, the funnel is scalable, but uncontrollable beyond a binary on/off. 

    The lighter blue of the renewable energy flow indicates that each individual renewable asset is smaller than the typical central plant; while significant in aggregate, renewable assets are dispersed throughout the grid and are variable based upon the microclimate of the asset location.  Balancing the flow from these assets can require granular weather modeling.     
  3. Bulk Operations.  In a traditional vertically integrated utility, a single entity is responsible for maintaining the balance of the grid; the bucket, hoses, and everything depicted in the image is owned and operated by a single company.  However, balancing at the bulk power level in the American grid, after PURPA, EPACT92, and FERC Orders 888 and 2000, is often a multi-stakeholder process.

    Imagine that the bucket, hoses, funnels, and (potentially) the ultimate retail customer relationship are all owned and operated by separate entities that are uniquely driven to optimize their own business.  Water from each hose or funnel can potentially serve multiple buckets, and each hose or funnel supplies water at a different price point.  In this world, there needs to be signals to coordinate the dispatch of each asset that serves the bucket.  Without getting too deep into the weeds of RTO/ISO, LBA, and Transmission operations, these signals can be can be market (e.g. auction or exchange) or technical in nature; in their totality, these Bulk Power signals maintain the overall level of water, while juggling Regional, State, and corporate governance rules.
  4. Distribution Operations.  Frankly, the bucket analogy begins to fray at the Distribution level.  However, for the sake of maintaining the visualization, imagine that the bucket is actually composed of thousands of smaller interconnected buckets (i.e. distribution feeders).  Bulk Power Operations maintains the overall level of the larger bucket, while the holes that represent customer consumption are connected to one or more of these smaller buckets.

    Just as Bulk Power Operations balance the supply side, Distribution Operations transform and deliver power to the end customer.  The function of a transformer can be visualized by the difference between the thick lines feeding the supply side and the smaller arrows that represent water flowing to Retail customers; just as it would be dangerous to drink from a fire hose, voltage needs to be “stepped-down” for safe consumption.   

    Historically, power has flowed in one direction, and Distribution Operations was primarily an exercise in planning, maintenance, and workforce management; in other words, Distribution designs the system and works to ensure that the holes in the bucket are never clogged. 

    As customers continue to install Distributed Energy Resources (DERs)[2], represented here with bidirectional arrows, Distribution is increasingly challenged to not only manage, but operate resources on the “grid edge.” 

    DERs can be visualized as straws where water can flow both to the customer or back into the bucket; Demand Response (which I consider a subcategory within DER[3]) is the ability to temporarily plug a hole.  Just as there is an optimal range for the overall level of water in the bucket, each “distribution bucket” also has limitations based upon utility and customer equipment that has been installed on that line.  The implication here is that a DER asset can present either a net cost or a net benefit to the system based upon the characteristics and capabilities of the local grid (e.g. distribution bucket).  This is particularly challenging given that most DER installations to date have occurred outside of the traditional utility planning process. 

    In many ways, DERs represent a grassroots evolution of the Bulk Power system.  However, whereas the dance between utilities, IPPs, transmission owners, and system operators has been refined over the last few decades, we are just now beginning to grapple with the unique challenges of “balancing the ‘D’ side.”  The standards, systems, and markets necessary to “co-optimize” customer, utility, and bulk values have yet to be defined, much less tested and refined.        


How might the grid continue to evolve? (Stay Tuned!)

This analogy has served me well over the last few years, but my attempt to simply describe the ‘largest and most complex manmade machine in history’ has already rambled on for far longer than intended. 

Regarding the shape of the future grid, the aggregation and operation of DERs remains a nascent space that I believe is likely to become increasingly significant in coming years.  I intend to share my thoughts in future posts, but Reader what do you think?      




[1] The commentary in Doug Houseman’s “When is Capacity not Capacity?” is particularly insightful. 

[2] Recognizing that DERs represent a broad range of assets with distinct characteristics, for the purposes of this simplified analogy, DERs are broadly defined as a single asset category. 

[3] Building upon SEPA and PLMA’s “DER 2.0” framework, I’ve spoken previously about the evolution of DSM into DER….a topic to be addressed in future posts!

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Matt Chester's picture
Matt Chester on May 4, 2020

I love this, Dean-- thanks so much for sharing. It's such a complicated topic, and with the natural evolution of grid assets, programs, and pro-sumers it becomes even more complex by the day. Obviously the makeup of the market and the regulatory framework was developed in a time before we really had to consider the renewable dotted lines and the DER straws (love this analogy!); do you think those fundamental frameworks can be continually and incrementally changed to account for these new realities? Or will there become a point in time where you think thought leaders will need to step back and evaluate if there's a more representative and modern way to structure the rules that govern this machine?

Dean Chuang's picture
Dean Chuang on May 4, 2020

Thanks Matt!  It's certainly an interesting time to be in the industry...there's so many ways things can go!  However, I do believe that we will increasngly need new models to regulate the D-side....  

Ed Thomas's picture
Ed Thomas on May 4, 2020

Dean, thanks for the PLMA reference in your footnote. Your readers can learn more about PLMA's evolution definition at

Dean Chuang's picture
Dean Chuang on May 4, 2020

Perfect, thanks for the link Ed!

Dr. Amal Khashab's picture
Dr. Amal Khashab on May 5, 2020

Complexing the easy thing is a good way to show how you are different. But, does it worth?.  What we already have is simpler. Simpler is meaningful and beautiful, too.

Roger Arnold's picture
Roger Arnold on May 8, 2020

Interesting analogy and good high level explanation. I'd quibble that the "bucket of water" analogy could be misleading, in that a "bucket" implies a degree of storage capacity. The grid, per se, has essentially no storage capacity at all. Your explanation addresses that with the "fill line" on the bucket, and the requirement to maintain the water level in the bucket to within a millimeter or so of that fill line. Deviations from the fill line then analogize roughly to deviations in frequency and voltage. One important factor that the "bucket of water" model can't be stretched to accommodate, however, is flow resistance between various sources and sinks, and the issue of line congestion. Partly for that reason, I like the alternative analogy of a water pipeline with multiple sources and multiple taps. But, again, that's a quibble.

One thing that your analogy could be useful for explaining is how the grid is affected by increasing levels of variable renewables. As intermittent sources supply an increasing fraction of the "water" to the bucket, the dispatchable resources necessarily supply less. That's desirable, in that most of the latter are fossil fuel plants, and reducing their contribution reduces carbon emissions. But the resources still need to be there, because the variable renewables aren't always producing, or aren't producing enough to meet demand. So adding variable renewables always increases overall system cost. That usually translates to higher utility rates -- regardless of how low the cost of "as available" energy from the variable renewables may be.


Dean Chuang's picture
Dean Chuang on May 11, 2020

Roger, thanks for the comments - I totally agree!  Any analogy has multiple points of failure, and this bucket clearly leaks; I hadn't heard/thought of the pipeline analogy, but can see where that would capture flow resistance.  I've found this analogy to be most useful when describing the dynamics of the grid to indiviuals that lack an energy background - the grid is complicated, but everyone has filled a bucket!    

I'm glad that you siezed upon the DER balancing attempts to describe the impact of renewables on the grid is actually part of the origin story for this analogy!   I actually believe that the increases to rates that are necessary to support a DER future, either through transmission, distribution, or generic "delivery" charges, will ultimately place pressure on the traditional monopolistic utility business model.

Mark Silverstone's picture
Mark Silverstone on May 11, 2020

I also very much like this model.

Further to Roger´s point, I guess a central question is to what extent can we do without "Central Generation".   As we move forward, it is likely that the answer is that we can do without it more and more, as renewables (wind, water, solar) and storage (as batteries, hydrogen, heat, etc.) become cheaper, more plentiful and more predicitable.  It´s hard to imagine that we would ever be able to do without back-up base load, probably with gas, though there may be a niche for SMRs to provide some baseload, assuming they live up to their promise.  If CCS ever becomes practical, we may still need it to take CO2 out of the atmosphere, though the amount that would be needed seems way out of the question from where we stand now.

Dean Chuang's picture
Dean Chuang on May 11, 2020

Exactly.   Matt had a great comment above regarding changes in the "fundamental frameworks" necessary to operationalize DERs.  A grid that has historically been designed to optimize centralized generation has now been forced to accomodate DERs.  The policy story can still go in many different directions, but central generation is here to stay.  However, I do believe that the management of different operational resource classes will continue to develop, and that the role of generation will evolve in response; as DERs are geographically driven, these changes will have to incorporate regional differences in DER potential and policy.   

Erwin Heuck's picture
Erwin Heuck on May 12, 2020

Great anaology...  the level of complexity driving the overall system tolerance for spillover or under-service (ie distance between two red dotted lines) has been the utility main argument to resist integration of DER's into the grid in a meaningful way...  too complicated, too many owners etc.  Digital twin technology should help by modelling scenarios, creating boundary conditions and qualifying how complementary technologies get deployed.   Energy diversity as a positive attribute in support of energy security, resilience...  vs utility "monoculture" energy service, starting at grid edge and working to the centre.   Thanks for sharing

Dean Chuang's picture
Dean Chuang on May 12, 2020

Thanks Erwin!  Glad you found the analogy useful; it's so easy to get deep into the weeds without establishing a common understanding for the realities, challenges, and opportunities of the modern grid.  On that note, I agree on the increasing relevancy of 'virtual twins' as an evolution of existing operational planning models.  Here's hoping that the industry can start standardizing on the inputs for those modelling scenarios... :) 

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