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Threats to the Utility Compact

Microgrids may be a dagger aimed at the heart of utilities and their large, centralized power grids.

If consumers, business and industry abandon the main grid in favor of microgrids, it will threaten the utility compact and also have serious societal and national security implications.

The utility compact has been under attack for decades. It was created to ensure that a reliable affordable electric utility infrastructure would exist to serve the entire community. A utility was granted a monopoly in a region, and in return it agreed to deliver affordable, reliable electricity service.

That worked for a century, but in recent years deregulation, cogeneration, wind turbines and solar panels have gradually eaten away at the compact. It is becoming common for individuals and businesses to produce some of the power they use.

As microgrids become more reliable, it will be possible for large businesses and wealthy individuals to cut the cord with the grid. The tipping point will likely come when largescale power storage systems  become available. Not only will wealthy consumers isolate themselves from the grid's power, they may also isolate themselves from the demands our society places on electric utilities.

They can then avoid  systemwide outages. They may be insulated from aging infrastructure that may limit reliability and push up costs to support upgrades. And they can embrace new technology while bureaucratic utilities and their regulators continue to debate what is right and what is wrong and who gets what first.

It is easy to understand why the wealthy would leave the grid. However, the rest of us won't have that option. If the grid eventually serves only the vast majority of us who are not wealthy, our cost burdens will increase. Yes, the utilities will deliver less electricity initially, but as the infrastructure ages there will be  ewer of us to pick up the operating costs.

The downside for private grid owners will come 25 or more years from now. As the new microgrids age, they will need upgrades and maintenance like any other grid, and  some will fall into disrepair. The public grid will then have to resupply customers served by ill-performing microgrids or may even have to step in to repair them. The wisest option might be for electric utilities that are already good at performing maintenance to offer their services to the new microgrid owners.

Going it alone is very American - as is rebelling against large institutions like utilities.

However, we cannot overlook that the grid was built to serve everyone and huge costs have been incurred to accomplish this. For example, how will utilities pay off those massive bonds they have issued?

Individuals should have the right to leave the grid, but that should not excuse them from the costs that were incurred on their behalf.

A healthy grid supporting the entire society is fundamental to our nation's security. Throughout the country there are military facilities and government buildings that serve all of our needs. We cannot allow weakened utilities to jeopardize these institutions.

A strong grid was a key factor in the United States becoming a dominant world power and a haven for technical innovation. Unfortunately, the converse may also be true. How strong will the United States be if the electric grid is financially weakened?

Though state regulators control how tariffs and most rules are written, the federal government has ultimate control over the electric power industry. To keep the grids financially healthy, the U.S. Federal Energy Regulatory Commission and the Department of Energy must establish guidelines for a business or individual to exit the grid.

Howard Scott - PH. D.'s picture

Thank Howard for the Post!

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