Smart Power: Climate Change, the Smart Grid, and the Future of Electric Utilities, explains the challenges facing the utility industry in entertaining, easily understood prose. It also presents a bold vision for a sustainable power industry for the 21st century -€“ an industry that operates a clean, smart system and places energy efficiency and customer empowerment at the core of its new mission.

anniversary edition

smart power

CLIMATE CHANGE,

THE SMART GRID,

& THE FUTURE OF

ELECTRIC UTILITES

 

chapter one

Chapter 1: The First Electric Revolution
Path Markers- 1, 2, 3
 
Key Terms:
 
Samuel Insull’s Four Pillars:
 
Massing of Consumption: In terms of the early electric industry, the massing of consumption referred to the aggregation of power delivery using a large electric grid to reduce costs.
 
Scale of Production: The reduction in costs realized by utilizing progressively larger generation plants to reduce production costs. (An attribute of natural monopolies.)
 
“The Gospel of Consumption”: Insull’s marketing message that encouraged sales growth by providing higher discounts as consumption rose.
 
Utility Regulation: Insull’s vision of the utility industry depended on regulation for stability.  Insull worked to consolidate small utilities and organize them under a system of independent state agencies.
 
Summary:
 
Over the past one hundred years the process of electrification has enabled dramatic scientific advances in technology and in daily life. In the wake of electrification, productivity levels in factories rose by as much as ten-fold. In the 1950’s the typical American home relied on an average of 138 kilowatt-hours per month. How much does the average American home use today? The Department of Energy’s Energy Information Agency keeps statistics on household electricity usage[1]. How much does your house or apartment use?  The impact in the growth of widely accessible electricity has revolutionized the way people live and has enabled modernization in the US. Think of how you use electricity on a daily basis and how it has changed in the last decade. In 2013, for instance, the Pew Research Center reported that 91% of Americans owned a cell phone.
 
In the coming century the electric industry is facing great challenges. Two of the largest are the industry’s ability to reduce its impact on climate change and keep electricity supply reliable in the face of aging infrastructure, increased intensity of storms, and threats such as cyber attacks.  In order to diminish electricity generation’s impact on climate change, a comprehensive shift in the industry’s supply sources and business model will need to occur. The electric industry will need to move away from selling as much power as possible and as cheaply as possible, to a model based on conserving as many resources as possible. Moreover, in the next thirty years, the installation of advanced electricity metering technology and other communication and control elements that have come to be known as “the Smart Grid” will allow a shift from a centralized control system with one-way communications and little transparency to a system that requires and empowers consumers to control many aspects of their power supply.
 
Key Concepts:
 
The electric utility business model of the 20th century was driven by economic and  political pressures of that time.

The electrification of the United States was a major contributing factor to the growth of the U.S. into a world power. The business model that fueled this growth no longer meets our needs and must be changed to support new energy policy objectives, especially reducing global climate change and increasing our energy security.

For the electric industry to meet Greenhouse Gas reductions of 80% by 2050 (or similar targets), fuel sources and electric generation will have to change at an unprecedented pace.
 
 
External Study Resources:
 
Path Marker 1- Energy Policy
 
Review the history of the electricity industry and types of utilities:
 
History,” The Edison Electric Institute (Webpage)
 
Visit your library to check out these books on the history of the electric industry:
 
  • Platt, Harold L. The Electric City. Chicago: University of Chicago Press, 1991. 
  • David E. Nye, Electrifying America: Social Meanings of a New Technology. Cambridge: MIT Press, 1995.
  •  Jill Jonnes, Empires of Light. New York: Random House, 2003.
 
Path Marker 2- Environmental or Climate Studies
  • Learn how existing energy policies can impact GHG emissions scenarios.  Use the EIA chart builder mentioned in this article to find the difference between the impact of extending current policies versus enacting a $25 price for carbon.  Using the chart builder, find the impact of a $25 carbon price plus continued low natural gas prices: "Even A Moderate Price For Carbon Pollution Has a Big Impact On U.S. Emissions," Climate Progress, May 6, 2013. 
  • Look at IPCC modeling on how much carbon emissions need to be reduced to stay under 2 degrees of warming:
 
 
  • Review the following publications that discuss various ways to reduce carbon emissions from the electricity sector.
           Power Sector Energy and Regional and Regulatory Climate Policies in the Presence of a Carbon Tax,” Resources for the Future, April, 2013.
            Comparing the Clean Air Act and a Carbon Price,” Resources for the Future, May 2013.
             The EPA’s Clean Power Plan to regulate carbon emissions from existing power plants
             The Regional Greenhouse Gas Initiative is a good example of cap and trade carbon regulation.
 
Path Marker 3- Business Strategy and Economics
 
  • Review the qualities and attributes of natural monopolies:
     "Natural monopolies” - A short video by Richard McKenzie, based on the textbook "Microeconomics for MBAs", Cambridge, 2007.
  • Read this posting for a good summary on economic and technological pressures on the traditional business model.
 
 
Research, Discussion, and Exam Questions:
 
Path Marker 1- Energy Policy
 
  • List Insull’s four pillars and explain why they are no longer the key to successful utility growth. What are the drivers of change in the electric utility industry?
  •  What are the three objectives for the new electric power industry?
  • Discuss whether or not it is the responsibility of an industry to reduce sales of its product, or should that fall on others, e.g., energy efficiency entrepreneurs or policy makers who can, at least in principle, impose taxes to reduce demand in the face of externalities.  Consider the tobacco industry as an example.
 
Path Marker 2- Environmental or Climate Studies
 
  • According to this chapter, what technology is widely viewed as both the easiest and inexpensive way to reduce carbon emissions?
  • For discussion: what are the pros and cons of various policies to reduce carbon emissions in the electric utility industry?
 
Path Marker 3- Business Strategy and Economics
 
  • What were the end uses electricity was applied to and roughly when did they occur, from 1890 to 1930?  Perform your own research to develop a table of end uses of electricity showing the new technology, machine it replaced, and the year.  Include the indoor electric light, gas lamp, electric motor, mechanical drive from steam engine, electric washing machine, and wringer washer.
  • What was the original electric utility business model circa 1890?
  • What financial challenges may arise at the industry shifts its supply resources, builds transmission, and increases energy efficiency?