GIS and the Electric Utility Death Spiral

By Bill Meehan, Esri

“The report of my death was highly exaggerated.”

It turns out Mark Twain never really said the quote like this. But that doesn’t really matter. The quote retains its meaning. For a utility professional like myself, Twain’s insight reminds me that though many are speculating on the impending demise of the electric utility, that death is highly exaggerated.

The Electric Utility Death Spiral Goes Like This

In the United States, we have a new trend. Customers are installing solar panels to beat the band. In most places, customers can sell excess electricity these panels generate to utilities — at the same price they buy electricity from these utilities. The controversial practice is called “net metering.” The question people are asking is, “Is this fair?”
At the same time net metering is rising, utilities are dealing with old infrastructure. As it gets older, they have to spend more money on fixing and replacing the old stuff. Plus, they have to supply power to customers whether the sun shines or not. This means the cost of delivering power continues to rise — while revenue goes down (since customers’ electric needs have gotten lower). Because electric companies are regulated monopolies, they can’t raise prices unless they go to the state public utility commission, who can approve a rate increase.

Sure, the utilities can make a strong case. Revenue is down, and costs are up. Regulators guarantee a rate of return on the utilities’ investments, so they are apt to grant these rate increases.

The problem, however, is that the rate increase hurts the people who don’t have solar power. So what do they do?

What would you do?

You’d install solar. Over time, the population of people with solar grows, and utility revenue shrinks further. Costs rise. You get the point.

Behold the death spiral.

Add to this all the onset of affordable battery power. Instead of people relying on the utility during times of low sunshine, they can install a battery along with their solar panels. Guess what? They disconnect from the grid entirely. The gas companies might even jump on the bandwagon and install natural gas generators to supplement batteries and solar. Who knows what’s coming next? Perhaps people will install wind turbines, just for fun.

A Light on the Future

Will that really happen? No.

Do you remember big, mainframe computers? They came along, and next came PCs. Everyone predicted the death of the central computer (just like centralized power generation). Although PCs became hugely popular, they also had limitations. As people placed more demand on them, the computers needed to be constantly upgraded. Otherwise, they ran out of memory, broke down, and left people stranded for computing power.

The biggest change happened when people realized computers were information islands. The PCs had to talk to one another. They needed to connect. Thus, the Internet became the equivalent of the mainframe computer. Today, the notion of an independent PC is almost never an issue. The cloud has replaced much of the computing power of the PC. Now, the cloud is even more of a centralized system than the mainframes ever were.

See the Trend

Here’s the first trend: The computing industry started with localized, central systems. It moved to decentralized systems. Now, it’s returning to global centralized systems — with the cloud, which lets users expand their computing power as demand changes their needs.

To some extent, this centralize-decentralize cycle has created a hybrid. You can have local resources when a particular application requires it, but these are backed up by a nearly infinite supply of computing resources when peak demands require.

The same trend is happening with the power industry. It has also created a hybrid: the microgrid.

By definition, a microgrid is an electric supply and distribution system that can provide all the power it needs to a small facility, such as a house or college campus. It is neither independent from nor dependent on the grid. A microgrid is in effect a power system that stands alone when a situation requires it — perhaps during power failures or power curtailments — but will connect to the grid whenever doing so makes sense.

Just as I continue working on my PC during power and Internet failures (but can’t wait to connect back to my power supply and Wi-Fi), the distribution electric grid will evolve to a two-way power platform, where suppliers and demanders communicate and collaborate.

It will be a hybrid, centralized at times and decentralized at others. The grid of tomorrow will be like the cloud of today — only for power. We will migrate to a market system, able to buy and sell power at the lowest price that benefits consumers.

Completely splitting from the grid will never happen. That would be like never having Internet access. People could never install enough capacity in their houses to achieve total self-sufficiency, able to increase power those rare days they need a lot of it. For instance, let’s say you host a big pool party complete with a power-hogging margarita machine and three blow-up jumping-jack houses for the kids. You could never run all that stuff at once from a self-contained in-house power supply. The other problem is reliability. Sure, a utility power failure doesn’t impact you. But what if your inverter dies? You might be without power for days, maybe even weeks while waiting for a new part or a service technician. Today, when the power fails you call the power company, day or night, and they get your lights back on.

The future is the hybrid. You will have it both ways.

In the new world, you could arrange to buy supplemental power delivered over the grid just when you need it. This is analogous to buying extra computing and storage capacity from the cloud. You would have your own microgrid for normal days and perhaps sell excess power via a contract to a local aggregator, and you would at times purchase extra juice from the aggregator for the party.

The distribution utility will be the energy equivalent of the internet — it will facilitate the energy market at a much lower level than happens today. Customers will pay for connection to the grid and its services, and less so for their energy uses.

GIS and Tomorrow’s Smart Grid

So what has this got to do with GIS? A lot. The grid of tomorrow will need to be much smarter. It will in effect be a grid of connected and disconnected microgrids, some producing, some not. There will be a need for more sensors, more intelligence, and a lot more monitoring.

GIS will help monitor the health of the solar panels. It will be able to help predict new demands, where to site new charging stations, and how best to integrate microgrids together. It will help figure out shifting populations for better planning of energy sources. It will help utilities shift their business model. GIS will help operators and new participants in the grid market figure out where things stand: how the market is working, why it is not working when it goes down, and which actions to take.

Rumors of the death of the utility are dead wrong. The grid is changing, dramatically. But as more sectors, like transportation, move to electric, we will actually see increases in electric usage and a decrease in the use of fossil fuels.

GIS will be there to help. It will play a key role in helping utilities, solar providers, battery producers, gas companies, wind farms and who knows who else figure out how to manage this new world of energy.

It’s going to be great.


Learn more about GIS and the grid at esri.com/electric.