We’ve all been hearing a lot about “decentralization” lately, but what does it really mean? I guess we can all derive the idea of what decentralized energy might mean by just looking at what we know about the meaning of centralized power.
An energy grid is simply what it sounds like; a bunch of power plants and electrical lines that are interconnected to distribute electricity to the end users throughout a region. In the United States; about 10,000 large scale energy production plants, 55,000 substations, and 120,000 miles of transmission lines (this doesn’t count the distribution lines, which is what we’re all connected to at our homes and businesses), all owned and managed by a fairly small number of companies and entities. There happens to be 3 primary energy grids in the U.S., one for the eastern states, one for the western states, and one for Texas (yes, Texas actually has its own grid, you know how Texas rolls).
This is what centralization really means, millions and millions of end users of a commodity, interconnected and managed by very few; think of an oligarchy as opposed to a democracy.
Now let’s not be too quick to demonize the centralized model, it was necessary to get us from point A (candles for light in your home) to point B (the ability to turn on a light switch in your house and get light). Without massive conglomerates and government support these networked energy grids would never have come to be built nearly 100 years ago (1938) and we would have nothing to complain about now. However, the centralized energy model has begun to show more and more of its shortcomings; as energy demand has grown exponentially in both volume as well as service area, and public demand for cleaner energy has increased, the current and failing grid has become one of the biggest infrastructure issues of our modern era.
Another complication that we face with the existing centralized model is natural monopolies which occur when, for practical reasons, a service or good is only provided by one entity in a region. These monopolies exist due to high fixed costs (expenses that do not change depending on the amount of goods or services produced), which make it inefficient for more than one entity to provide a given product or service. Transmission and distribution services are natural monopolies; building more than one set of power lines in a given area is not practical. This has made it inherently difficult for New Energy Developers to interconnect into transmission and distribution lines to provide end users with clean renewable energy. It also means that we, as a society, are dependent upon a closed number of entities to maintain and upgrade the physical infrastructure, which at 83 years old, is beginning to fail, causing mass power outages, wildfires, loss of homes and structures, and even deaths.
The decentralized energy model is one where regions and communities share in the benefit of a collection of disparate and independent Distributed Energy Resources (DER) which are comprised of some form of onsite generation paired with advanced Energy Storage Systems (ESS a fancy word for Batteries). Typically the generation is a Solar Photovoltaics (PV) system but can also include wind and Cogeneration facilities. These Distributed Energy Resources can be managed by the new quasi-utility companies called Community Choice Aggregators (CCA’s), who act on behalf of the community not corporate shareholders, and specialize in procuring and distribution of “carbon free” energy, for customers that want clean energy.
What these CCA’s plan to do is utilize these Distributed Energy Resources to shift and shuttle energy across a smaller “community grid” to more evenly distribute any surplus of clean energy generation or to provide localized resilience in the event of the larger grid failure. This requires the continued implementation of site generated energy assets (SGEA) throughout the municipal, commercial, and industrial real estate landscape. These sites tend to be where there is a large need for power so large distribution lines exist, or where there are larger buildings with lots of inactivated rooftop and parking lot space with owners who see the value in investing in their property for economic returns and the desire to further the mission of green energy development. Some of the sites are even being developed by MYNT into “microgrids” which mean that they can actually run independent of the existing grid through large scale solar, battery, and sophisticated software.
Ultimately we’ll see the evolution of the virtual power plant (VPP), a regional network of DERs all managed together ‘virtually’ through cloud based software but in aggregate capacity on the same community grid. These VPPs have already begun to emerge residentially with Tesla's VPP and with CCA’s like our regional central coast’s3CE (Central Coast Community Energy) who have already begun to develop a regional VPP within the municipal and commercial property landscape. VPP’s will create an even more dynamic version of decentralized energy, managed by incredibly powerful artificial intelligence software like Stem's Athena platform. If you own or operate commercial real estate, this is your opportunity to not only generate new income for your property but also participate in one of the biggest changes to the economy, social impact, and future-proofing events of our time. The New Energy Future is here along with a big dose of hope for a more distributed, sustainable, and equitable future for all of us.
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