Editor's Letter

09/01/2013 | By Chris Olson

What Will Your Costs Be in the New Energy Paradigm?

Although the term paradigm shift is bandied about as a synonym for a big change, it refers to something more than that – and one is coming your way.

As used by historian Thomas Kuhn to describe the nature of scientific revolutions, the term refers to the gulf between two competing conceptual models. The difference between such models is so great that the vocabulary of the earlier model cannot accommodate the later. It takes some time for people to adjust to all implications of the new model because they continue to think in some terms of the old. Such a magnitude of change is underway in the energy industry, where microgrids and local generating capacity (solar, fuel cells, wind, diesel and gas generators) will turn the traditional utility model upside down. In the process, building owners’ choices will become a huge factor in the rate that they pay for electricity.

A new paper from the Rocky Mountain Institute entitled Microgrids and “Micromunicipalization” describes several factors that put the power in the hands of the building owner. The current grid is a one-size-fits-all, commoditized system but a microgrid is a customizable system. Building owners with multiple buildings (or several building owners who band together) can create their own microgrid tailored to their needs. For example, they can build networks with a specified level of efficiency, power quality, reliability, environmental emissions, or mapping of source to demand.

As electric rates are pushed upward due to the huge sums that utilities must invest to replace rusting infrastructure, owners who defect from the grid and invest in microgrids may insulate themselves from rate increases. Another microgrid bonus: because the generating equipment is located closer to the source of demand, the losses of transmission and distribution – currently estimated at 7–10% – should be reduced, another potential money-saving factor.

The fact remains that no one yet knows what our energy costs will be in the new paradigm – and soothsayers often err. In 1954 the chairman of the Atomic Energy Commission predicted that energy generated by nuclear plants would be “too cheap to meter.” Nevertheless, situational awareness of what is coming – which could be here in less than a decade – will make it easier for building owners to prepare and react. Some experts are predicting that the cost of electricity generated by PV solar power will dip below the cost of power from coal and natural gas in just seven years.

Are you thinking ahead to the new paradigm?

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